Cash Me Outside & Barnett's Hairiest Deal

Repo Men

Lenders are no longer stuck in molasses: They took back $20.5B of CRE in Q2, up 13% from Q1 and the highest level since ‘15, per MSCI data cited by WSJ. The volume of office properties seized jumped $5B YoY, while multifamily – where there’s been an uneasy stalemate between lenders & naughty borrowers – saw a nearly $1B increase in seizures.

Small (<$10B assets) banks, seeing their peers implode and facing regulatory heat, are hustling: they upped their CRE seizures by $125M in Q1, the largest quarterly increase since 2000, according to figures bank-data consultant Matthew Anderson provided to the publication.

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Lender Seizures (Cont.)

Besides standard foreclosures, many properties have gone back to their lenders via a deed-in-lieu, colloquially known as “handing back the keys” – a little primer on how that all works here. A GS/TMG JV did such a deal w/ its lender KKR last week, at a Silicon Valley office complex.

Short sales – where lenders & borrowers work together to get whatever they can for a property – are also way up 🩳, per Ten-X: the first half of this year saw an 83% YoY increase in such sales. One such marquee deal happened earlier this month, when biotech 👩‍🔬 scion Carlo Bellini paid just $297M for 180 Maiden Lane - Clarion and MHP had bought the building for $470M in ‘15, and landed $372M in financing from ING in ‘20.

Hairy HoF Ep. 1: Barnett’s Most Audacious Deal

There are real estate deals that the general public is obsessed with. Billionaires’ Row, Hudson Yards, etc. etc. And then there are real estate deals that real estate junkies are obsessed with. Somewhere at the top of that list has to be Gary Barnett’s masterclass at the Ring portfolio. This thing has it all: family feuds, neglected primo buildings, lawsuits, partition sales, warring moguls (Chetrit! Tabak!) and at the end of the rainbow, a big, big pot of gold 💰️ We’re thrilled to feature it to kick off a ten31 video series looking at hairy HoF deals. Now live on our Instagram. 

Watch: Masters of the RE Game: Inside Barnett’s most audacious deal

Anatomy of a Cash-Out

The big families are the big families for a reason. Jeff Levine’s Douglaston Development has pulled off a tasty bit of business at its Hudson Yards luxe rental, 3Eleven. The firm and its partner Ares landed a $500M SASB CMBS loan (originated by GS, Wells) on the 938-unit property that will see them cash out to the tune of $116M, per Kroll. The financing, plus $60M in mezz, will pay them out and retire the construction debt.

Terrific case study of all the tools a big-city developer needs for an outsized W:

• Seller relationships: Douglaston got into the site in ‘18, signing a 99Y ground lease valued at $130M w/ the longtime family owner it already had a relationship w/ through 2 other deals in the area.

• Money connects: Brought in Ares as equity partner in ‘19. Landed a $415M construction loan from an HSBC-led syndicate.

• Political juice: Got the site rezoned from manufacturing —> resi. Committed to keeping 25% of the units affordable

• Construction: Got the damn thing built

• Leasing: 98% leased, asking from $6K for a 1-bed to $25K for 3-beds

After all that, the prize: A sweet SASB loan, a $930M valuation and a nine-figure payday 👏 🎩 

Hotel Bill Gets Irate Reception

An NYC bill that would bar nonunion hotels from contracting out most gigs is being viewed in apocalyptic terms by hotel owners. Introduced by Councilwoman Julie Menin, the bill states that hotels can only contract out services to 1 management company. Subcontracting would be banned unless “a majority of all core and critical employees” – cooks, cleaners, front desk, security etc. – are “covered by a collective bargaining agreement,” per the Post. 

Meaning: if you’re not unionized, you’re paralyzed.

The hotel union claims the bill will help protect workers and crack down on seedy joints that are hotbeds for hookers, drugs and human trafficking.

Owners are fired up, as you can imagine: Hotel trade group boss Vijay Dandapani described the bill as “a bazooka to kill a gnat.” 🙏 Room rates in NYC are already the highest in the nation, and more red tape could kill off smaller hotels and push prices even higher, owners argue.

Quickies

• Fatty: TPG in talks to take 300K sf at Tishman Speyer’s Spiral

• LPs want more visibility into how PE managers use NAV loans 

• Fed Whisperer says… September rate cut is a good bet

• Disaster: FEMA 🔥 🌊 cites “market conditions” in decision to shelve HQ relo

• Lipstick jungle 💄: Sephora gets 2/3 rent cut on renewal at Tishman’s 520 Madison

• Trump was in Deal, NJ for a fundraiser w/ SY royalty Sunday - if you want to understand just how much of a RE titan (Suttons, Cheras, Sitts etc.) stronghold that town is, check this out 

• ICYMI: Check out our ongoing feature on the Quiet Kings of Capital. Pt. 1 here, Pt. 2 here, and stay tuned for Pt. 3 on Wednesday 👀 

Unquotable Quotes

A dedication: This is for the two legends who were spotted reading The Promote in the middle of a club in Tijuana. We salute you! 🫡