Meridian's Freddie "Freedom" & Morning Calm's Miami Bet

Meridian’s Freddie “Freedom”

Brian Brooks sent out the note to Meridian Capital staffers at 5:29 p.m. Within less than forty-five minutes, it had acquired “forwarded many times” status on Whatsapp. How’s that for CRE virality? 😉 

“Team, I have great news,” the CEO of the hobbled mortgage giant wrote Tuesday, as first reported by The Promote. Starting in Jan., Freddie Mac would begin accepting Meridian-brokered loan deals, ending a nearly yearlong stalemate that has proved a body blow for the firm’s business and catalyzed big defections of talent (list of top exits here). “Ralph [Herzka] and I can’t thank you enough for all your patience and confidence through this process,” Brooks added, saying he was “over the moon” 🌚 about the development.

Within the note, however, was a line that should bring Meridian brokers back to earth.

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Meridian (Cont.)

“There will be a special process for loan submissions to Freddie,” Brooks wrote, instructing his brokers to hang tight on such deals for now. And it’s the details of that process that might make Brooks’ announcement more of a PR stunt than an actual return to form. The most onerous, according to agency guidance reviewed by The Promote, are loan repurchase rights.

On Meridian deals, lenders would be required to repurchase a loan from Freddie if a borrower defaults for ANY REASON within 12 mos., sources confirmed. And if hanky-panky is discovered – recall that Meridian was benched bc of mortgage fraud concerns over a deal – then a lender would be required to buy back the loan even after that 12-month period. Meridian-brokered loans will now also come with “enhanced representations & warranties” – a lender will have to vouch that a deal is fraud-free – and enhanced due diligence requirements, including stricter lease audits and a requirement that a lender will have to meet w/ the borrower in person. 🤝 

“The decision to consider loans submitted by our Lenders that are brokered by Meridian Capital Group comes after a thorough review process and enhancements to our Lender requirements,” a Freddie spox said in a statement to The Promote. “We are continuing to closely monitor brokered loan activity to ensure our requirements are being followed.” A rep for Meridian didn’t respond to requests for comment.

It’s helpful to remember that Freddie emphasizes that its r’ships are w/ lenders, not w/ brokerages. So it’s up to the lenders – the Arbors, the CBREs, the Walker & Dunlops – to decide whether it still makes sense to go the Meridian route, given that the buyback provisions and the DD will make things a lot riskier and pricier for them.

In CRE finance, loyalty can be measured in bps. If the new hoops & warranties make doing a Meridian deal a few bps pricier for the lender, but Meridian can cash in some goodwill (Ralph’s been in the biz a long, long time) and make it worth their while in volume, then maybe the lender keeps playing ball. But if they make Freddie loans a lot pricier than they would be when done directly or through an untainted broker… that loyalty will be tested. Also, we’ll see how Fannie Mae responds to all this - the other major force in MF lending had also sidelined Meridian in March.

“People use a broker because they want to get something they didn’t have before,” said a senior player in the space. “But now, you have this crazy scrutiny… and the seller-servicer won’t want to take the extra liability.”

“They [Meridian] can tell people they’re kosher,” the source added. “But is it kosher to the glatt level that everyone will want to eat?” 🥩 

Bonus: The Plot to Free Fannie & Freddie 

Morning Calm Joins Singer on Big Brickell Bet

A pretty sensational deal just closed in Miami: Nuveen (which is having a banner year w/ sales, C-PACE and a lot else – more on them soon) sold 701 Brickell for $443M, or just under $650 a foot. The sale, per JLL (their squad has been cleaning up in Brickell), is the 2nd largest office deal in the state’s history, and was done all-cash. One of the buyers is Paul Singer’s hedge fund Elliott Investment Management, which has been reported, but it’s worth zooming in on its partner: Morning Calm Management, a firm run by Mukang Cho. Cho cut his CRE teeth as a lawyer, working on deals such as Harry Macklowe’s $1.4B purchase of the GM Building 😢, and founded Morning Calm a decade ago w/ a focus on special sits.

The Boca Raton firm has made several office bets in Florida, including a $54M deal in West Palm Beach in ‘21, and launched a distressed office JV in ‘23. But AFAIK it’s never done anything of this scale before – wondering if it’s just the minority/operating partner here for the billionaire edgy hedgie.

RIP Greystone Monticello

Not all marriages go the distance: Greystone Monticello, a bridge lending JV between Greystone and MONTICELLOAM formed in ‘21 to target the sr. housing and healthcare sectors, is over, sources told The Promote. The website is out of commission as well, and the LinkedIn page’s branding has changed to that of just Monticello. Looks to have happened v recently, too – as recently as mid Sept. the vehicle was still active. The JV brought together a giant of agency healthcare finance in Greystone w/ a prolific specialist in Monticello, but sources said that the combination created a 2-layered credit process that put a further damper on Greystone’s already spotty bridge-lending business.

(Tried to reach the Greystone folks for comment, but their IT crowd blocked my emails 😭 )     

Google’s West Side Story

Manhattan, man! Joining the torrent of marquee leasing deals in the city is the news from TRD that Google is staying put at its 300K sf spread at Vornado/Related’s 85 Tenth Ave. Remember that Google owns its space at Chelsea Market ($2.4B pp) & neighboring 111 Eighth ($1.8B pp), so this renewal is really significant. Asking rent for the spread was $100/foot, but we don’t know if the landlords had to heavily sweeten the deal for Google, as Vornado did for Bloomberg at 731 Lex in May.   

PSA for Pacaso Investors

Pacaso has been pushing its $75M Reg A offering to everyday Americans ™️ – catch up here. Its marketing focuses on a nebulous “$100 million in gross profit,” though in truth it’s staring down ongoing losses and even more worryingly, tumbling revenues. My PSA for investors: Listen to Paulie  

Quickies

• 🎥 EB-5’s black hole: Cheap mezz, pricey drama 

• Ah, grand: Primark taking nearly 80K sf at Vornado’s Penn property 🍀 (see also: Manhattan is still Manhattan)

• NSFW building in Tribeca headed to auction block 💄 

• Florida Man has buyer’s remorse: mucho homes, mucho hurricanes ⛈️ 

• Hedge fund Deer Park launches office distressed debt fund 🥱 

• Judge Dread: Fortress can pursue Charles Cohen on $187M PG (catch up w/ mega-foreclosure case here & here) 🥋

• Ares swallows GLP’s non-China logistics portfolio in $5B+ megadeal 

• Edgardo Defortuna wants to build another Brickell supertall

• NYC releases guidance on 485x tax break (more on NY’s housing deal here)

• KKR buys Philly warehouse from Dov Hertz for $83M 

Unquotable Quotes