Essex Crossing Underwater & Single-Malt Buildings

Essex Crossing Underwater

“You’re at the precipice… of an enormous crossroad.” - Lil’ Carmine Lupertazzi

What matters more – how a deal went down, or how it is remembered? Essex Crossing, the 1.9M sf megaproject that promised to transform the LES into a live-work-play destination (dubbed by the Times as the anti-Hudson Yards), has had a pretty rough go of it so far. Its 150K sf food hall was 86d earlier this year, and Verizon, its anchor tenant at one of the project’s office buildings, put its space up for sublease w/o ever occupying it. Now, the ownership group looks to have turned 2 of the properties over to its lender: Deutsche Bank took control of the office & retail condos @ 180 & 202 Broome this week in what smells like a classic deed-in-lieu-of-foreclosure transaction: the $237M “purchase price” for the condos is well below the $285M DB loaned the developers on them in ‘22.

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Essex Crossing (Cont.)

Now, it’s possible there was a paydown at some point on the loan, which would help explain the lower transfer price, but a sale - as the deal was described here and here and here – makes little sense. One, DB is not generally in the business of buying Manhattan office buildings, particularly those it’s owed money on. Two, if it were office shopping, why would it opt for lifeless properties in a dead zone? Three, no brokers, no fanfare for a deal of this size. 🤷‍♀️ 

Our hunch: Taconic Partners (Charlie Bendit, Paul Pariser), which along w/ L+M, BFC, Prusik and Goldman Sachs’ Urban Investment Group, developed Essex Crossing, took a bath here on their equity. Taconic didn’t respond to requests for comment. 🛀 

More: Amazing read here on how Sheldon Silver helped stall the development at the site for decades 

Johnnie Walker & Flight Risks: Inside Puretz’s Sentencing

I have this one source who, when he Whatsapps me something, I drop everything (even cricket 🏏 ) and read it. Yesterday, I received a 70-page transcript of the sentencing of mortgage fraudster Aron Puretz (catch up here) and it felt like reading a grand opera of deceit, obfuscation & finally, comeuppance. The judge, Robert Kirsch, is a lyrical gangsta and was in fine form during the sentencing, exchanging crisp banter w/ Puretz’s attorney, Steven Yurowitz. Some highlights:

• Judge pushes back against characterization of Puretz's "minimal role" in the scheme: "There's dual closings, so the left hand doesn't know what the right hand is doing. This was well orchestrated, sophisticated, and over a very long period of time, with real losses here.”

• Point system on dirty deeds: >$10M fraud, sophisticated means, misuse of a charity, fake ID, personal gain of $1M+

• "You don't need to be a mathematician. You can only use an abacus" 🧮 - judge on Puretz’s mansion vs. his stated modest income

• Prosecution asks for max. sentence: “The real-world damage that the defendant has done as a slumlord throughout this country.”

• Pushes back against Puretz’s good works as a mitigating factor: "It's easy to be charitable with other people's money." 🐐🐐🐐

• Johnnie-come-lately: "When asked, by the way, what's your favorite whiskey, he couldn't come up with that. And then he threw out Johnnie Walker, he likes Johnnie Walker. A handle of whiskey a day...That can kill a horse." 🐎 
  
  Read our entire annotated rundown, w/ transcript snippets, here.

Single-Malt Buildings

Lest anyone accuse The Promote of being a doom-and-gloom prophet, wanted to highlight a solid read from Bloomberg on the pack of Manhattan buildings that are crushing it, even as their older peers face existential challenges. There’s SL Green’s One Vandy, of course, which by our count is now America’s most valuable skyscraper, but also properties like Tishman Speyer’s Spiral, which is close to fully leased at premium rents; and SLG/Vornado’s 280 Park, which had to turn away some prospective tenants to make room for edgy hedgie Paul Singer. At RFR’s Seagram Building (asking rents up to $275/foot), tenants had to be shuffled around to make room for private-credit player Blue Owl’s expansion (I’m v pleased w/ “Leverage,” the photo above I clicked in Nov.).

“At top buildings, tenants are routinely getting bumped,” said CBRE leasing 🐐 Mary Ann Tighe. “The parties are negotiating and then someone else comes in and offers to pay a higher rent, wants more space or has better credit.” The Plaza District’s 5 hottest buildings scored rents 4x higher than the saddest ones, per Savills – the biggest spread in at least 6Y. Will leave you w/ this stat: Manhattan has just 2.5M sf of in-pipeline office space, per CBRE, and 80% of it is already spoken for. 🥃 

Kibitzing w/ Kushner

The Kushners, a real estate dynasty that stumbled in the mid 2010s before roaring back, are an object of endless fascination, both within and outside real estate circles – the family tale is one of incredible resilience, pluck and vision, but also of vengeance, corruption and redemption (if you haven’t yet read Gabe Sherman’s fantastic narrative, go do that first and then come back). Jared Kushner, who ran the family firm for many years starting when his dad Charlie was sent to prison, now runs PE shop Affinity Partners, but is probably best known for his White House stint under his father-in-law Donald Trump – Kushner was one of the behind-the-scenes forces in Trump’s first term, particularly on Middle East matters. He just sat down w/ the Invest Like the Best pod for a wide-ranging chat (title: The Mechanic) about his life & career, and here are some highlights (take w/ a large pinch of salt, as obv there’s a good bit of spin here 🧂 ):

• On the debacle at 666 Fifth: “We had a thesis at the time which I think was the right thesis. We just had the wrong timing and the wrong capital structure.”

• Stepping in after Charlie’s incarceration: “I was either getting kicked in the nuts or kicked in the stomach every day. And some days it was both.” 🥜 

• On partnering w/ CIM at 200 Lafayette: “He [CIM’s Avi Shemesh] looked at me on top of the roof and he said, ‘Jared, I'm not going to invest in this building. I'm investing in you.’”

• Abraham Accords: “When I was sitting with [UAE prez] MBZ, I basically was asking him one simple question, which was, ‘America has a lot of power. We have a lot of tools at our disposal. You are somebody who's been here for a long time. You're thought to be one of the wisest leaders in the region and in the world. If you were me, what would you do?’ He said, ‘You're the first senior person that's come from the US that I can remember who actually asked questions.’"

Quickies

• The Nightingale will sing: Trustee expects Elie Schwartz to plead guilty in federal wire fraud case 🪶 

• YOLO, YODO: Hollywood Forever’s new mausoleum doing brisk sales 🪦 

•  Highgate surrenders 686- 🗝️ SF hotel to lender Blackstone

• Chehebar Bros. buy Times Square office for $370/foot 💇 

• Slammer time: Chicago developer gets ≈ 13Y for embezzling funds from now-failed bank 🏦 

• Inside Wall St.’s “synthetic risk transfer” mania 🛟 

• How fighting affordable housing nearly bankrupted 1 of 🇺🇸 ‘s richest towns 

Unquotable Quotes