Flatiron's Jacob Garlick Anniversary, Blackstone's Capital Punishment & Short Sellers Rise

Happy Anniversary, Jacob Garlick

“It’s been my lifelong dream of mine since I’m 14 years old. I’ve worked every day of my life to be in this position.” - Jacob Garlick

The Manhattan skyline is hella romantic, but the way its icons trade – teams of lawyers and bankers swig liquid styrofoam and haggle over paper in some Midtown boardroom – is usually not. The Flatiron Building was that rare exception, one of the world’s most recognizable skyscrapers up for grabs at a live auction on the steps of the county courthouse. As close to real-world Monopoly 🎩 as it gets.

The city’s real estate players expected Jeff Gural to run away with it – he was already a part-owner and could place a credit bid. But he was bested by a literal guy off the street, in a piece of performance art that will live on in industry annals.

Happy anniversary, Jacob Garlick. Exactly a year ago, a portly 30-something held up a paddle, placed a preposterously high $190M bid, and won. No one knew who he was. No one understood who was backing him – there was speculation that he was a beard for Nathan Silverstein, the minority partner on the property whose disputes with the other owners had set this whole thing off. And everyone was asking: can this dude close? 

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Garlick Flatiron Building (cont.)

As per the sale terms, Garlick had to put down a $19M deposit (10% of sale price) in 48h. He was scrambling to land emergency short-term financing, and sources familiar with the discussions shared some of the terms he pitched lenders with The Promote:

In exchange for $20M wired immediately (within a day), Garlick was offering either:

A: $26M back in 30 days, plus $10M equity in the deal

B: $40M of equity in the deal

Garlick’s plan, at least per his pitch to one lender, was to close on the building purchase in 90 days, spend up to $250M on converting the top 15 floors into condos and the rest into a hotel 🛎️ . He pegged the total condo sellout at between $500M-$700M, and claimed he had the acquisition and construction financing lined up from Goldman.

He was willing to pledge $100M in collateral, but when he wasn’t able to show it, the lender walked, a source said. We all know the rest: Garlick failed to close; he was sued by Gural and the other owners for a “fraudulent” bid; the property went back to auction, where Gural bought it for $161M; the partners brought in Brodsky to help convert the property into residential, likely condos.

Garlick didn’t respond to requests for comment.

Some towers, particularly ones with global cachet, are magnets for drama, (see Chrysler Building). But even among that peer group, the Flatiron Building may stand out: Garlick’s caper is one in a long line of maneuvers at the property- the thread below gets into it, as does the video breakdown.

Blackstone Takes Capital Punishment on DC Office

PRP Real Estate (Paul Dougherty) bought Market Square, a D.C. trophy office complex (home to Visa, Pepsi, Prudential etc.) for $323M, CO reports, in the city’s largest office deal of the year. PRP paid a sum roughly = to the debt on the property: The seller, a Blackstone/Pimco (via Columbia Property Trust) JV took a sizable hit in the deal: Blackstone had bought into the deal in ‘15 at a $595M valuation, and the partners had taken a $325M loan from Pacific Life Co., which has now been paid off. The lifeco. issued $248M in debt to the new buyer.

Mukang Cho’s Morning Calm Management is PRP’s partner on the deal, per CO. “I think this is going to reset values,” said Dougherty, noting that this was the first truly premium product that’s traded in a while. “The stuff that’s been trading has been B and C crap.” 💩 

Blackstone stressed yet again that office represents <2% of its portfolio (this is a message they’ve been hammering on in recent months) and even got a bit salty : “These are rare instances in our nearly $600 billion portfolio comprising more than 12,000 assets, and we’re incredibly proud of our performance, which speaks for itself.” 🧂

Quickies

• Short sellers up their CRE bets

• Taking stock of the opaque world of CRE appraisals: I take issue w/ the opening line – “In a normally functioning CRE market, appraisers mediate unbiased information about the market between buyers, sellers and lenders” - as appraisals have baked in 🎂 conflicts of interest in both times good and bad. Still, a worthwhile read. 

• Aimco wants $650M for 2 Brickell towers, being marketed as a 4.3-acre redevelopment play in 1 of the hottest office markets in 🇺🇸 

• Freshly a lone wolf 🐺 , Jonathan Landau is looking to build a 47-story resi tower in Brooklyn Heights, on land owned by the Cayres

• R&B Realty (Aron Rosenberg) hit w a foreclosure suit over a Wynwood office project (The Gateway) where it has $113M in debt

• DJT could get a windfall from a surge in shares of his social-media company, Truth Social - which is, of course, considering an IPO via SPAC 🟠 🎺 

Finally: A Gauge of Rent-Stabilized Portfolio Pricing

We’ve had bits and bobs, but now we have a portfolio trade to give us a sense of just how much pricing in the NYC rent-stabilized market has dropped. Sentinel Real Estate (Michael Streicker) is in contract to sell a nearly 1,300-unit, 1.2M sf package (Upper Manhattan, Crown Heights, Brighton Beach) for close to $180M, per TRD. At that number, Sentinel is taking a 40% haircut 💈 on its acquisitions, made for just shy of $300M between ‘15 and ‘19 - the fateful year for this particular asset class. The buyer is a JV of Alma Realty, PH Realty Capital and Rockledge. The deal would be the largest of its kind this year, and sets a pretty gloomy benchmark for a struggling sector. 

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