Reichmann Runs it Back, Shadow Lenders, Miami Megaproject, CoStar's Super Bowl

Reichmann Scion Runs it Back

''There have been two great real estate deals in the history of New York. The first was when the Dutch bought the island of Manhattan. The second was when the Canadians bought the island again.'' - Meyer Frucher, Battery Park City Authority

$33 a square foot. That’s what it cost to propel two Canadian brothers, in a single transaction, into the ranks of Manhattan’s largest office landlords. Albert and Paul Reichmann were able to see past the "Ford to City: Drop Dead" blight of the late 70s and envision what might be the most spectacular “buy below replacement cost” deal in the history of the world’s most famous skyline. The broker on the deal, Ed Minskoff (yes, the very same Koons stan Ed Minskoff) estimated that all-in costs of new build in the area would run about $150 a foot. Meaning that if the Reichmanns could be patient, this deal was pure maple syrup 🍁 

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Reichmann (cont.)

But not even the infinite optimism a CRE broker has for their own deal could have matched just how well things would work out, and how quickly. Within 3Y, the value of the 8-building, 10M sf “Uris package” had tripled, and within a decade the Reichmanns’ $330M purchase (made through their Olympia & York holdco) was valued at $3B+ (One of the key assets, 245 Park, became Bear Stearns HQ - the world is rich w irony). The Uris deal set the stage for what would become a $10B real estate dynasty, albeit one that ran into the ground just 15Y later (rare interview w Paul Reichmann here - 'It is my fault.”)

Nearly a half-century after that now-mythical purchase, a scion of the same clan is attempting his own legacy-setter, in another existentially challenged market, the Bay Area’s own Gotham City. WSJ reports that Ian Jacobs, who went from yeshiva to Goldman and then apparently sat for years at the feet of Buffett, is looking to make a transformative bet on SF’s office market. He wants to buy 3M sf of properties in the city, with a target pricing of 70% below replacement cost (recent SF office sale comps have been in the $200-$300 psf range, implying a total bet of as much as $900M). He too, wants to look past the city’s doom loop (high crime, urban blight, a lack of belief in political leadership, hybrid work) and find his own Xanadu in those abandoned (35% vacancy rate is the most aggressive estimate out there) office corridors.

The way this whole thing is being presented seems very much a bet on pedigree rather than domain expertise. He’s raised $75M so far, through family and other dynastic connections. “We know the Reichmanns,” one LatAm family office investor in the venture said. “They are a very trusted partner.” And Jacobs’s name for the plan, “Project Uris,” is an explicit nod to those who came before him.

One adviser told WSJ that Jacobs’s “whole professional career has been around value investing in public markets. This is the first time he can do value investing in real estate.” Oy vey.

Big Plans in Little Haiti

Dream no small dreams. Swerdlow is proposing a $2.6B megaproject across 65 acres in Miami’s Little River and Little Haiti, that would contain nearly 5K affordable and workforce apartments as well as a new Tri-Rail station 🚄 . Ben Weprin’s AJ Capital will be working alongside Swerdlow to redevelop a 27-acre industrial parcel it bought in ‘21. (Miami Herald story is really well done, encourage reading it for more details and history of the area). 

The proposals come as part of an RFP issued by the county looking for someone to zhuzh up its affordable housing stock under a federally supported program that requires all existing residents be provided housing in the new buildings, at the same rents they were paying. Tri-Rail leadership is already telegraphing that it feels really good about the project. This is big, because having the transit station allows the county to override local zoning and up the height and density. 

Anatomy of a Heist

Dream no small dreams applies here, too. Former HFZ principal Nir Meir’s alleged $86M bilking of investors, contractors and the City of New York was impressive (a figure of speech – please don’t steal folks) in its scale and audacity. TRD dove into the criminal indictments and broke down just how methodically Meir and his associates – two other HFZ execs and execs from HFZ’s GC Omnibuild were also charged – allegedly made it all happen. (If new to HFZ, do yourself a solid and catch up on that company here and here– there’s been a fair bit of activity.) Highlight 🎞️ of the latest from TRD below

• $250M in loan funds was moved (in violation of NY’s lien law) from the XI project (since taken over by Blavatnik/Witkoff’s One High Line) into different entities to cover shortfalls on those projects. When it came back, $37M was missing 👏 

• Invoices were padded to account for the shortfall. This also (two 🐦️, meet 🪨 ) had the effect of making it look like XI was further along than it really was, releasing more lender (Children’s Investment Fund) money into the kitty 

• Subs apparently voiced concerns over the practices; were told to keep at it if they wanted to get paid  

An Omnibuild spox said ​​“all billing instructions were exclusively directed by the project owner and any deviations from this originated solely from their directives.” It’s the classic “he told me to do it” argument – let’s see how it holds up in court. :hei

CoStar’s Super Bowl

Speak to me not of football 🏈 , but of football ⚽️ 😍 . Still, one interesting nugget from that big game yesterday was CoStar’s ad blitz, part of its massive push into resi: Everyone’s favorite lechy professor Jeff Goldblum talked up Apartments.com; Dan Levy starred in a Homes.com spot, 3Y after his iconic SNL Zillow sketch - h/t @amandaorson for making the connection). Opendoor, too, somehow found a budget for a spot, but Realtor.com and Zillow sat this one out. Check out the full rundown w the ad segments here from BAM.

The Lazarus Project (s)

NY Gov. Hochul couldn’t get 421a to stick, but she’s got a workaround of sorts going in Gowanus. 18 projects with a total of 5,300 units will be eligible for the pilot program, which involves payments in lieu of taxes to mirror the benefits available under the dead tax break (good breakdown here) She said the move was “like Lazarus brought back from the dead.” 👻 

Hochul has indicated this is unlikely to be replicated across the city, which leaves a lot of builders lukewarm about the whole thing. A full-blown push to replace 421a citywide (primer here) is still in the works, with both Hochul and Mayor Eric Adams pushing.

Trillion Dollar Baby

US financial institutions’ lending to shadow banks – an increasingly vital and largely unregulated part of the CRE capital markets ecosystem   –  has broken the $1T threshold, per the FT. That number is up 12% over the past year, way outpacing overall loan growth of just 2%. 

“We need to solve for the race to the bottom,” top banking regulator Michael Hsu told the publication. “And I think part of the way to solve it is to put due attention on those non-banks.” 🔬 

Whatever it Takes - NYCB Update

There’s been a deluge of coverage on the NYCB crisis over the past few days: a scare barometer from Bloomberg; a promise to do “whatever it takes,” from the bank’s new exec chairman; a snappy profile of the bank from WSJ (banger quote: “The time to worry about risk management for an institution going over $100B is before they go over $100B.”); and an op-ed from the Journal’s august 😷 editorial board (“Primary culprits are Albany’s destructive rent-control laws.“) 

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