Barry & Joel's Excellent Adventure

Barry & Joel's Excellent Adventure

“I’ve been very fortunate that my story’s been told by people who understand it’s a redemption story.”- Frank Abagnale Jr.

Barry Sternlicht lent Joel Schreiber money, and lending Joel Schreiber money is something that has mixed results. Now, after being unable to collect on the debt despite $80M+ in judgments, Starwood is asking the court to hold Schreiber in contempt. Given that Schreiber has repeatedly ignored orders to turn over documents, a dose of jail may be in order, Starwood argues.

Schreiber (Cont.)

“Given Schreiber’s abject failure to respect numerous court orders, it is appropriate for the court to consider incarceration as a tool of compliance,” said Starwood’s attorney, per TRD. The property at the 💓 of the dispute is DTLA’s Broadway Trade Center, which Schreiber’s Waterbridge and Jack Jangana’s Continental Equities bought for $122M a decade ago. Plotting a live-work-play 🙃 redevelopment at the 1.1M sf property, they refi’d in ‘18 for $213M through Starwood, bridge debt on which the principals signed PGs. At the time, the developers expected to close on a $300M construction loan within a couple months. Instead, they defaulted on Starwood’s loan, and when Starwood took the property over it also tried to enforce the PGs. Starwood alleges that Schreiber hasn’t turned over info on two-dozen plus LLCs through which he plies his trade, and has moved assets around despite the judgment against him and an order barring him from doing so. 👏 

Schreiber is, to steal a Churchillism, "a riddle wrapped in a mystery inside an enigma:" Born in the UK to a Hasidic family, he came to NYC sometime in the 90s, worked for Mendel Mendlowits’ B&H rival Adorama 📷️ , got into RE syndication, became a prolific CRE flipper, became the first outside investor in WeWork (“I made those guys”), allegedly used his WeWork stake as collateral on multiple loans (bad), and duked it out with creditors ranging from HNW individuals to Goldman Sachs.

BREIT’s New Boss: A Snapshot

BREIT, Blackstone’s $100B+ private vehicle and one of the poster children of the redemptions troubles playing out at private REITs, has a new boss: Wesley LePatner will take over next year from Frank Cohen, who is retiring. LePatner, 43, was already COO of BREIT, so no surprises there. The appointment makes her one of the most visible women in CRE (along w/ her new boss, Kathleen McCarthy) and puts her in the hot seat at a unit that’s been a bucking bronco these past 2Y: a reportedly painful (but face-saving) deal w/ the University of California; a scramble to meet investor redemption requests; its first-ever seller financing deal (to KKR); and tough questions about how it values assets.

LePatner came from Goldman to Blackstone in ‘14, and helped build its Core+ business (primo assets), working on deals such as the $5.4B acquisition of Stuy Town. She helped Cohen launch BREIT in ‘17.

Bonus Succession Read: On Brookfield’s crown prince Connor Teskey   

The Philly Shell

After pandemic-era federal tenant protections expired, most cities saw an expected surge in evictions, as landlords were once again able to get delinquent renters out. However, Philly, one of the nation’s poorest big cities, bucked the trend, thanks in large part to eviction diversion: a policy that requires landlords to negotiate out-of-court w/ tenants before suing to evict them.

Court filings to evict in Philly are down 41% over a 12-mo period ending in June (compared to ‘16-19 avg.), per Eviction Lab data cited by WSJ. Here’s how diversion works: a tenant who’s fallen behind on payments works w/ a program-appointed counselor to come up w/ a payment plan to present to the landlord: it could include using the tenant’s tax refund or part of the security deposit to make good on the rent. Landlord trade group Philadelphia Apartment Association is asking the City Council to tighten the eligibility criteria – currently, even tenants who have lease violations that don’t involve nonpayment of rent can avail of it.

Will other cities follow Philly’s lead?

The Affordable Housing Killer: Insurance Costs

The surge in insurance costs, particularly in states like Florida/Texas/CA, has been one of CRE’s biggest running stories, and rightly so: we’re talking multifamily premiums/deductibles up 2-3x over the past 5Y in some cases. Less explored has been the resulting fallout on affordable housing. While market-rate landlords can pass costs on to tenants in the form of higher rents, affordable landlords don’t have that option, and the industry warns that things are getting to a breaking point.

“If it spreads further, it could threaten to end affordable housing development as we know it,” Frank Woodruff, head of AH trade group Community Opportunity Alliance, told the Times. That would in turn rock banks who’ve invested billions in LIHTC. Owners may be forced to sell the properties (sans deed restrictions) which would then likely be converted to market-rate rentals.

Insurance trade groups say that growing climate threats 🔥 🌊 ⛈️ have made higher premiums an inevitability. HUD is looking to kick in some extra funds to make up the shortfall. Affordable developers are pushing for construction codes that would require stronger materials that should in theory reduce risk and lead insurers to lower premiums, but are asking for guarantees that insurers would actually do so.

No Will, No Way

More fallout from the death of Brandon Miller, the New York developer who killed himself this summer when faced with mounting debts. A friend who lent Miller $1.5M secured by a High Line development site and took control of the property after his death says he’s been unable to access any records/bank accounts for the property. That’s because Miller apparently didn’t leave a will.

“I don’t know what obligations might exist, I don’t know where a bank account sits, what might be in it,” Douglas Teitelbaum said during the Ch. 11 hearing, per TRD. “I have access to nothing.” He added that he hopes that once Miller’s widow, Candice, becomes administrator of her husband’s estate (she has filed to do so), he’d have an opportunity to look at the books.

We dove deep into Miller’s death, and the immense and sometimes crippling pressures of being a real estate developer, here.

Quickies

• Kyle, TX - a town of just 63K ppl – has a 6K unit housing development 🤯 

• The Promote podcast: Answer these 4 Qs on what you’d like it to be

• Zero Bond owner faces the wrath of East Hampton 

• How PIKs could create a WTF moment for private credit

• How unions, pols botched an NYC hotel “safety” bill 🛏️ 

• Why Blackstone, Brookfield are no longer investors’ default option

• RSVP for our Chicago Happy Hour w/ Iman Jalali on 9/10 🍸️ 

• Inside Abu Dhabi’s ambitions to become a world city

• 7K+ CRE obsessives are now bingeing The Promote: A snapshot of who else is in the mix 

Unquotable Quotes