Mnuchin White Knight, Builder's Remedy Breakthrough and Witkoff's Coup

Mnuchin: NYCB’s White Knight

"Because he's the hero Gotham needs, but not the one it deserves right now." - Commissioner Gordon, The Dark Knight

Steve Mnuchin is back in the mix. His Liberty Strategic Capital led an investor group (Sander Gerber’s Hudson Bay Capital, Milton Berlinski’s Reverence Capital & Ken Griffin’s Citadel Global Equities) that pumped $1B into NYCB Wednesday, a stay of execution for a key multi lender. The deal came with some more executive musical 🎶 chairs: CEO Alessandro DiNello didn’t even last a full Scaramucci and is being replaced with Joseph Otting, who served as Trump’s comptroller of the currency.

“I like the franchise a lot,” Mnuchin told CNBC. “Whatever issues there are in the loans we’ll be able to work through.” Interestingly, Mnuchin flagged the bank’s New York office loan book as the most problematic part of the business. That’s in contrast to many players who see NYCB’s NYC rent-stabilized apartment loan book as the albatross: about $18B of the bank’s loans are backed by the city’s rent-stabilized units, per WSJ, representing more than a fifth of its total loan book.

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Mnuchin-NYCB (cont.)

“There were a lot of ppl who bought these properties with the idea that they could convert ‘em and raise rents,” Mnuchin said of the RS business, “and they’re not going to be able to. But there’s a lot of people that didn’t.”

Mnuchin has played this bank takeover game before, and well: In ‘09, his Dune Capital (co-founded with former GS/Whitehall guy Dan Neidich - big $$ in top projects incl. 15 CPW) led a group that took over failed mortgage lender IndyMac. Buying it with billions of dollars of govt. sweeteners, they rebranded it as OneWest and sold it at a handsome profit in ‘15 – though they did take some reputational damage for allegedly turning the bank into a “foreclosure machine.”  

NYCB new boss Otting made clear that he believes the bank is too CRE-heavy.

“The right balance sheet for an organization is a third of it being in consumer-related businesses, a third in commercial banking-type relationships and a third of it in real estate,” he said. “You can probably see a path for us to head in that direction organizationally.”

Does this mean more Signature-esque selloffs to the likes of Related/CPC on the RS side, and to the Mavericks of the world on the office front? A lotta fees to be juiced 🧃 …

Three good reads for more: 

1) This Crain’s dive into the disastrous NYCB-Flagstar merger that got us here

2) The Promote’s primer on where the CRE lending landscape stands

3) A conversation we published with a federal bank examiner on how regulators are thinking about loan mods 🐫 🐫 🐫 

Witkoff’s Miami Coup

Steve Witkoff is the platonic ideal of the buccaneering developer, a guy whose dealmaking chops match up to his schmoozing ones. His career has seen him go from walk-ups in Washington Heights to becoming one of Lower Manhattan’s biggest office landlords to building for captains of the universe in the West Village. His most recent quest is testing just how far pricing can go in Miami Beach, and the answer seems to be in the nine-figure range: WSJ reports that a penthouse at Witkoff’s Shore Club Private Collection is in contract for north of $120M, or a staggering $11,400 a foot. (Witkoff’s partner on the venture is Monroe Capital, which those following the HFZ story would recognize as a key lender to that now-fallen developer.)

The $120M+ pad in question comes with 7,500 square feet of outdoor space and a private rooftop pool. And it means that Witkoff will soon hold the record as the developer of Miami’s most expensive residence. Quite a journey for a guy who used to run with Bo Dietl, spent one New Year’s Eve with a plunger at one of his derelict Uptown walk-ups, and kept a copy of “Tough Jews” on his desk.

(For more on Witkoff: Check out this fantastic profile from the vintage Observer, and this video interview I did with him.)

Poll: A Brokerage by Any Other Name

Vertical Limit

Our rental towers are getting bigger and taller. U.S. cities added nearly 3K buildings with >200 apartments between ‘21-’23, per Yardi data cited by WSJ, a 17% jump from the previous 2-year period. Rental developers are scaling up, and not just in the usual metropolises: Milwaukee is getting a 46-story tower, the Couture, that has 322 units with rents going from $2K a month (!) to $12K for the penthouse. (I’m most definitely a coastal e*%te, so am constantly surprised when I see this stuff - bear with me). The developer, Rick Barrett, is being backed by Boca Raton-based pension fund manager WhiteStar Advisors on the venture. Meanwhile, in Baltimore, MCB is gunning for a zoning variance that would let it build a 2-tower, 900-unit project.

Many factors leading to this supersizing: higher interest rates that ice out condo buyers and make condo developers more hesitant to build, cities being willing to nix parking 🚘️ minimums for new projects, and more hospitable zoning and building codes.

Quickies

• Sun Life subsidiary BGO aims to drop $500M to buy SFRs directly from builders, following similar moves by industry giant Pretium and Fundrise.

• René Benko, Aby Rosen's partner on the Chrysler Building, has declared personal insolvency. If you’re new to the decades-long telenovela 🍿 that is that iconic skyscraper, start here.

• Citadel boss Ken Griffin is dropping $78M (about $312/foot) for 250K sf of St. Bart’s ⛪️’ s air rights for his New York tower at 350 Park Ave., being developed w Vornado and Rudin. The billionaire’s alpha HQ, however, will be in Miami.

• More color on Shashi Jogani, the brother awarded the largest share ($1.8B) of damages in the two-decade family feud over a $6B apartment empire. Turns out Shashi also has a big stash of apartments in Arizona. Dhandho!

   

California YIMBY Breakthroughs

Couple of major YIMBY-affirming updates in the Golden State 🌞 

1) California Governor Gavin Newsom made a move to expedite construction of a $2B megaproject in Skid Row, announcing that the state would fast-track judicial decisions in any legal challenges to the project made under the developer boogeyman CEQA, the state’s environmental act.

“For decades, we’ve let red tape stand in the way of these kinds of critical housing projects — and the consequences are in plain view all around us,” Newsom said, per the LA Times. “Now we’re using California’s infrastructure law to build more housing, faster.”

The Continuum Partners 10-building project is slated to replace a smattering of cold-storage facilities and industrial buildings in Skid Row (kissing the Arts District) with 1,500 residences (572 condos, 949 apartments, 200+ affordable), 400K+ sf of office and a 68-key hotel.

2) In La Cañada Flintridge, Cedar Street Partners scored a first-of-its-kind win in a Builder’s Remedy case. The Superior Court ruling forces the city to recognize the project as a BR project and thereby allows it to bypass local zoning rules (as long as affordability criteria are met).

Builder’s Remedy, a once-obscure provision, is going to be one of the defining state vs. city development battles of the decade, with 67 cases across California, per SF YIMBY.

Unquotable Quotes

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