NewPoint’s Unwanted Ride-or-Die & a Bombshell Yardi Ruling

NewPoint’s Unwanted Ride-or-Die

“Take the crookeds with the straights." - August Wilson, Fences

In January 2021, two of the biggest names in multifamily finance, Barings & Meridian Capital Group, launched an agency lending platform, NewPoint, with ambitions of ruling that lucrative roost. Bankrolling the new JV was Stone Point Capital, a PE firm whose previous bets on Rialto (special-servicing/B-piece beast) and Kensington Vanguard (title) had already given it a ringside CRE seat. Stone Point also invested in Meridian at the time, giving it a piece of one of the most formidable debt brokerages in the country, a 24-6 “Eat. Sleep. Close. Repeat” shop that had juice w/ mighty mortgage REITs like Arbor and CRE’s most important regional banks.

 NewPoint took off: As of Sept. end, the company said it had a servicing portfolio of $55B, becoming a top 10 Freddie lender and a top 3 HUD lender in the sr. living/healthcare space. Now, its owners are looking to cash in, sources told The Promote, and in the past few months retained Bank of America to steward a sales process.

One factor has proved an impediment: the attempt to tack Meridian onto a sale. NewPoint’s bosses want to sell Meridian & Newpoint as a package, or sell a stake in a combined Meridian/NewPoint entity (the details of the structure are still fuzzy to me), but some buyers have balked: An agency lender w/ coveted Fannie & Freddie licenses is quite a catch, goes the thinking, but why buy a talent-depleted brokerage that’s still climbing out of scandal?

Newpoint (Cont.)

“The Meridian piece is viewed as a toxic pill,” an agency insider told me. Lenders have expressed interest in acquiring NewPoint as a path to a lucrative agency license, but Meridian’s headline risk is a dealbreaker for some. PE firms - the usual suspects, including Blackstone – have been in discussions to acquire NewPoint, but at least one has explicitly said that if Meridian is in the mix, they are out. 💊 

Late last month, Bloomberg reported that NewPoint was exploring raising growth capital. “It has always been part of our strategy to secure additional investment in NewPoint,” NewPoint CEO Nick Gesue said at the time. “We are now executing that plan, seeking to raise strategic capital to grow the platform.” A $400M+ valuation was dangled in the story, which did not discuss a sales process or the Meridian encumbrance.

Here’s how we got here. The exact timeline of events is unclear, so this is ballpark:

Sometime last fall, Freddie blacklisted Meridian over an allegedly dodgy deal. Around then, David Brickman, the former Freddie CEO who was the founding CEO of NewPoint and had also been given the add’l title of “Executive Chairman” of Meridian, vacated his Meridian title – curiously, references to the stint were also scrubbed off his online profiles. In March, Fannie followed suit, and Meridian brought in Fannie alum Brian Brooks to right the ship, w/ founder, chairman and CEO Ralph Herzka moving to a “sr. chairman” role. Brooks promised an end to the firm’s cowboy culture (“we will cut brokers who cut corners,” he said), but much of the damage was done: the ensuing months, with Meridian on ice w/ both agencies, became a blur of rainmaker exits (see our rundown here). And of course, this was all playing out as regional banks such as NYCB and Santander, lenders with whom Meridian reportedly enjoyed “most favored nation” status, became a far less potent force in CRE finance.   

This August, NewPoint abruptly replaced Brickman (it was spun as a “stepping down,” but “effective immediately,” and employees weren’t told in advance 🤷‍♀️ ) w/ Gesue coming into the top job. Gesue arrived w/ valuable industry M&A experience, having seen Lancaster Pollard through its merger and then roll-up into what is now Lument. Bringing in a new boss led to more shake-ups: NewPoint’s #2, president Jeff Lee, is out - he’s no longer on the website. 

In October, as first reported in these pages, Freddie deemed that Brooks had suitably cleaned up the act: it reinstated Meridian, effective January, though w/ caveats in the form of buyback provisions and enhanced DD that could make business w/ Meridian pricier and more onerous for lenders. (No word yet on where Fannie stands.)

NewPoint didn’t comment by press time. Without Meridian, it is considered a highly attractive target, either for a lender looking to crack into agency finance – there are only 24 DUS licenses & 22/23 Optigo licenses, and new ones are insanely hard to get – or for a PE shop – recall that this summer, Blackstone found a side door into agency lending by striking a partnership w/ M&T Realty Capital. 

A combined Meridian-NewPoint transaction could still happen, of course, and discussions may even be happening at this very moment. It’d just need a suitor ok w/ all that extra hair. 🦱 

Yardi Ruling Gives DoJ Ammo in Price-Fixing Crusade

This deserves a deeper dive, as it has major implications for the future of landlords using algorithms to help set rents, but for now: a federal judge in a case brought against Yardi Systems has ruled that collusion by algorithm can be considered price-fixing, a boost to the DoJ’s “per se” interpretation of antitrust law – i.e. regardless of whether landlords went ahead and disregarded the algo’s recommendations, the fact that they were provided in the first place equates to price-fixing (I’m not a legal expert by any means, just trying to dumb this down for myself and for you- docket here).

Here’s a snippet from Holland & Knight’s blog on the matter: Importantly, unlike in the RealPage case, where the court found the alleged conduct did not fall into a category that courts have condemned as per se illegal – such as price fixing, bid rigging, or market or customer allocation – Judge Laznik found that the plaintiffs' "allegations that defendants colluded to fix prices at above-market rates and impose those prices on customers is per se anticompetitive conduct.

This is, of course, playing out while the DoJ dropped its criminal investigation into Yardi’s archrival RealPage, but is still pursuing civil action. We’ll have more Friday for you.

SY High Street Games

We riffed on this deal Friday. I wish we had waited, because the most delicious details have emerged. Macy’s had tapped a New York outsider, Raider Hill Advisors, to market its Downtown Brooklyn megastore (440K sf space), and oh boy did the SYs capitalize: First, Ike Chera bought the joint for the laughably low price of $23M, per the Post, and scored a near-instant $13M profit by flipping it to 2 contemporaries, the Laboz and Chehebar families, for $36M. It would be bad enough for Macy’s if the story ended there, but soon after, the Laboz and Chehebar syndicate brought in another investor into the deal at an $80M valuation. 👏 👏 👏 Everyone made out like a bandit, except Macy’s – the first word that came to mind when I read the dispatch was “bechara,” which is like “schmuck” but evokes more pity.

There’s a lot more drama to come: This week, activist investor Barington Capital revealed it had taken a stake in Macy’s and began pushing the retailer to create a separate real estate unit within the company. To assist w/ this quest, Barington has brought in another SY retail titan: Thor Equities’ Joe Sitt 🍿 , according to an investor presentation it made to Macy’s shareholders Monday. Thor & Barington claim that Macy’s real estate is worth between $5B-$9B, well in excess of its $4.4B current market cap. We’re poised for a season of very fun dealmaking.

Cousins Sets Sail in Austin

Quite an office acquisition frenzy Cousins has been on – nearly $1B across just these 3 deals: it partnered w/ Blackstone cub 🦁 Tyler Henritze’s Town Lane this summer on an $83M ($158/foot, all-cash) deal in Midtown Atlanta; then struck a deal in November to buy twin office towers in Charlotte for $329M. Now, it’s paying Trammell Crow $522M ($650/foot) for the fully spoken for (Google pre-leased the whole thing but never moved in) 804K sf Sail Tower ⛵️ in Austin, in what is poised to be the second-highest price ever paid for an office tower in the city – on a psf basis though, there have been pricier deals, per CoStar., incl. one by Cousins itself, which paid $860/foot for 300 Colorado in ‘21 – TikTok struck a deal to anchor that tower in ‘22.

Quickies

• 🎥 Sevenstone, Fannie, and the case of the missing page 

• Feds charge luxury brokers Alexander Bros w/ sex trafficking - indictment here, more deets here & mugshot here 

• Extell files resi plans at Disney/ABC campus 

•  SL Green refis 100 Park, signs purchase option agreement to buy out partner Prudential

• Jeff Soffer lands $550M refi from GS/JPM at Aventura resort

• However corrupt you think HOAs are, double it 

Unquotable Quotes