Habibi Come to Miami & a Rent-Regulated Reckoning

Habibi Come to Dubai Miami

When developer Hussain Sajwani was a college student in Baghdad, he faced an existential challenge: his lack of English fluency had led the Emirati to fall severely behind in his studies, and he had flunked 2Y in a row. The university gave second chances, but absolutely no thirds, and w/ his dreams of becoming a doctor hanging in the balance, Sajwani did what most men would not: he picked up the phone and rang Iraqi dictator Saddam Hussein ☎️ 

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Sajwani (Cont.)

Someone had slipped the decidedly middle-class Sajwani the private number of Saddam, one of the Middle East’s most powerful & feared rulers. Sajwani went to a nearby 💈 , paid the barber a few cents, and asked to use his phone. “I dialed, and within a second, Saddam came personally on the line,” Sajwani recently recalled. The college student pleaded his case, and though Saddam refused to help, the anecdote is now part of the origin story of Damac, Sajwani’s multibillion-dollar Dubai-based development firm that just launched sales at one of Miami’s most scrutinized projects: the luxury condos being built at the site of the Surfside collapse.

Unlike most Emirati titans, Sajwani shot to prominence without access to the most important currency of his country: wasta, which inadequately translates to “who you know.” He’s the son of a humble souq trader & a door-to-door saleswoman, a Shia in a majority Sunni country, and has long been regarded as an outsider by Dubai’s business elite – “The old families don’t really like him,” one Dubai-based executive told the FT. His Trumpian approach to marketing his projects – free flights ✈️ for prospective buyers, luxury car giveaways – rattled the city’s top state-backed development firms; Emaar boss Mohamed Alabbar once described his tactics as “unethical.” Damac’s ups and downs in Dubai and overseas projects are well-documented, w/ an Egyptian misadventure leading him to be sentenced in absentia. But Damac is now back in a big way – pre-tax profits in H1 ‘24 were at $456M (up 54% YoY), per the FT – and the firm’s razzle-dazzle approach seems perfect for Miami, which I’ve long argued is Dubai’s spirit animal.

Prices at the 37-unit Surfside project, dubbed the Delmore, start at $15M. Damac closed on the site in ‘22, after a stalking-horse $120M bid. Given the property’s tragic history, the firm was the sole bidder. But then, Sajwani’s always had the ability to make headlines, a trait he shares w/ his longtime associate and friend, Donald Trump – talk about wasta. Damac is planning a $20B US data center investment, which Trump touted at a Mar-a-Lago presser last month – that number appears to be more of a vibe than a concrete figure. But Sajwani has a simple philosophy: haters gonna hate

“People will tell you, ‘Hussain Sajwani . . . He is a difficult man,’” Sajwani told the FT. “Which successful man is easy?” 🫡 
 

The Office Landlord Cavity Search

Know thy enemy…and thy landlord. After seeing dramatic cases of capital-stack carnage play out in the office market, prospective tenants are now subjecting their potential landlords to heightened levels of due diligence to ensure that they don’t become collateral damage. “I don’t ever remember a period where a basic filter was the viability of the entity that owned the building,” CBRE leasing 🐐 Mary Ann Tighe told CO. “We would look at what was available: location, pricing, condition of the building. But it wasn’t standard operating procedure to say, ‘What is going to happen with this building? When does this financing expire?’ ” That caution is extended even to blue-chip sponsors nowadays, Tighe added – remember that the likes of Blackstone & Brookfield can and have walked away from once-trophy towers, leaving tenants wondering what comes next.

“It’s incumbent upon any occupier to understand all the nuances and the makeup 💄 of the capital stacks [sr., mezz, equity] that constitute the financial backbone of these assets,” said Savills’ David Goldstein. JLL’s Evan Margolin told CO of a tenant that insisted upon a landlord-funded full buildout of their space. One of the buildings in the mix was part-owned by a REIT, and “their lender said that they didn’t think this was the best use of their funds,” Margolin recalled, noting that his reports to tenant clients will now have a report on the building’s debt, and even sometimes an assessment of how solid the ownership situation is.

“Every larger leasing transaction we work on now,” Margolin added, “is also a capital markets transaction.” 🦷 🔦 

A Rent-Regulated Reckoning

A&E Real Estate (co-founded by Douglas Eisenberg & John Arrillaga Jr.) is among NYC’s largest multifamily landlords and a mega-player in that now-precarious asset class: rent-regulated apartments. The firm had been scrambling to get a handle on its CMBS debt on a major chunk of its holdings, but things now appear to have come to a head: bondholder trustee Wells Fargo has filed a pre-foreclosure action on the portfolio, which spans 3,500 units across 31 properties and includes marquee complexes such as Harlem’s Riverton Square; OGs will remember that that complex also felled Larry Gluck’s Stellar Management.

A&E told PincusCo that the move was part of a negotiation w/ sr. and mezz debt holders that will soon be resolved, stressing that it “has always made and continues to make interest payments,” and that building ops wouldn’t be impacted. Some of the units in the portfolio took a devastating hit from NYC’s ‘19 rent reforms; others are subject to different regulatory agreements.

Valuations on many of these rent-regulated portfolios have taken a hit, and w/ the collapse of key regional banks, financing avenues have dried up. To give you a sense of just how much the scene has shifted: in ‘16, NYCB’s then-chief lending officer Jim Carpenter described the bank’s big rent-stabilized lending push thus: “It’s helped shield us from all of the down cycles in the market.” 

Anatomy of an Assemblage

With SY royalty riches behind him, Victor Sigoura is poised to kick off what is likely to be Gramercy Park’s most significant development in a decade. Sigoura’s Legion Investment Group & repeat backer Gindi Capital have closed on the final parcels in a 6-property assemblage, per TRD. The parcels were crucial to the branding of the planned 20-story condo, as they allow for 2 things: the usage of a Gramercy Park address and the ultimate buyer amenity: a key to the private Gramercy Park. 🔐 Sigoura & Gindi also landed a whopper construction loan for the project: $335M from BDT & MSD (on our Quiet Kings of Capital list ) & Eyal Ofer (the $ on some of NYC’s most transformative resi projects of the past 2 decades), brokered by Newmark.

Highlights

• $72M: For 4 Third Ave parcels from a Korean investor + neighboring air rights

• $1.5M: A buyout of a co-op unit who tried to stymie the air rights deal

• $47M: For a co-op building at 38 Gramercy Park North

• TBD: To purchase a 5-story rental at 37 Gramercy Park East

Mona Lisa Smile

In light of the news that Manhattan’s Waldorf Astoria has closed its first condo sales since the Chinese govt.’s takeover (side note: quite a PR coup to get Bloomberg ink for a mere $7M in deals) of former sponsor Anbang and its installation of state-owned Dajia as cleanup crew, thought it an apt time to resurface this nugget: In ‘15, then Anbang-chair Wu Xiaohui, fresh off the $1.95B acquisition of the property from Blackstone, commented on the Chinese firm’s global spending spree. “If you choose to stay in rural villages, you can only meet common village girls,” Wu told students at Harvard. “Yet if you come to Paris, you will have the chance to lay your eyes on the Mona Lisa.” 🖼️ Anbang, of course, went on to epitomize China’s problems w/ so-called “gray rhinos,” highly levered conglomerates whose heady dealmaking was later subject to a state crackdown - in ‘18, Wu was sentenced by Chinese courts to an 18-year prison sentence after a multibillion-dollar fraud conviction. 🦏 

Quickies

• 🎥 Aby Rosen’s real estate reckoning 🦳 🫃 

• PA county hits Silber, Schulman w/ felony theft, conspiracy charges – remember their sentencing in federal mortgage fraud case is mañana 

• Shutters on the Beach owner seeks $2M/ 🔑 valuation on hotel recap

• MG Properties pays $309M ($430K/unit) to PSP/Greystar for 718-unit San Diego multi - largest such trade in 4Y 🐚 

• Lightstone lands $290M refi for Moxy Times Square – new lenders are Israeli bondholders w/ Reznik Paz Nevo (pops up a LOT) as trustee

• Gotlib, Orbach land $240M from Apollo for recap of luxe rental @ 685 First – RXR, Macquarie now also in the mix

• Deloitte bouncing from DTLA’s Gas Co. Tower - which is now owned by LA County

• Good analysis here of BMO’s curious Baltimore boogie w/ Mendy Steiner (catch up on whole Steiner saga here)

Unquotable Quotes