Butt Lifts, Multi Bulls & Chatting w/ Arbor's Nemesis

Butt Lifts and Multi Bulls

Even Brazilian butts 🇧🇷 🍑 can’t cushion these losses: Investors who put their money into multifamily syndicator Western Wealth’s deals are being wiped out. One shared her path to financial insecurity w/ Bloomberg, which just dropped a good read on the whole syndicator mess – specialty publications, including The Promote, have explored these topics in depth for a while (see here and here and here), but a big piece in a mainstream pub like this does a lot to boost awareness among potential LPs.

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Syndicators (cont.)

The adventure started, as it often does, on social media. Underwhelmed by the meh returns from her family’s 401k, Lynn Nathe discovered a podcast hosted by Mir Jafer Ali Joffrey (aka “Buck”), a former cosmetic surgeon turned RE investor and podcaster 👏 👏 . Buck had Western Wealth’s CEO Janet LePage on as a guest, and Nathe liked what she heard: In late ‘21, she put $200K into 4 Western Wealth deals, which touted the same playbook that had supposedly led to >30% returns thus far: fix-and-flip multi.

There was nothing to it but math, according to Buck: “Wealth=Leverage (Mass x Velocity)” was the mantra he preached to his flock 🤲 , and touted Western Wealth’s track record – one early investor, he said, had turned $750K into “over $4M in principal!” Buck described himself as a “partner” in Western Wealth deals, but the Bloomberg story reads to me as if he ran a feeder fund, a nebulous vehicle used to pool funds for syndicators that has v little control over GPs if things go wrong. (We broke FFs down in detail here.)

“To me, we were winning and winning and winning and winning,” Joffrey told Bloomberg. “The reality is what ended up happening was pretty unprecedented in the macroeconomic world.” 🤷‍♂️ Nathe’s $50K on one of the deals, when sold to Rise48 😍, turned into $1,427.

That’s how it’s going for wealthy normies – what about casualties on the industry front? Remember that much of this multi buying bonanza was financed by CRE CLOs, which are facing a reckoning: a record 8.6% of such debt was in distress as of April, per CRED iQ, and many of the biggest syndicators have massive exposure – Tides, for e.g., has $1.8B exposure to CRE CLOs, per Trepp. Cue the silent screams from lenders.   

Bloomberg Throws Aby Lifeline

Aby Rosen really needed a win: His RFR is drowning in debt, he’s being hunted by special servicers 🧃 and lenders, and his partner on his most famous asset has imploded. Salvation, or at least a taste of it, has come in the form of Michael Bloomberg.

New York’s alpha citizen just paid $560M, per PincusCo, to buy RFR’s 980 Madison. His Bloomberg Philanthropies had agreed to lease the majority of the space at the property last year, a deal that meant Gagosian 🖌️ and all the other artsy tenants would have to find a new home, and now he’s decided to own the bricks.

The way-above-market sale –  a scarcely believable $2,750 per buildable sf – gives RFR some liquidity for what’s poised to be a gnarly year ahead: $2.5B in maturing/delinquent debt and some pesky lawsuits for starters.   

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Viceroy Boss on his Big Arbor Short

Viceroy has dropped its latest missive on short target Arbor Realty Trust, saying that Freddie’s blackballing of appraisal firm BBG (first reported here) stems in part from loans originated/underwritten by the REIT. Viceroy also claims that Fannie is running a parallel investigation into BBG, and that Meridian’s blackballing by Freddie has an Arbor connection. I had mixed feelings about my tweet being on the cover of their report 😅 , but was curious to chat w/ Viceroy boss Fraser Perring, a Basil Fawlty-type who didn’t shy away from using the “fraud” word.

“The reality is this company is so dirty it’s unbelievable,” Perring said in a conversation with The Promote Friday, pointing to what he said was Arbor’s failure to disclose related-party transactions to its investors. “They’re buying loans at par that are barely worth 30 cents on the dollar in some cases,” and “refusing to be transparent or purposely not being transparent about their loan book.”

Perring claims, citing whistleblowers, that Arbor has some sponsors who are in default but are not listed as such by the REIT. He called its tactics “willfully misleading” and said Viceroy has flagged them to the SEC. Viceroy estimates that 90% of Arbor’s $12.5B-ish loan book “isn’t in a healthy state,” w/ the true LTV on deals in the 120% range on avg.
 
Perring, who dubs himself the “Grand Poobah of criminal shorts” and gained prominence for calling out fraud at Wirecard, is an animated chap: his voice cracked several times while breaking down Arbor, and he described the REITs’ borrowers – “wet behind the ears” and warehouse lenders – “itchy feet” – in boarding-school terms.

“When reality dawns, when the defaults feed through, Arbor can’t gild the lily anymore” he added. The REIT has refused to comment on Viceroy’s reports, except to say that it stands by its financials and that the reports cherry-pick data to “inject fear into the market for personal gain.”

Howie and Barry’s Excellent Adventure

There are leaders with juice, and leaders without juice. Those in the latter category must content themselves with balance-sheet babysitting 👶 and promising disciplined growth, and even then, their PE bosses can pull the plug. Leaders with juice, however, can have a lot more fun.

Newmark CEO Barry Gosin is very juicy right now. He has the full faith of his chairman, Howard Lutnick, who’s pushing him to pillage the talented halls of CBRE, Cushman and JLL (and maybe sometimes Avison Young & Marcus), even if that means spending big to do it: A levered up Newmark dropped a record $161M on talent acquisition (in the form of forgivable loans) in Q1.

Lutnick, in turn, can afford to be this aggressive because no one can really stop him: he has Zuck-esque 10:1 voting shares, per TRD, giving him 56% of the voting power w/ just 11% of the stock. He’s also filled the Newmark board w/ Friends of Lutnick ™️ , which helps. Gosin & Lutnick like to personally poach the biggest names (Harmon, Spies, Firestone for e.g.), promising them that they too, will have juice. 🧃 The strategy has helped Newmark snag one monster assignment in the $60B Signature loan book, but it’ll be a bit before we’ll know whether it was a good bet – the brokerage is losing money at the moment.

Quickies

• Multi giant Cortland says it’s “cooperating fully” w/ the federal rent-fixing investigation into RealPage. Cortland was raided by the FBI late last month - more here.  

• Highgate takes full control of Row NYC hotel in $275M deal w/ David Werner (our profile of the lone-wolf 🐐 here)

•  Private jet broker reacts to Robert Rivani hating on private jets 🛩️ 

• Abu Dhabi 🇦🇪 wants out of the New York Edition

• Waiting for Godot: Time between getting permits and starting apartment projects jumps 45% from ‘19 

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