Freddie's Syndicator Slap & Cooper Union's Ground Game

Freddie’s Traveling HFC Decree

This is as fresh as it gets: The Promote has learned that Freddie Mac has paused quoting new financing deals for traveling Housing Finance Corporations, vehicles that became lifelines for Texas multifamily syndicators by absolving them from property taxes 🤲 , de-risking even “dogshit deals.” (If new to the issue, read The Promote’s deep dive from last month here.) Keep in mind that lawmakers have already started to ask tough Qs about whether the vehicle is kosher.

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HFCs (Cont.)

A Freddie source confirmed the change to The Promote.

This takes a key financing option off the table for syndicators in such deals. Recall that a similar thing took place w/ traveling Public Facility Corporations; though deals that were structured prior to the Texas legislature banning the vehicle last year were allowed to stand, they’ve become quasi-unfinanceable via the agency route.

With traveling (official term: cross-jurisdictional) HFCs, there is growing concern that an incentive designed to spur the development of affordable housing locally has transmogrified into a freebie for far-flung existing operators – vehicles from places like Garland and Cameron County have been running amok across the state.

CRE capital markets are pretty mimetic, so we’ll see if this new move by Freddie impacts how other sources of financing, including CMBS and muni bonds, view the vehicle. 💼 

Cooper Union’s Ground Game

“I have always recognized that the object of business is to make money in an honorable manner.” - Peter Cooper

The rent stays like before… but the entity collecting it is no longer RFR. Aby Rosen & Michael Fuchs’ firm, which is battling to keep control of the leasehold at the Chrysler Building, was just barred from collecting the tower’s rents, which must now be paid directly to ground lessor Cooper Union. The venerable college is in the midst of booting RFR from the tower for nonpayment of rent, and RFR’s had fought the move by claiming that Cooper Union’s handling of student protests had repelled tenants at the Chrysler. A judge, however, ruled that the institution’s actions at any other property could not be a factor in tenant rent payments, and ordered RFR to stay out of Cooper Union’s way when it comes to managing the property. Cooper Union’s bid to collect $21M in back rent from RFR is still playing out in the courts.

RFR bought the 1.2M sf Art Deco landmarked tower for just $151M in ‘19, the low price ($125/foot) mostly bc of the specter of skyrocketing ground rents – from $7.8M in ‘18 to $32.5M now and $41M in ‘28. RFR’s equity on the purchase was the Austrian Icarus, René Benko, whose Signa Holding went through an emergency restructuring (good profile here) late last year and threw the fate of the tower into flux. We’ll see if RFR fights this new ruling – a rep for the firm described the benching as “temporary.”

Aby Rosen, a self-described “lucky bastard,” has taken his fair share of knocks recently: he and Fuchs were ordered late last month to cough up $18M to their Korean lenders over PGs signed at 285 Madison - catch up with that whole sitch here. As they fight to come out from under a $2.5B mountain of debt, the partners have sold off some big assets, including a distressed Gowanus site for $160M+ to Tavros/Charney and the W South Beach to the Reuben Bros for $400M+.

Bonus: Inside the wild ownership history of the Chrysler Building 

Going Concerns

Crikey: Office Properties Income Trust, which controls 20M sf of space across the country, has alerted investors about “substantial doubt about its ability to continue as a going concern for at least one year.” In an Oct. 30 presentation, OPI flagged that it had over $450M of debt coming due in Feb., but pathways to refi that debt remain murky. The REIT is in the process of selling 17 properties (1.6M sf) for $119M, and is seeing what else it can conjure up to get through this. Net losses in Q3 were $58M, more than twice the $ lost in the same period last year, and the firm has nearly 3M sf expiring this year.

Kushnernomics

During DJT’s ‘16 race to the White House and in the early years of his term, the Kushners became the 2nd-most scrutinized family in America: every move was deconstructed to death (incl. by me), from the battle to reposition 666 Fifth w/ Chinese capital to talks to bring in money from the Qataris to its treatment of tenants. The family’s pivot away from the suburban apartment bets that made it rich and into glam Fifth Ave holdings didn’t pay off, and the family’s eponymous firm, Kushner Cos., was valued at just (I know) $1B in ‘16.

The years since have been kind: Kushner Cos. is now worth $2.9B, per a new Forbes deep dive. Efforts to investigate it have floundered, it successfully unloaded 666 Fifth, and its early bets on South Florida have been prescient, both in profitable flips of the dirt and in low-basis luxe development plays. It’s also fallen back in love w/ suburban apartment investing across the Mid-Atlantic & the south, taking adv. of cheap agency financing, and is again a big player where it all began: New Jersey.

More: The best thing ever written about the Kushners 

Even more: “Do you want me to throw you out of here now? Because I will:” The wildest Charlie Kushner interview you will ever read

Quickies

• RXR & SLG restructure $1.3B debt on Times Sq. tower- Apollo goes from mezz—> equity 

• What data center originations tell us abt the 🔥 asset class (catch up here)

• South Florida CRE broker charged w/ felony homicide in boating death 

• An annotated read of EQR’s earnings call: Back in 😍 w/ the Sunbelt, less time for coastal bets

• Florida CRE bigwigs lavish DJT w/ $$$ 

Unquotable Quotes