The Alchemy of Nathan Berman, TASE Me I'm Dreaming, Condo Buyout Limbo & the Mouser Rebbe

The Alchemy of Nathan Berman

“A woman swears she'll never have another child during labor. I'm already starting to forget all the difficulty and all the challenges that we had to overcome in putting this together.”- Nathan Berman, Metro Loft Management

There’s ambition, and then there’s real estate developer ambition, and then there’s immigrant New York real estate developer ambition. 

Nathan Berman’s story should have already yielded a Lifetime special. A native of Mukachevo, Ukraine, the son of a concentration camp survivor, a kid who moved to New York in the early 70s and was blown away by the tube socks – “How could they be so white, so clean? They didn’t have Tide in Russia,” he once recounted. The Kew Gardens resident first drove a cab, and then through his father-in-law got into representing Russian artists looking to make a mark stateside (he shows up in this ‘94 Baltimore Sun article). His first real estate deal was a Tribeca loft building at 71 Leonard (price: $520K, $70K cash) in ‘95, which he converted into 8 apartments. Then, he went bananas 🍌 : by ‘23, Berman had converted 3.5M+ sf of Lower Manhattan office into FiDi apartments, with another 1.5Msf in the works.

Today’s sponsor is: BetterPitch

Whether raising an SPV, open-ended or REPE fund, lean on BetterPitch’s team of seasoned analysts, copywriters and designers to make your pitch professional and crisp. Focus on your core competency – real estate – and let us figure out how to make your pitch pop. 

Get in touch today for a free pitch deck audit.

Berman (cont.)

Even though he’s not a condo guy ( a condo is a delayed flip,” he once said. “It makes a lot more sense to hold.”), he developed one of Tribeca’s most successful condo projects ever, the celeb-heavy 443 Greenwich. He’s raising a $1.5B office-resi fund with Silverstein Properties (at 1 time there was chatter he’d replace Marty Burger as Larry’s CEO), and scored a $500M+ loan for the 1,300-unit conversion of 25 Water Street – the largest office-resi debt package in U.S. history.

Why stop there? Berman has now bought into David Werner’s 219-235 East 42nd St, the former Pfizer HQ, with the partners eyeing a record-breaking 1,500-unit conversion at the property, TRD reports. Werner deals come standard trim with complexity: the investor, who brings T-shirts that says “Free Aggravation” and “Aggravation Free” with him to negotiations, owns the leasehold on one of the towers and is gunning to buy the fee interest in the other. 

Office-resi conversions are the market’s existential riddle right now: if they can happen at scale, they help solve the blight of ghost 👻 office towers while also putting a dent in the housing crisis, and even help tackle greenhouse gas emissions. BUT: they are incredibly complex, most office buildings don’t pencil as residences, and city, state and federal officials will likely have to play ball. Berman was a big user of New York’s 421g incentive to pull off his Downtown conversions, but new state-level incentives for citywide projects are yet to arrive. A $35B federal program to tackle such conversions has had a painfully slow start, with constraints that don’t match the realities on the ground.   

TASE Me, I’m Dreaming

Old paths to cheap debt never die, they simply fade away. There was EB-5, the cash for green card 🦅 program that was dubbed the “crack cocaine of real estate financing.” And in the mid-2010s, the bond markets in Israel became the land of milk and honey for developers.

The way it works: a developer rolls some properties into a new entity that issues publicly-traded bonds on the Tel Aviv Stock Exchange (TASE).

For a detailed breakdown, check out this excellent primer. Snippet here 

It creates a corporate entity with multiple holdings and its own balance sheet, spreading risk and enabling firms to raise debt at remarkably low interest rates — established developers with solid credit can sell bonds for 5 to 7 percent, about half what they’d pay for mezzanine debt back home.

At least $3B has been raised through TASE financing for U.S. real estate projects since 2008, by a who’s who of developers: Gary Barnett, Yoel Goldman, Abe Leser, Related. It has sometimes gone very wrong: Sponsors have been sued by Israeli investors, their books have been subject to a level of scrutiny they aren’t used to, and in the case of Yoel Goldman, things went nuclear.

Now we have another player taking a run at it. The parent co. of Eli Elefant’s Property Building Corp is looking to raise at least $400M in TASE financing, per TRD, with the goal of buying its JPMorgan debt ($385M) at the HSBC Tower in Midtown and paying it off. The property, at 452 Fifth, has had quite a ride: HSBC decamped to Tishman Speyer’s Spiral, and PBC’s deal to sell the building to Andrew Chung’s Innovo Property Group for $855M fell through in ‘22 after Chung failed to raise the equity (and lost his $30M deposit 🫣 ). It’s unclear if Elefant will be able to score the same sweet rates his peers did in the heyday of TASE raises.

Quickies

• This is resi, but massive:  Powerhouse trade group NAR agreed to a $418M settlement over agent-commission lawsuits and will agree to halt practices that allow a seller’s agent to set buyer’s agent comps. Is this the beginning of the end for your standard 6% commission? Good collection of immediate rxns here

• An appeals court smacked down a Miami condo buyout, in a move that could ripple across a state where such buyouts are increasingly gaining steam. Here’s TRD: “In its ruling, the higher court determined that the original declaration gave every unit owner an effective veto over any termination, which would be lost if the amendments passed by the developer-controlled association were enforced.”

• Goldman Sachs wants back in: Its asset-management arm will resume “actively investing” in US CRE, per Reuters. “We feel like the market is bottoming out,” said the group’s RE boss Jim Garman.

No Mouse in This House

Walking around Brooklyn, you may have peeked construction sites bearing the image of this man: Reb Shaya'le of Kerestir, also known as the “Mouser Rebbe.” As to why, a fascinating backstory (h/t @philwalkable) via KehilaLinks

One motzo'ay Shabbos, while Reb Shaya'le was eating this special melave malka meal, a chossid came to him with an urgent request. For the past number of months, his warehouse had been taken over by mice who were eating his grain and other commodities and his entire livelihood was threatened. At that time, each small town in Europe was ruled by the local church pastor. Some of the pastors were kind towards the Jews and others were very harsh. Reb Shaya'le asked the chossid if the pastor of the town he lived in was kind or harsh. The chossid replied that he was very harsh toward the Jews. Reb Shaya'le then instructed the chossid to go to his warehouse and to tell the mice, "Reb Shaya'le says to go to the estate of the pastor." The chossid followed the Rebbe's advice and instantly hundreds of mice raced out of the warehouse all heading in the direction of the pastor's estate. Ever since, Jews who have been plagued with this problem have used Reb Shaya'le's picture to accomplish the ridding of mice from their homes.

If it works in homes, why not development sites? Shabbat shalom.

Unquotable Quotes

Favor

If you liked this edition of The Promote, the best thing you can do is tell people about it. Email it, text it, share snippets with your family and friends and colleagues. We’re new, we’re having a blast and we’d like everyone to be in the mix. Check out this chat for a sense of the broader vision for ten31 – that bit starts at 33:18. Subscribe here. Reach out for advertising here. And follow me on Twitter for more spice between the letters.