Capital Call Season, Wall St Go Home & Yardi Eats WeWork

Yardi Elevates WeWork’s Consciousness

WeWork has done it: It has held off Adam Neumann’s takeover bid by striking a deal with its senior lenders for a $450M bankruptcy and exit financing package. The new deal, if blessed by the court, would put a familiar name in majority control of the co-working company: Yardi

Yardi-WeWork (cont.)

This “is some of the best news we’ve had in this case,” and WeWork now has a “fast and reliable path out of bankruptcy,” Eli Vonnegut, an attorney repping the senior lenders, told Bloomberg. The publication reported that the deal would give majority control of WeWork to an entity known as Cupar Grimmond LLC, which the FT has previously revealed as Yardi, the property management data behemoth behind PropertyShark, RentCafe and Yardi Matrix. (A boring, profitable company 😴 compared to the sexy but cash-hemorrhaging WeWork.) Yardi would put in $337M for a 60% stake in the new firm, while hedge funds would pump in $113M for a 20% stake.

WeWork still has to put the deal into final contract and get creditors’ blessing on the broader reorg plan. (For the finer details on the bankruptcy, I point you to the FT’s Sujeet Indap and to the excellent Petition, which tallied up the fee mania involved in the bankruptcy so far to $67M ).

Neumann is, of course, displeased about all this. The master of business magical realism said in a court filing Friday that WeWork’s bankruptcy plan is too rosy and light on details. 👏 

Capital Call Season

Remember that capital call we said we wouldn’t need a few months ago? JK

Multifamily syndicator Ashcroft Capital (Frank Roessler, Joe Fairless), which amassed a nearly $3B, 13K apartment portfolio, is asking existing investors to cough up another 20% of their initial investment in a capital call, according to materials posted on Wall Street Oasis reviewed by The Promote. "We (Joe & Frank) will consistently support you and our other investors through both favorable and challenging times," Fairless and Roessler said in the note to investors. “This is Ashcroft’s first capital call, and while it’s regrettable to take this step, our primary focus remains safeguarding your investment.”

Ashcroft said it’s secured a preferred equity provider to put in $48M, and is looking to refi $165M of the debt into fixed-rate debt, in a move that would cut 41% of its floating-rate exposure. (Sources told me that Related is the pref provider in the mix, and that CBRE is helping Ashcroft secure agency debt for the portfolio, though it’s unclear to me if those deals are finalized.)

In November, Ashcroft said it was pausing Class A distros in its first value-add fund, citing the ballooning cost of rate caps. At the time, though, Roessler said it wouldn’t need a capital call, and that Ashcroft would fund the shortfalls with its own money and pref. In the new communiqué, Ashcroft’s language is curious: “As a gesture of our ongoing commitment, we will extend a $1M note payable at 0% interest upon the successful conclusion of the capital call,” it says – but that’s a meaningless number for such a sizable portfolio. Ashcroft also takes pains to say it’s not charging an asset management fee, but in the next breath clarifies that it means it’s deferring those fees 🤷‍♀️ . It says that Roessler and Fairless will kick in $3M of their money for the capital call – which it says is essential to ensure that Class B shareholders in the portfolio aren’t completely wiped out.

One last point to flag 🎏 . Ashcroft said it’s “changing the waterfall 🚿 to a straight 85/15 LP/GP split,” describing it as “an improvement for you compared to our current 70/30 split (from 8%-13% IRR) and we are eliminating the 50/50 waterfall.” GPs in such syndications do have near carte blanche to change things around, but whether it’s a better deal for investors is another question that needs a closer analysis of the offering. Stay tuned.

Go Home Wall Street

White picket fences aren’t meant to be securitized. That’s the message from lawmakers proposing a crackdown on institutional purchases of single-family homes, a trend exemplified by the likes of Invitation Homes, AMH, and Tricon (recently acquired by Blackstone). 🏡 

Bills in the House and Senate would cap SFR ownership at 50 properties for many firms, per WSJ, requiring many players to sell off hundreds if not thousands of homes (Invitation Homes, for context, owns 80K+ homes). A Minnesota bill is even more draconian on big landlords, capping ownership at 20 properties. And then there’s Ohio, where Louis Blessing III introduced a bill that would smash large landlords with a heavily punitive tax that would spur them to sell.

“It’s an antitrust in spirit bill,” he told the publication.

The industry’s position has been fairly consistent since the sector started attracting heat a few years ago: Institutional homeownership is a tiny portion of the pie, they argue, and giving Americans access to high-quality rental housing stock that they may not be able to willing to buy is in fact a good thing. Moreoever, the institutional shopping frenzy ain’t a thing anymore.

“The great trade is done,” said John Burns, founder of IMO the most solid provider of national SFH data. “So what are you trying to stop?”

Wall Street’s an easy piñata in election season, so I get why this debate is heating up again now. But I also wonder how enforceable this is in practice – institutional buyers could shell company the fuck outta this ownership cap in a way that would be really hard to prevent.

The Oddest of Lots

I’ve been cooking up a theory of how the world's ultra-ultra-luxury markets are one unified "parallel universe" 🌎 , with economics untethered from the on-the-ground local realities. It’s been happening for a while now, but the pandemic really supercharged the trend: in Dubai, for example, there were 4 sales of $25M+ in any given year pre-2021. In 2023, there were 56. It’s a function of a new billionaire class that is less tied to, say Manhattan or London than it ever was before, and developers and sellers around the world are taking notice.

There’s not enough data out there on this still nascent trend, but fortunately, the folks at Odd Lots - a podcast I admire for its wonky, polymathic brilliance – indulged me and had me on to talk about it. A few themes: global wealth 💰️ , shielding money from authoritarian governments 🛠️ , and of course, billionaire schnitzel-measuring ™️ You can listen on Spotify here, Apple Podcasts here, or read the transcript here.

Quickies

• Greystar hit w $860M verdict over East Dallas crane collapse 🏗️ 

• PA regulators shut Republic First Bank ($6B in assets) - reopens as Fulton Bank

• Proptech founders made a killing in stock sales, even as many of their companies floundered 

• Diving into 485x, successor to NY development tax break 421a

Unquotable Quotes