Arbor Responds & Wire Fraud Nostalgia

Arbor: What, Me Worry?

The FBI and DoJ are coming at Ivan Kaufman’s Arbor Realty Trust, asking questions about its lending practices and how it has portrayed the health of its loan book. Arbor though, is taking a “nothing to see here” 🤷‍♀️ approach for now: It issued a statement Monday to “reiterate that its financials and business practices have been and are compliant with all of its accounting and regulatory obligations.” Arbor did not specifically address the nature of the probes (catch up here if you missed the bombshell news Friday)

Brought to you by: BetterPitch

If you’re in the real estate business, you’re in the capital raising business. Crucial to a successful fundraise is a professional pitch deck, built by marketing experts who understand the industry intimately. Enter BetterPitch.

After $3B+ in deals facilitated, BetterPitch is expanding into full-service marketing: branding, websites, investor materials, ad campaigns, content creation, and more. Readers of The Promote get unlimited revisions on your materials until you’re 100% satisfied. Get started today.

Arbor (cont.)

Arbor is a major multifamily lender (nearly $11B in ‘22 originations) and was a key enabler of the Sunbelt multifamily boom that is quickly turning into a bust (catch up here and here). Kaufman is an industry demigod (you get a good sense of him from this chat w former Freddie Mac multifamily head David Brickman), but industry players are remarkably good at the cut-and-run when necessary. Kaufman himself has used the tactic: Even though Arbor has long enjoyed a tight relationship w/ brokerage firms including Meridian Capital Group, Kaufman said in a May earnings call that “I think there was a lot of elevated fraud in the industry through the brokerage industry.”

The big thing to watch for now is how Fannie and Freddie react: do they wait and see how things shake out with these probes, or have they already begun to tighten the screws? And what about sponsors? Do they take their SBL requests elsewhere? Arbor is one of 25 lenders nationally that holds a coveted Fannie DUS license - new ones are maniacally hard to get, which is why you might be seeing side-door plays like Blackstone/M&T.

(More: Hagens Berman, which specializes in class-action suits, is asking Arbor investors to speak up)

The Taking of Madison Six Two Five

After SL Green pulled off one of the greatest heists in recent New York real estate history at 625 Madison, it turned around and sold the tower to Related Cos. for $632M. The Post now has deets on Related’s plans for the property, and they are big: a 1,200-foot-tall skyscraper w/ luxe condos, retail and maybe even a hotel. Jeff Blau, now lord of the realm since his former boss and mentor Steve Ross went south, told the publication that the tower can be built as-of-right.

The project is notable and interesting, of course, but what preceded it is what really gets insiders’ juices flowing: embattled retail mogul Ben Ashkenazy owned the ground, and tried to jack up the rent for the leasehold owner (SL Green) by a LOT. SL Green boss Marc Holliday didn’t love that, so he took control of the $200M mezz position, effectively making him both Ashkenazy’s tenant AND his lender. And so when Ashkenazy got his rent hike, SL Green moved to foreclose on the building, and then won the property at auction. Ciao Ashkenazy. SL Green then sold it to Related. Fun fact: Related had bought into the building way back in ‘86, purchasing a stake from the Ginsberg family and bringing in Revlon to anchor the building before cashing out at a girthy markup in ‘01.

Mortgage Fraud Szn: Another Guilty Plea

Mark Silber, partner-in-crime to Barry Drillman, has copped to one charge of conspiracy to commit wire fraud. Sentencing is scheduled for November, and Silber, of Rhodium Capital Advisors, could face a max of 5Y in prison.

The scam, as alleged by the DoJ, went like this: Silber and his partner Frederick Schulman bought an Ohio property for $70M (using a stolen identity obvz), and then flipped it to Drillman for $96M. Based on that more frou-frou price tag, a lender provided a $74M loan 👏 . Madison Title performed both the closings, for the true sales price and the fugazi one.

Some of the language detailed in the complaint (h/t TRD) is so Sunday league it’s glorious. To wit: Silber wrote back to a lawyer and a Madison Title employee that “If there is no price anywhere then it’s good. Please make sure [Madison] knows that one mistake kills the deal…”

Schulman is yet to be charged. Madison, though it hasn’t been charged with wrongdoing, has been iced out of the game by Fannie, as first reported by The Promote in February. Another Drillman associate, Aron Puretz, pleaded guilty last month for his role in a Michigan mortgage fraud scheme with Drillman; Aron’s son Eli is also being hunted by the Feds.

(Bonus: A primer on mortgage fraud – and what the Feds are doing about it – here.)

Quickies

• 🎥 Tired: Buy an NPL. Inspired: Buy a regional bank 

• Top 25 banks most overexposed to CRE 👀

• Evictions are way, way up in the Sunbelt compared to pre-’20 ☀️ 

• Jeff Worthe buys back Burbank Studios from Warner in $375M deal 

• A crisis of faith: Appraisal bible comes under scrutiny 📗 

• San Diego approving homes at nearly 2x rate of SF 

• DoJ may pursue further changes to agent commissions

• It’s special servicing szn 🧃 for Brookfield’s DTLA tower 

Jersey Boys

"If you're not from a place that has a superiority complex, it works to your benefit". - John Gorka

Couple of noteworthy deals in the Garden State: First, Hines dropped $223M for 2 Jersey City luxury rentals, all-cash, per PERE - that’s nearly $550K/unit for the 408-unit spread. The buildings are 96% leased. Hines made the deal through its ‘21 vintage $2B+ core/core-plus fund, which is targeting sellers who bought in at peak vals. in ‘21 and are being visited by the floating-rate reaper. The investor buys all cash to get a leg-up in bids, and then adds leverage “at the fund level” post closing.

Second, Benefit Street funded a $210M Weehawken condo construction deal for a Chinese investor syndicate, WHK (associated w/ W&L Group and Windfall Group). The project is slated for 282 condos, and the initial sponsor was another Chinese entity, Hongkun, that lost the project via foreclosure. The news comes to us via CO, which couldn’t resist throwing in this dig at their rival: “Commercial Mortgage Alert first reported the deal, but had the incorrect loan amount and lending syndicate.” 😆 

Unquotable Quotes