S2's Rescue Recap & The People vs. Puretz

S2’s Rescue Recap

One man’s carnage is another man’s chance. Nowhere does that feel more true than in multifamily syndication, where Icaruses are falling out of the sky on the regular and those w/ capital find themselves in prime position to pounce. The latest such deal: Scott Everett’s S2 Capital is taking over as GP on a massive portfolio formerly controlled by Alan Stalcup’s GVA, according to investor docs viewed by The Promote. S2 is putting in ≈ $60M to recap the distressed portfolio, which spans 1,768 units in Nashville, Knoxville, and Dallas. 🤠 

To make the deal happen, GVA’s existing LPs had to agree to contribute all the individual property JVs into a new holdco that would sit junior to S2’s pref, according to sources - that’s the move that puts S2 in control here.

S2-GVA (Cont.)

Half of the $60M will be used for capex/renos, per the investor docs, while the other half will be used for “existing lender paydown to de-lever from the existing $225M senior loans and put on new debt at $195M.” The portfolio, which has an avg. occupancy of 77%, is delinquent on its uncapped bridge loans and is facing threats of foreclosure, per the docs.

Everett declined to comment, while Stalcup didn’t respond to requests for comment. Recall that Everett is in the midst of a closely-watched attempt to fold a chunk of S2’s multibillion-dollar portfolio into a private REIT, a high-wire act of operations & LP finessing we broke down in detail last month. Stalcup, meawhile, is deep in foreclosure mania, and is facing allegations of going behind his LPs’ backs and cross-collateralizing loans.

The People vs. Aron Puretz

“Who is the happier man, he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed?” - Hunter S. Thompson

He got the maximum: Aron Puretz, a central character in the mortgage-fraud scandal that has discombobulated the CRE universe, was sentenced to 5Y in prison last week. Puretz, who pleaded guilty this summer to a single count of wire fraud, was also ordered to pay restitution of $22.2M - $20.3M to Chase and $1.9M to CBRE 😶 – as well as a $250K fine. After the 2h 2m hearing, he was remanded to the custody of a US Marshal. He’ll have a 3Y period of supervised release, during which he’ll have several restrictions (no booze 🍷 , no taking on new debt, no asset sales w/o court approval).

Flashback 🎞️ : In ‘20, Puretz, along w/ co-conspirator Barry Drillman 🚬 , bought a Michigan office park for $43M, but showed the lender a purchase & sale contract for $70M, plus a fake LoI (and even arranged a short-term $30M loan to demonstrate proof of 💵 ). Riverside Abstract, a title firm based in Puretz’s hometown of Lakewood, performed both the real & fugazi closings. Puretz, of Apex Equity Group, had pulled similar stunts w/ multifamily properties in Illionis & Arkansas a few years earlier, duping Freddie Mac & HUD in the process - the Illionis deal even saw Puretz & co. create a charity in order to score tax-exempt status. 🥹

What this sentencing ( 🎩 TRD) does is establish a “comp” of sorts for the other convicted fraudsters awaiting their fate: Drillman, Fredrick Schulman, Puretz’s son Chaim “Eli” Puretz, and Moshe “If there is no price anywhere then it’s good” Silber, all of whom have pleaded guilty to the same charge. It also gives a ton of juice to the FHFA, which oversees Fannie & Freddie and has been co-piloting the mortgage-fraud investigations. 🧃     

Landau’s Omakase Dealmaking

Jonathan Landau, the former Fortis CEO who struck out on his own 2Y ago, has been in the thick of the action across New York and South Florida. He’s developing a 47-story resi tower in Brooklyn Heights on Joe Cayre-owned land (fascinating project, more on it soon), and in Bay Harbor Islands, a posh South Florida enclave right by Bal Harbour (what’s w/ all these different spellings), he’s developing a boutique condo. Now, Landau has made an even more intriguing bet on the area: he’s partnering (50-50) w/ local bigwig Irwin Tauber ( 🚤 🚤 ) on a boutique 126K sf office project called One Kane Concourse. Landau scored a $74M construction loan from 3650 Capital (fka 3650 REIT) for the project, he told CO. But here’s a little extra wasabi: the lender only financed the deal once a lease with BondST, a chic NYC Japanese eatery that will be anchoring the One Kane retail, was finalized, according to deal emails viewed by The Promote – the BondST tenancy hasn’t been previously reported. 🍣 What’s also interesting is that Landau threw a party at BondST’s Hudson Yards location in April to fête the aforementioned Bay Harbor condo project (the party was co-hosted by the project’s former brokers Oren & Tal Alexander, who are now facing federal sex-trafficking charges; Landau replaced them some time after the allegations surfaced.)
Landau has been chasing this deal for a while. Here’s a snippet from a Jan. ‘24 equity-raising presentation we got our hands on.

A former transactional tax attorney w/ DLA Piper, Landau led Fortis on behalf of the Kestenbaums (Joel & Louis) before deciding it was time to go into business w/ his own family; his partners on his new shop are his daughter and son-in-law.

Rialto Ratchets Up the Heat

UFC legend Khabib Nurmagomedov 🦅 tells the following tale: as a kid in Dagestan, his cousin got involved in a street fight, and took a hiding. Khabib then stepped to his cousin’s tormentor, and said: “Now, you need fight with me.” 💀 

I thought of it today as I read TRD’s latest on Rialto’s strategy w/ Signature Bank borrowers – Rialto partnered w/ Blackstone and CPP to buy a stake in the failed bank’s CRE loan book this time last year, and is now putting considerable legal heat on delinquent borrowers, most notably RFR’s Aby Rosen & Michael Fuchs. Rialto has filed at least 6 lawsuits against the duo, alleging defaults on Signature mortgages/ promissory notes – the latest one is over a $45M loan that RFR took on the retail at an UES property. Other, less St. Barth-type borrowers have also felt Rialto’s wrath: “I don’t know how to stop them. I don’t know what to do,” said one.

“We continue to engage with borrowers to find the best resolutions possible and expect borrowers to honor the commitments they made under their agreements,” Rialto told TRD in a statement. It’s an imposing counterparty, a far cry from the buddy-buddy vibes that Signature had w/ its clients. Perfect summary here from @meaty_bones 👇️ 

See also on RFR: When Business Gets Personal (Guarantee)
And more on Rialto: Tragedy of the Special Servicer 

Quickies

• 🎥 Musk’s DOGE & Trump advisers ask: Do we really need the FDIC? 🐕️ 

• Brokerage accuses CushWake’s Diana Boutross of making false statements to NYC agency (full rundown on saga here)

• Saudi conglomerate Olayan (owner of NYC’s Sony Tower) gunning to buy Walton St.’s Mag Mile tower at fat discount 

• “Retired” is a curious choice of word here - Lampen was part of Lorber’s inner circle

• V interesting in the wake of RealPage/Yardi rent-fixing mess: startups are trying to seize the moment by pushing their public-data offerings via sponcon

• 🎥 5 gifts sure to delight a CRE junkie in your life 

Unquotable Quotes