Blaze of Inglory & Sheikhing Up Data Centers

Blaze of Inglory

There are scams that I think of the way I think of Tom Cruise: impossibly cool, sophisticated, armed w/ tech from the future. Something mere mortals can only awe at, but never really aspire to.

And then there are scams that I liken to Tom Hanks: schlubby, bumbling, totally relatable for the run-of-the-mill swindler. Real estate scams usually fall into this category.

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FDNY (Cont.)

On Monday, two former top New York Fire Department chiefs were arrested and accused of accepting bribes to fast-track fire-safety approvals for developers. The chiefs, Brian Cordasco & Anthony Saccavino, “allegedly created a VIP lane for faster service that could only be accessed with bribes,” US Attorney Damian Williams said. “That’s classic pay-to-play corruption.” 👨‍🚒👨‍🚒 

The indictment details the long-running scheme, and it’s absolutely inglorious: it involved a former firefighter who now runs an expediting business, and was conducted over group chat 👏 👏 👏 . The expeditor would inform Cordasco & Saccavino of client projects that warranted special love, and they would in turn instruct their minions to fast-track those approvals. For the privilege, the clients would pay thousands of dollars to the expeditor, who would then split the proceeds w/ the fire chiefs – he would make payments to them over Zelle 😍 or hand them cash/checks at their HQ in Brooklyn or over steaks in Manhattan. 🥩 

The expeditor, ID’d in the indictment only as CC-1 but later ID’d by prosecutors as Henry Santiago, was not registered w/ the FDNY as an expeditor. Santiago was not only effective – approvals that would typically take 8-16 weeks (depending on what was needed) would be done in as little as 2 – he was poetic. The indictment reveals the following conversation between him and a developer’s rep.

Brother/I am your shadow…You guys will look like your moving clouds and the moon with a touch. ☁️ 🌙  

He spoke w/ clients of a “family plan,” for multiple jobs, and in what has to be the greatest detail in this whole thing, even charged them tax. Meanwhile, the fire chiefs were no less brazen: Cordasco, when responding to one fast-track request, said: “Are we getting wowed with the price?” And they didn’t just work on projects supplied by Santiago; they showed impressive entrepreneurial initiative by generating leads themselves from their day jobs and “steered them to CC-1 and his company.” One way the chiefs sped up the inspections were by telling their subordinates that the projects were on the “DMO List,” re. to the list of projects that City Hall wants to see fast-tracked. (That list, which has included developments like SL Green’s One Vandy and Related’s 50 Hudson Yards, has also come under question, and is part of a federal probe into Mayor Eric Adams’ fundraising.)

Crucially, Santiago usually didn’t deal directly w/ developers, but rather with their own expeditors – its a longstanding practice that buffers builders from shady shit done on their behalf, and there have been periodic calls to reform the whole expediting industry that have gone pretty much nowhere. We’ll see if a proper scandal like this one changes things.  

Sheikhing Up the Data Center Race

Sheikh Mohamed bin Zayed Al Nahyan, the swashbuckling ruler of Abu Dhabi, controls a network of sovereign wealth funds and investment vehicles said to manage a staggering $1.5T (or, in CRE terms, roughly the Wall of Maturities ™️ ). MBZ has used that wealth to become an increasingly important player in the global economy, which means that a data-center play was inevitable. In March, Abu Dhabi announced an AI infrastructure vehicle, MGX, and its first big bet has just come into focus: a $30B AI fund in partnership w/ BlackRock & Microsoft to build data centers and energy projects to support the AI economy. The fund could pull in another $70B via leveraged debt financing.

BlackRock boss Larry Fink said such moves could “unlock a multitrillion-dollar long-term investment opportunity.” The firm is making the play through its Global Infrastructure Partners subsidiary, which it acquired for $12.5B in January.

Middle Eastern oil wealth 🛢️ has been flowing into the data center market via the world’s biggest investment firms. Saudi Arabia’s PIF made a $20B anchor investment into Blackstone’s US infra fund in ‘17, and that fund has been busy building up a gargantuan data-center portfolio. Jon Gray has described the asset class as Blackstone’s lens into the AI boom, while his boss Steve Schwarzman went even further: He expects to become the world’s largest AI infra investor, and this summer compared the consequences of AI to Edison’s patenting of the lightbulb. 💡 

Carlyle’s Capers

Money managing is as mimetic a business as there is: After seeing Nuveen making waves over the past 12 months in the C-PACE space, and seeing the regulatory winds shift in the program’s favor, Carlyle has gotten into the game: the firm is taking a stake in C-PACE lender North Bridge (founded by L&L alum Laura Rapaport), and has committed up to $1B to fund its deals. C-PACE offers developers and owners low-cost financing for green building upgrades through a tax assessment, and is now being opened up to new construction projects.

Carlyle’s also making an intriguing move into the home-equity market: It’s buying a minority stake in Unison, which gives homeowners cash in exchange for a slice of the home’s equity 🍕 . Per WSJ, Carlyle is also buying $300M of fresh equity-sharing home loans from the firm. The US home-equity market has a laughably large TAM – at least $35T, per the St. Louis Fed – so it’s been a perennial target for the biggest players.

Garrabrants the Gladiator

Gregory Garrabrants, the head of Axos Bank (fka Bank of Internet), just got the Bloomberg treatment, a dive into his battles with short seller Hindenburg, with whistleblowers, and with the principal of his kids’ private Christian school.

Garrabrants assumed the top job in ‘07, when Axos was mostly known for its home loans. He refashioned the bank as a major CRE lender – it now has nearly $9B in total CRE exposure as of Q1, 4x its total equity, according to a recent analysis. That shift has made it a Hindenburg target, w/ the short seller accusing it of shoddy underwriting and glaring problems in its loan book. For his part, Garrabrants says the bank ($22B in assets) “has achieved one of the lowest loan losses in the country over multiple decades in a wide array of lending businesses.” Like Bank OZK, which has also faced questions over its CRE exposure, he noted that the bank only takes the “most senior secured position” in the capstack.

It’s a colorful, spicy piece (vintage Max Abelson stuff), painting Garrabrants as a pugilistic maverick who cares little for market sentiment when making his loans, and if I’m a CRE player I’m probably thinking: Man, this is exactly the kind of guy I want in my corner.

Quickies

• Ashkenazy settles blood feud w the Gindi family

• Roth paid king’s ransom - $300M – to retain Bloomberg at Vornado tower

• David Rubenstein (of Carlyle and now Orioles fame) is JVing w/ multifamily investor Cortland on a pref vehicle 

• Ares closes record $3.3B distressed fund (see more on RE fundraising narratives here)

• Proptech VC Moderne Ventures raises $230M for new fund 

• Trump was golfing w/ Steve Witkoff during assassination attempt

• Mid-market lender telenovela 📺️: Dwight Capital principal alleges Oxford Finance reneged on exit-fee terms 

Unquotable Quotes