Special NYCB-Meridian Relationship, Live Local's Poison Pill, Delinquency Sweepstakes and Fertitta's Megadeal

The Special Relationship: Meridian-NYCB

We need to talk about Meridian.

As the NYCB fallout accelerates (downgraded to junk by Fitch Friday + further junkified by Moody’s) and the bank’s underwriting standards and exposure to New York’s rent-stabilized market are scrutinized, one question everyone’s asking: what role did the bank’s favorite brokerage play in the whole situation?

There has long been chatter of how major a rainmaker Meridian was for NYCB: according to several sources I spoke with familiar with the firm, Meridian brokered the lion’s share – as much as 75% – of the bank’s multi loan deals. Meridian leadership (Ralph Herzka and Avi Weinstock) have decades-long relationships with two former senior bank executives: Jim O’Donovan, who became chair of the mortgage and RE committee in ‘05; and James Carpenter, who became chief lending officer at that time.

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Meridian-NYCB (cont.)

There’s long been chatter of Meridian having “most favored nation”-type treatment at NYCB, with the brokerage having the credit committee’s ear 👂️ – often at the expense of other shops. “A special relationship that was more special than the other ones,” is how one source described it. An executive familiar with the brokerage said that “relationship banking” (Signature, First Republic, NYCB all fall into this 🪣 ) is a “squirrelly way of saying: ‘we do a lot of things that can’t be easily explained if you look at a dataset.’”

Now that the rent-stabilized market has turned so dramatically, the post-mortem may reveal underwriting procedures that were far from stellar, another source active in the market said. “The RS business is the most acute version of lots of fucked-up shit that was happening in multifamily,” he said, speaking generally about the lending environment and not about any one brokerage.

Meridian declined to comment to The Promote, while the bank couldn’t be reached for comment. The brokerage has been laying low in public while it deals with the fallout from a Freddie Mac probe. Fannie’s also unhappy: effective today, per a memo (first reported here) the agency sent out, Fannie will "not issue a Commitment or accept delivery of a brokered transaction” if Meridian was in the mix.

Live Local’s Poison Pill

Florida lawmakers passed amendments to the state’s Live Local Act last week to make it even more developer-friendly, adding tweaks that allowed projects to be built to 150% of the “highest currently allowed” FAR in the area and nixing some parking 🚗 requirements. The move was hailed as a sign that the state is serious about addressing its housing crisis and letting developers do their thing 🏗️ . Others, however, predicted that the counties would push back hard.

Have they ever. Last month, Pasco County had told 2 developers to withdraw their applications for tax exemptions to “avoid the time and expense” of litigation. There’s been a ripple effect from that move. The latest amendment to the Senate Tax package provides local authorities a major opt-out that could significantly water down Live Local in 40+ counties, per a memo sent by an attorney to developers seen by The Promote.

Here’s the killer bit from the bill, paraphrased by the attorney: “Beginning with the 2025 tax roll, a taxing authority, such as the county commission, public schools, municipal government, water management districts, and independent special districts, may elect, upon a 2/3 vote of the governing body of the taxing authority, to not exempt property within the 80% AMI-120% AMI range if the latest Shimberg Center for Housing Studies Annual Report states that the taxing authority is within a county where there is a surplus of affordable and available units in the county as compared to individuals meeting the 80% AMI-120% AMI income range.”

“Our understanding is that this opt-out provision is in direct response to Pasco County’s threat to challenge the constitutionality of the entire Missing Middle program,” the attorney wrote, noting that lawmakers were “open to tweaks so long as Pasco is still allowed to opt out.” The attorney’s firm is working to finesse the grandfathering language included in the bill, in order to ensure some projects are protected, and is hoping to have the Shimberg Center revise its report to break down the surplus/deficit by county instead of MSA – this would reduce the list of counties eligible to opt out.

The attorney is circulating the memo among developers in order to corral a group that could split lobbying costs. It’s going to be quite the fight - the attorney described it as “a grim situation.” And a developer involved in the discussions described the opt-out loophole to me thus: “Because hey, fuck them teachers amirite?!”

Fertitta’s Houston Megabet

Hometown hero and Rockets owner Tilman Fertitta dropped $450M on River Oaks District, a 14-acre mixed-use center in Houston, per the Houston Chronicle. The complex includes 300K+ sf of retail, with high-end tenants including Hermes 👜 and Cartier 💎 , as well as a 279-unit rental complex and nearly 70K sf of offices. The seller, JPMorgan Asset Management, is taking a $100M haircut, having paid $550M for the complex in ‘16. Fertitta has dropped at least $1.1B on high-end real estate since late ‘22, when he paid $650M for a waterfront hotel in the OC, per the publication. (The billionaire’s main gig is Landry’s, a gambling, hospitality and entertainment conglomerate, which he bought a controlling stake in for $400K in 1986.)

Quickies

• Harry “Midnight Demolition” Macklowe allegedly illegally cleared land around his Hamptons mansion and built additions sans permits. Meaning: though his pad is on the market for $38M, it doesn’t have a c/of occupancy, so a buyer wouldn’t be able to move in 👏 🐐 🐐 🐐 

• Credit investor CleanTo2ndLien’s third installment of his conversations with a Federal bank examiner. This one gets a little Tony Robbins-y, dealing with mindset and banks’ changing attitudes to regulation. (Check out Pt. 2 of the chat, on the crucial 🐫 rating, here)  

• Distressed-debt investor Kyle O’ Hehir provides an inside look, in vivid detail (“You can only buy notes for 50 cents in a few scenarios: 1. the collateral is a bag of 💩”) at how to buy a nonperforming loan.

•  Billionaire Paul Singer’s fabled Elliott Investment Management is bankrolling Madison Realty Capital’s Greenpoint rental development

• How sound is the #LongMiami narrative? A few data points (office leasing activity, apartment rent growth slowdown, more sites hitting the market) worth considering 

Most Likely To Default Sweepstakes

CRED iQ went hard in a new analysis breaking down CRE CLOs (debt securities backed by shorter-term, floating-rate loans, key vehicle for the multi buying spree of the past couple years) issuances, crunching it by:

• Current Deal Balance Outstanding

• Total Delinquent Loan Balance

• Overall Delinquency Percentage

Barry Sternlicht’s Starwood topped the delinquency rate list (12.6%), followed by Greystone (11.2%) and Fortress (10.7%). Arbor, which is being painted by its short seller as the poster child for this whole multi mess, just missed a podium finish, placing 4th with about a 10% delinquency rate. It did top the analysis of total delinquent loan balance (the constructors championship 🏎️ , if you will) by dollar volume, with nearly $800M in delinquent debt. MF1, Tides’ alpha lender, topped the charts in terms of highest outstanding deal balance, at $11B.

Unquotable Quotes

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