The Quiet Kings of Capital: Part I

The Quiet Kings of Capital: Part I

“I'd rather be alive at 18% than dead at the prime rate.” - Big Bill Zeckendorf

Gary Barnett scored a mammoth $1.2B refi for his UWS luxury condo. The Zeckendorf bros, grandsons of Big Bill, landed nearly $1B in construction financing for their Hudson River-adjacent condo project, likely the largest ground-up resi deal in New York since the pandemic began. Despite the turmoil in the real estate capital markets, with many banks hanging out on the sidelines or being cavity-searched by regulators, pedigreed sponsors are still filling up their capital stacks. But the makeup of those stacks has changed dramatically: it’s the major debt funds and other alternative lenders that are now front and center. With access to cheap capital and operating in a sort of regulatory DMZ, they are filling what KKR’s head of RE credit Matt Salem recently described as a $500B+ hole in the market.

The Promote decided it was time for a snapshot of some of the most active alt lenders in the mix: who they’re run by, what deals they’re doing, and where their money’s coming from. It’s a meaty series, so we’ll do Pt. I today.

Alt Lenders (cont.)

1) JVP Management

Principals: John Illuzzi, Van Nguyen, Anthony Pizonnia Shaskus (i.e. JVP)
HQ: Manhattan 🗽 

Illuzzi and Van Nguyen were bigwig equity derivatives traders at BofA who split in ‘02 to launch a hedge fund. They were joined in ‘20 by Shaskus, who cut his teeth at Fried Frank and JPM. According to a June SEC disclosure, JVP has nearly $3B AUM, the largest share ($2B+) coming from insurance cos. (It’s unclear whether they’re running more $ through other vehicles). JVP led the July $1.2B refi of Extell’s UWS condo tower at 50 W 66th St., in which they replaced Bank OZK as the senior debt ($800M+) and also provided mezz financing and committed further construction funds to the project. The lender was also at the heart of a refi for Aby Rosen’s Seagram Building - there’s a pref component to that whole thing that remains fuzzy.

JVP has also played on the equity side: it is the sponsor on 96+Broadway, another UWS condo tower, and a partner on Gamma (Kalikow fam)’s Sutton Place supertall. (Original sponsor on that beauty was one Joseph Beninati, who had a HoF flameout you can read about here.)

2) Cale Street Partners

Founder: Edward Siskind (Goldman alum)
HQ: London

Backed by the $250B London arm of the mammoth Kuwaiti 🇰🇼 sovereign wealth fund, Cale Street doesn’t do too many US CRE debt deals, but the ones it does are whoppers 🍔 : in April, it led a $575M construction loan for a Century City office tower being developed by JMB Realty; and last week, it was revealed as the co-lead on the $985M 😲 construction loan for 80 Clarkson, a full-block luxury condo on the Hudson River being developed by the Zeckendorfs (of 15 CPW fame), Atlas Capital Group and Baupost. The London-based Cale Street was seeded w/ $1.5B of Kuwaiti SVF money in ‘14, and says it targets CRE deals sized between $200M-$1B+ 💪

3) Farallon

Managing partner: Andrew Spokes (Goldman alum). RE guys: Rocky Fried, Josh Dapice
HQ: SF but w/ offices in all the usual global hotspots.

Founded in ‘86 by hedge fund bigwig Tom Steyer to do merger arbitrage, Farallon played in the wreckage of the LBO crisis and established a RE debt arm in ‘94. Today, it has nearly $40B in total AUM, per PERE, and completed a $650M raise for its 4th RE-focused debt fund last summer. It co-led the 80 Clarkson financing 👆️ w/ Cale Street, and recently partnered w/ Hal Fetner to buy an UES rental from BlackRock. In Chicago, it’s a partner on a troubled Loop office tower deal.

We’ll do Part II of this series on Wednesday - stay tuned. And feel free to write in with your own suggestions.

Fortress: Big D is a BFD

As Ken Griffin did with Miami, putting an exclamation point on that city’s “Wall Street South” ambitions, Fortress Investment Group is now attempting to do with Dallas. The powerhouse debt investor, a major lender to and sometimes tormentor of real estate developers, is establishing its co-HQ in the Big D, envisioning the city as a new “capital of capital.” Fortress is a founding investor (alongside BlackRock, Citadel & others) in the upstart Texas Stock Exchange, which aims to break the duopoly on corporate listings enjoyed by NYSE and NASDAQ by touting its non-woke credentials.

“The strength and dynamism of the Texas economy is perhaps unmatched in America, and the much cited ‘business-friendly’ approach of our state is becoming a more important, and more distinctive, element of the Texas value proposition,” Fortress’ co-CEOs Drew McKnight and Joshua Pack wrote in an op-ed in the Dallas Morning News. They noted their recent deal to rescue struggling Texas-based multifamily-focused lender First Foundation, and made a case for the state’s continued economic boom: more finance/banking workers than New York; a big uptick in employees at JPM, Goldman, Fidelity and Wells; and a governor (Abbott) who knows how to treat Big Business well.

Quickies

• 🎥 When Uncle Sam is your construction lender 🏗️ 

• 📸 Breaking bread after breaking debt 🥖: Restructuring celebration dinner for Yoel Goldman's All Year, once among the biggest players in Brooklyn CRE

• KeyBank sued for allegedly leaving sponsor high & dry on pref 

• Blackstone ups bond offering to help pay for $10B AIR Communities acquisition - more on that megadeal here

• A thriving local economy no longer means a thriving office market  

• Legal woes mount for Brandon Chasen, the Baltimore developer who recently claimed he has “adjusted for longevity” 🙏

Stalking Zombie at DTLA Megaproject

A stalking-horse bidder has emerged at L.A.’s biggest real estate boondoggle: Oceanwide Plaza, the marquee 3-tower DTLA project of embattled Chinese developer Oceanwide Holdings. Colliers and Hilco Real Estate, which are jointly shopping the property on behalf of Oceanwide, are in talks with a mystery L.A. developer to rescue the project, per WSJ. This developer would pay $500M to take control if no better suitor emerges through the bankruptcy bids (mid-Aug) or at the time of auction (mid-Sept.) They would have to pump in another $800M+ to finish the job, per Hilco – though people have called Oceanwide’s claims that the project is 60% complete into question.

The project was slated for 500+ condos, an open-air mall and a 184-key Park Hyatt hotel, to be completed in ‘19. It was part of Oceanwide’s $3.5B spending spree across SF, New York, Hawaii and LA, a Chinese capital flex whose biggest legacy was a string of zombie projects. Oceanwide Plaza, for one, owes nearly $400M to contractors, EB-5 investors and the city.   

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