DoJ Set to Sue Megalandlords & The Miami Empire that Asbestos Built

DoJ To Come Directly at Megalandlords

With a fortnight left in the Biden administration, the Justice Department is about to launch a major offensive against the multifamily industry.
 
This week, the DoJ is expected to name 6 of the country’s biggest multifamily landlords as defendants in its ongoing antitrust lawsuit against RealPage, The Promote has learned. The to-be defendants are household names representing a wide swath of the multifamily industry, and the DoJ’s impending action would be a major escalation in its bid to crack down on the use of ANY nonpublic data by big landlords. ✊ 

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DoJ (Cont.)

The DoJ had filed an antitrust suit against RealPage this summer, alleging that the Thoma Bravo-owned CRE data giant was enabling a rent-fixing conspiracy. “The modern machinery of algorithms and A.I. can be even more effective than the smoke-filled rooms of the past,” the agency’s head of antitrust said at the time 🚬. Though the DoJ ended its criminal investigation into the firm in December, the civil suit is ongoing, and some kind of legal action against RealPage’s biggest landlord clients was expected to follow. The upcoming action, however, is expected to be far more sweeping than landlords hoped, according to sources familiar w/ the matter, taking aim at a broad set of activities involving nonpublic data – not just the use of RealPage’s rent-recommendation engine. We’ll have more for you once the landlords are added to the case as defendants – currently, RealPage is the sole defendant and the 6 landlords are mentioned only anonymously – but this is a BFD, and something that could transform how business is done.

Meanwhile, RealPage’s biggest competitor Yardi is gearing up to defend itself against a price-fixing lawsuit, after a federal judge ruled last month that collusion by algorithm can be considered price-fixing, a boost to the DoJ’s “per se” interpretation of antitrust law.

Landlords could play ostrich and hope this all goes away under a Trump administration, but based on Veep-elect Vance’s comments on institutional investors in housing, it’s unclear if they’ll find salvation there.

The House that Asbestos Built

“Mr. Weitz is a clenched-jaw champion of justice for the little guy. Always has been, always will be.” - Weitz & Luxenberg bio

A fast-rising Miami development empire has its roots in one of the most lucrative corners of big law: asbestos litigation 🦠 In ‘91, attorney Perry Weitz won $75M for 3 dozen workers who got sick after asbestos exposure in the Brooklyn Navy Yard, a landmark case that set up his firm, Weitz & Luxenberg, as one of the go-to players in the burgeoning space. Just to give you a sense: in ‘08, 7 asbestos bankruptcy trusts – Weitz’s was among the firms involved in them – generated a collective $600M in asbestos litigation fees, per a RAND report. That kind of cash flow is often the foundation for a CRE side hustle: Weitz is not only an investor in Miami projects such as the Baia Beach Club and Mondrian South Beach hotel, but is also the money behind Oak Row Equities, currently making waves in South Florida for its audacious buys - 6 mixed-use projects w/ a total of 4M sf in the works, incl. a 41-story office and resi building in Edgewater & a 45-story rental in downtown Miami.   

Most recently: the firm, run day-to-day by Weitz’s son David Weitz and Erik Rutter, went into hard contract ($38M nonrefundable deposit!) on Aimco’s Brickell waterfront site: Oak Row agreed to pay $520M ($122M/acre 😲 ), per an Aimco filing, though if it opts to take seller financing (at 12%) on a $115M chunk of the deal, the total price could rise to $540M. (Side note: Aimco is smashing it rn; this deal comes on the heels of a $190M sale to Kushner at a girthy mark-up from its ‘20 price)

Oak Row wants to build luxe condos on the 4.25-acre site, w/ Rutter telling Bloomberg that it’s a “once-in-a-lifetime opportunity to build a transformative project.” Other developers active in the market, however, are perplexed by how the money for this bet will come together, even w/ the asbestos ackers. “If only you could see our Slack thread, asking the same qs,” one told me.

Let’s see what role is played by Oak Row’s partner on the deal, Mariposa Real Estate – it looks to be a vehicle connected to the Franklin family, a merchant-banking/corporate raiding heavyweight clan w/ roots in the U.K. The current patriarch, Martin Franklin, also bought a stake in hospitality firm Casa Tua in ‘22.

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Postscript: Jacob Chetrit

Jacob Chetrit, part of the four-brother quartet of Moroccan émigrés whose audacious dealmaking and invisibility in the press captivated U.S. real estate, has died at 69. His death was announced by his Brooklyn synagogue, Ohel Moshe, w/ TRD reporting that funeral services took place in Israel Sunday. Jacob & Juda Chetrit ran the Chetrit Org., which owns/owned properties such as 850 Third Ave (taken over by lender HPS), and 1 Whitehall St., and regularly partnered w/ their brothers Joseph (the Lennon of the group) & Meyer Chetrit on deals. Jacob’s would-be biggest deal, the $815M purchase of the old Daily News building, was never consummated, and seller SL Green got to keep his $35M deposit.

The Chetrit family’s journey to the apex of Manhattan dealmaking is an engrossing tale of Silk Road mercantilism & American capitalism: The father, Simon Chetrit, ran a trading store in Erfoud, Morocco, profits from which he parlayed into a textiles import-export operation. Joseph opted to move to NYC as a 17-Y-O and expanded the family’s schmatta ops there, w/ real estate investing becoming a natural byproduct.

“They looked as if they just came off the boat from Morocco,” I-sales broker Yoron Cohen said of encountering the Chetrits in ‘94, according to Adam Piore’s engrossing acct. of the clan. “Just the way they were dealing. These guys were not real estate investors. They were traders — buy low and sell high. They were just very pragmatic, they were looking to buy a building like you buy furniture. They were coming in with a lot of energy.” 👚 

Quickies

• Manhattan, ‘nuff said: 28 office leasing deals broke $200psf threshold in ‘24 (see also: Single-Malt Buildings) 🥃 

• The emancipation of Fannie/Freddie: How this could go down

• David Werner, 601W team up on distressed Chicago office (more on Werner’s dealmaking playbook here)

• Why an NYC tax break could lead to a surge of 99-unit projects 🗽 🏗️ 

• $100M 💇 : Williams & Jamestown buy Midtown South office for $148M 

• Jumaane Williams admits NYC’s “warehousing” law has flopped 

• Boston PE shop pays KW record $116M for Santa Barbara multi complex

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