Singer's CRE Song & FTC's Invitation Homes Smackdown

Singer’s CRE Song

South Florida is still small enough that a few billionaires can throw their weight around and reshape the market – it’s part of what draws them here I suppose. We have Ken Griffin, the grand sherpa of Wall Street South. We have Steve Ross, the prophet of West Palm Beach. And given the torrent of dealmaking he’s been on, it’s now worth calling attention to Paul Singer.

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Singer (Cont.)

Singer’s hedge fund Elliott Investment Management just snapped up Nuveen’s 701 Brickell office tower for $450M, per Bloomberg, or about $650 a foot. Nuveen had already cashed in on the tony corridor earlier this year, when it sold 801 Brickell to a Monarch/Tourmaline JV for $250M, or $600 a foot.

That’s on the equity side. What Singer is doing with debt is even more intriguing. Elliott is backing ex Genesis Capital CEO Robert Wasmund on a resi construction lending platform, Ascent Developer Solutions, which aims to do $3B-$5B in deals annually. It’s also the money behind Tyko, a lender run by former prolific debt broker Adi Chugh that is writing some of the biggest checks in the CRE market, including $565M to Vlad Doronin at 830 Brickell and the mezz on Witkoff/Blavatnik’s $1.2B refi on New York’s High Line.

Elliott moved its HQ from NYC to West Palm Beach in ‘20, giving a major boost to South Florida’s money manager ambitions.

Special Servicer Workout MOs

Variety is the spice of life, an old chestnut that holds true even in the Bizarro Jerry world of special servicers. Some deal w/ problem loans by working things out w/ borrowers, others crack skulls and are more prone to take properties back via foreclosures, as a new study from CRED iQ shows. The analysis, which crunched 1.8K loans w/ a total value of $45B, spat out some interesting findings: KeyBank (which the Canadian Scotiabank took a stake in this summer) had the highest % of foreclosures, representing just over a 5th of its troubled loans. Compare that to Rialto, which pursued foreclosures on 12.3% of its book. LNR was the biggest user of REO strategies (19.5% of book), while CWCapital had the greatest proportion of loan mods (20.3%).

Special servicers are the ones to watch at this stage of the cycle- they’re both printing money and catching 🔥 from sponsors, as we break down here.

Bonus: How $164M Went Missing in Multi Megadeal (hint: special servicer holdback)

Electric Karma

Here’s a shocker: A $97M CMBS loan on a sprawling Rochester industrial park has hit special servicing with the borrower staring down “non-monetary default” from $2.4M in unpaid utility bills 🔌, per Morningstar (h/t CO). The 3.4M sf property, a former Eastman Kodak facility 📸, was just over 60% occupied as of June, w/ net cash flow 30% below underwriting. Despite the property’s challenges, the CMBS loan, originated by Cantor Commercial, had remained current, per Morningstar’s David Putro, who told the publication that “he can’t recall a loan where the borrower funded debt service shortfalls for several years then saw the loan moved to special servicing because of unpaid utilities.” Quite a mystery over at the owner, Leslie Westreich and Morty Yashar’s Tryad Group.     

FTC Comes at Invitation Homes

Invitation Homes, the country’s largest owner/operator of SFRs, reached a settlement w/ the FTC over allegations that it tricked renters about lease costs, hit them with a variety of junk fees, failed to inspect homes before move-ins, and held on to security deposits after move-outs. The REIT, whose portfolio spans 85K SFRs, will pay a $48M fine (these fines are always piddly) and is required to make mods to how it displays prices and deals w/ security deposits.

“No American should pay more for rent or be kicked out of their home because of illegal tactics by corporate landlords,” said FTC chair Lina Khan (over the summer, SFR giant Barry Sternlicht said the FTC had “gone off the deep end.”) This is Invitation Homes’ 3rd major legal scandal in recent months: in Jan., the firm settled price-gouging allegations brought by the California AG, and this summer paid $20M to settle a fascinating whistleblower (see Snitches get Riches here) case over unpermitted renos.

Quickies

• 📽️ “Brother I am your shadow:” Rundown on the FDNY/building permits scandal 🧑‍🚒 

• The institutionalization of home equity 

• Related takes 73% bath 🛀 in Hell’s Kitchen office sale to Namdar/Empire (also see: Billionaire and the Great Neck Strivers)

• Primo Midtown office focus gives SL Green its mojo back 

• Ziggurat zeal: Bids for hulking OC federal office property jump to $165M – more than 2x the original ask

• Bistricer’s $100M CMBS on DoBro office goes delinquent

Unquotable Quotes