The Promote: Domino's Dealmaker, Billionaire Multifamily Fetish & NYCB's World of Hurt

Sugar Daddy

If your first earnings in a city come from selling a pint of blood 🩸, it might be an auspicious place for you to ply your trade as a real estate developer. 

Forty-five years ago, in one of the defining deals in modern U.S. real estate history, David Walentas struck an agreement with one Harry Helmsley to buy much of Fulton Landing, a dilapidated industrial stretch of New York City where mob hitmen would dump bodies. Walentas was iced out of his investor base – he had fallen out with his well-heeled partner, who then killed himself – so he needed new backers. Through his second wife (met through his lechy landlord policy of personally interviewing all young female potential renters 🙄 ), he got hooked up with the brothers Lauder. And so it was that Walentas ended up acquiring 2 million square feet for $12M. $6/foot. For what is now Dumbo. 

"We got the whole neighborhood,” he told Forbes. “You had the freedom to create a neighborhood. In New York. And whatever you did with one building would add value to the others."

The rest we know. Walentas parlayed those holdings into an empire and built one of the trendiest (and most Insta’d) neighborhoods in the world. He arguably kicked off brand Brooklyn and inarguably became a billionaire along the way. It was, even as megaprojects go, complicated: a rezoning standoff with the Koch administration, a head fake engineered by Gov. Mario Cuomo, and finally, a residential nod from Rudy G’s administration. (To go down this particularly enthralling rabbit hole, listen to the man himself tell the tale here.)   

In 2012, Walentas and his son Jed (the new REBNY chair) decided to do it all over again. Their Two Trees Management bought the Domino Sugar refinery and 11 acres around it for $185M, kicking off a multi-decade effort to remake the Williamsburg waterfront. The scale and complexity of the $3B Domino project is head-spinning: 3M sf, 2,700 apartments, 600K sf of office, slated for completion in ‘27. (Along the way, another knife fight w a mayoral administration, de Blasio’s - read this Gabe Sherman scorcher to understand just how much of a top-level developer’s job is PR management and public posturing 🦓 ) The area is already a contender for the vibiest spot in New York - if you’re single, you could do worse than go hang out on its “urban beach.” 

This week, the Post reported that we now have some office leases at the Refinery, the glassy building inside the historic factory’s brick facade. It’s a long road ahead – 15K sf down, 450K to go in a less-than-stellar office leasing environment – but it’s one of those projects you want to work, because of how hard they went for it. (Thinkbois, here’s a great one for you: Embroidered into the left cuff of all Walentas’ dress shirts is “NO GUTS, NO GLORY”) 

Fuck, Barry, Kill

Sternlicht is in the class of investors who can kind of say whatever they want and it’s treated as news. (Something he is aware of and games beautifully - remember that Starwood owns special servicer LNR)

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Billionaire Multifamily Mania

David Rubenstein is going shopping - and not just for baseball teams.

The billionaire co-founder of Carlyle, and, as of last night, the incoming owner of the O's, is an anchor investor in Declaration Partners, which is looking to raise about $400M from wealthy folks and family offices (organized wealthy folks) for its latest fund targeting multifamily and industrial properties, per Bloomberg. JBG Smith alum Todd Rich heads things up at Declaration, and prefers to keep the fund cozy: “Wealthy families have had money for centuries, and they’ve only chosen to invest when they’ve had conviction and not out of some institutional pressure to allocate capital,” he said during their first raise in ‘22. (Is there a money manager finishing school where everyone learns to talk like this?)

Billionaires plowing their personal fortunes into multifamily is nothing new, but it’s gotten lots of attention in the wake of moves made by Zara owner Amancio Ortega. Pontegadea, his family office, is required by its tax structure to invest all its money from his retail empire within a year and into “real economy” assets, per Bloomberg— meaning securities are off the table.  Every Miami CRE broker has made Ortega their patron saint since ‘15, when he dropped a record-breaking $370M to buy an entire block of Lincoln Road. In ‘22, he made quite an entrance into multi, dropping $488M (nearly $1M/unit!) to buy Carmel Partners’ luxury rental in FiDi, and last year, dished out $230M+ for the Chicago version.

TRD reported today that Harmon & Spies are shopping Durst’s luxury rental in Long Island City - guessing Ortega is on the ☎️ list.  

Multi Lender NYCB’s No Good, Very Bad Day

NYCB’s shares plummeted a record 46% after reporting way higher than expected loan-loss provisions and a slashing of its dividend. “Something has clearly changed in their tone,” RBC analyst Jon Arfstrom wrote to clients, per Bloomberg. “This was a material negative surprise.” Investors may now be seeing it as a poster child for the CRE crisis.

Per TRD, the bank reported a close to $2B jump in “criticized” multifamily loans — loans with a chance of default. 8% of its $37B multi book was marked such, as was 14% of its $18B rent-regulated loan book. (For a broad overview of just how fragile NYC’s rent-stabilized housing stock is right now, and how much of a landmine it is to lenders, recommend reading this from Thesis Driven )

Cushy Gig

Hunter over at Lewis Enterprises makes a case for a Colliers takeover of Cushman & Wakefield, which he argues is in a Mexican standoff between needing to grow to compete with JLL and CBRE and needing to ✂️ expenses  and de-lever. It has lost some major business recently, getting fired by Brookfield in a potential act of retaliation over backing out of an office lease, and there’s been a steady exodus of top dealmaking talent (most notably, the Batman-and-Batman duo of Harmon/Spies last year).

From LE: “An acquirer would pick up over $5 billion of recurring revenue from Cushman’s services business, get the leasing and capital markets business for cheap, and step into a cost structure already partially rationalized by existing management.” Check out the rest here.

(Note: the Agnelli family has no current control over CushWake - it sold to DTZ in ‘15. I just couldn’t resist throwing L'avvocato in here)

Worldwide Woes

For more on RXR’s endgame, check out this edition of The Promote

Ashkenazy’s Boston Bruising

It’s been an unhappy journey for Big Ben in Boston. The New York investor picked up the long-term lease on the historic Faneuil Hall from GGP in ‘11 for $140M, but it’s not gone well: the city, which owns the land, didn’t like how he ran things and hit him with a notice of default over payments; retailers alleged poor upkeep; and just bad vibes all around. Now, he’s out, selling the complex for an undisclosed price to a branch of the House of Safra, the Brazilian banking dynasty which is going through its own epic succession telenovela.

Unquotable Quotes

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