Snitches Get Riches & KKR's Brooklyn Barrage

Snitches Get Riches

“I got the shotgun. You got the briefcase. It’s all in the game though, right?” - Omar Little

A fascinating case of vigilante justice brought upon SFR’s biggest player: Invitation Homes has to fork over nearly $20M to settle a suit over allegedly unpermitted renos (demos, swimming pool construction 🏊️ etc.) it made across its California portfolio. The hero (or villain, depending on your perspective) in this story is Neil Senturia, who built a software that analyzed before/after images 👏 of Invitation Homes’ rentals and realized something was up, per LAT (h/t @ryanchandrapaul). He then filed a Qui Tam lawsuit – a whistleblower action that allows pvt. citizens to sue on the govt.’s behalf & collect a reward – and stuck out a 4-year battle. His bounty? $8M, the same sum that all the affected 35 cities received collectively. (The remaining $4M went to the lawyers 💼 .)

Invitation Homes didn’t admit wrongdoing and denied the allegations 🤷. The firm has 84K SFRs across the country, and earned $632M in rental income from them in Q1. Nearly a fifth of that haul comes from its 12K unit California portfolio, and SoCal’s where it’s able to get the highest ($3K+) average rents. Earlier this year, it paid nearly $4M to settle a rent-gouging case. 

KKR’s Brooklyn Barrage

Don’t look now, but KKR has become 1 of Brooklyn’s biggest rental landlords. Quick tale of the tape:

• Summer ‘20: $860M for the 14-building Bruman portfolio

• Summer ‘22: $190M for 80 DeKalb (also w/ Dalan)

• Now: $240M for 540 Fulton - the deal w/ seller Jenel for the 43-story tower was put together late last year, then fell through, and now KKR “just got their arms around it,” Jenel’s Jack Dushey told TRD.  

All 3 deals – $1.3B for about 2K apartments in aggregate – were done in partnership w/ Dalan Management, whose Matt Sobel helped put them together. Dalan holds a minority stake in each deal, and is also minding the shop for KKR on a chunk of its Quarterra portfolio, which the firm paid $2.1B for last month.

Bonus: A dive into KKR’s multifamily “called shot” here and a snapshot of RE boss Ralph Rosenberg here.

Always Makes Money For His Partners

When David Werner swooped in to buy Barings’ 100 Wall for a song, those familiar with the man’s playbook were waiting for the other shoe to drop: the reveal of the deep-pocketed partner who’d kick in most of the equity. Well, the $116M ($220/foot) deal closed last week, and via PincusCo we learn that Werner’s partner on the deal is Lloyd Goldman’s BLDG. Goldman – nephew to the 🐐 of ground leases Sol Goldman – controls 300+ properties, and is building Long Island City’s tallest tower.

The JV also landed a $95M acquisition loan from Ran Eliasaf’s Northwind, the same lender who recapped the long-suffering 125 Greenwich supertall condo project. Goldman and Werner could opt for an office-resi conversion; Werner already has a huge one in the works w/ the alchemist Nathan Berman at the former Pfizer HQ in Midtown 💉 

Barings had a miserable run at 100 Wall, having paid $270M ($528/foot) for it at the top in ‘15. Hopefully, at least this sale was an “Aggravation Free 😀” process.

Blackstone Strip Mallin’ Hard

If you’re dropping your kid off to karate in the burbs and you spot Jon Gray, now you know why: Blackstone is exploring a $2B take-private of strip-mall operator ROIC, per Reuters, though talks are in the early stage. ROIC controls nearly 11M sf of retail across 95 properties, and bills itself as the “largest West Coast grocery-anchored REIT.” Same-space new leases rented for a 12.4% premium in Q2, ROIC disclosed. 🥋 

Any deal would add further sauce to a monster M&A year for Blackstone in CRE: it bought SFR giant Tricon in a $3.5B take-private in January, and brought joy to rental landlords everywhere in April w/ a $10B deal for AIR Communities.

Quickies

• 🎥 The Quiet Kings of Capital - Part II 

• Liquid courage: Equity Commonwealth - a former Sam Zell joint – to wind down, has to sell last 1.5M sf of office 

• Equity Residential, however, is killing it: $177M profit in Q2 and a hunger for more apartments

• $3.3M phishing scam gets retail REIT

• Wild IF true: During the last full year of 421a, 1.6M buildable sf of NYC land for rental development sold. 2Y later, just 38K sf traded. (This sounds directionally correct but I’m skeptical of these numbers from Avison Young – would love to see another analysis)

An Aristrocrat Lands in Jersey

Arki Busson, a French hedgie who enjoys an Agnelli-esque lifestyle in European frou-frou hotspots, has made working-class Bayonne, NJ the site of his latest adventure. Busson has bought 70+ acres at the site of a former Texaco plant, per WSJ, and is planning a $1.2B production studio w/ 23 soundstages and 1.5M sf of space.

His partners on the caper are even more storied names in High Finance: Louis Moore Bacon and the Rothschild family.

Why NJ? Not only do you not have to pump your own gas, the state also offers hefty incentives for such projects – the Busson JV can avail of up to $400M in tax credits. It would have to clean up and develop on a brownfield site, and Bayonne mayor Jimmy Davis expects construction to create up to 3K union jobs.

As the world gets ever more content-greedy, soundstages have become a pretty serious asset class for big CRE players, w/ everyone from Blackstone to Apollo to HPP to Square Mile (now Affinius) making big bets.

“It’s America,” Busson said of the venture, dubbed 1888 Studios. “It’s industrial America. It’s Hollywood. It’s the ’30s, it’s the whole dream.”

Unquotable Quotes

Save the date: ten31 - in partnership w/ Iman Jalali’s Bear Peak Capital – is doing a Chicago Happy Hour on Tues., Sept. 10 at Joy District. We’ll have more deets plus an RSVP shortly but please lock that in your calendar if you’re in the area - should be a hoot! 🌬️