Tragicomedy in Times Square & A $5B Debt Hunt

Tragicomedy in Times Square

In 2018, UBS announced its largest direct CRE deal pursued on behalf of its clients: a $400M equity investment in the razzle-dazzle TSX Broadway. The bank had seen a surge in appetite from UHNW and family-office clients for single-asset deals, UBS’ Don Giuseppi said at the time, and the funds would sit alongside those from SoftBank ($200M-ish) and Fortress’ principals, as well as the personal funds of L&L bosses David Levinson & Rob Lapidus, who were developing the project w/ Fortress & Mark Siffin’s Maefield Development. All told, nearly $800M in new equity had been lined up for the $2.5B project, which sought to restore Times Square to its rightful place at the center of the hospitality & entertainment universe.

UBS may be fielding some pretty angry calls right about now.

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TSX Broadway (Cont.)

Goldman Sachs, which gave TSX Broadway a $1.1B construction loan in ‘18, has just seized control of the complex from the sponsors, per Bloomberg, after they defaulted on the loan. It’s tapped SL Green to manage the recently completed project, with an eye on prepping it for a sale.

It’s a tragicomic end to a nearly decade-long odyssey for Maefield, which acquired the leasehold to the Doubletree Times Square in late ‘15 for $540M and tried everything to get this to work, w/ seemingly everyone. The construction job was hella complex – it involved, for instance, lifting the landmark Palace Theatre 29 feet into the air and building retail & entertainment space below it – and in ‘17, Maefield & Fortress brought in L&L as a partner. Cost estimates kept rising – we went from a $2B project to a $2.7B project – and the developers dutifully upped their estimates of eventual value, telling cash-for-green card investors in the EB-5 program that it would be worth $4B+ upon completion 👏 👏 👏. Those foreign investors did pump in funds as part of a $543M mezz loan, but that money became an albatross: Chinese investors sought to block the regional center, Nick Mastroianni’s USIF, from moving their funds into TSX Broadway from another Maefield/Fortress boondoggle, nearby 701 Seventh Avenue aka 20 Times Square – Maefield lost that one in ‘22, w/ French bank Natixis taking a bath.

Is this the biggest clusterfuck in recent Manhattan development history? It’s certainly claimed the most boldfaced scalps. Write us with your nominations, while we leave you with these words from Maefield’s Siffin: “My mind constantly wanders to foolish places, but I have the discipline now to pull it back in so I can lead to extraordinary outcomes.” 🙏 

Doronin’s Olympic Debt Quest

“Look, it takes money to make money. Otherwise every pauper would be a king.” - Clay Davis

An in-progress ultra-luxury resort in Beverly Hills seeks a staggering $5.25B to finish the job: One Beverly Hills, a project from Vlad Doronin’s OKO and Cain International (a JV between Jonathan Goldstein & Todd Boehly) has the ‘28 LA Olympics in mind as the deadline. The financing - Newmark’s leading the search – would replace a $2B JPMorgan-led package from earlier this year and go towards construction, per Bloomberg. It would be a mix of jr. and sr. floating-rate debt raised from a cocktail of banks, debt funds, insurance cos and others.

The two-tower project across 17.5 acres is slated for 200 Aman-branded condos, an Aman hotel and luxury retail. It includes a soup-up of the storied Beverly Hilton.

Really curious who’ll cough up for this mammoth undertaking. Could it be some of our Quiet Kings ™️ ? 

BiggerPockets Lands Deep-Pocketed Buyer 👖 

Chernin’ & earnin’: BiggerPockets, the RE investor community, media co. and educational platform, has sold a majority stake to the Chernin Group, per Fortune. Founded by Josh Dorkin in ‘04 and now led by Scott Trench, BiggerPockets now has 3M+ members, and feels like the only media property that figured out how to successfully talk to a huge group of disparate investors (This is a hard problem to crack – we at ten31 are thinking through it every day). Its forums are a good barometer for the vibes in the syndicator community, going from bulletproof exuberance in ‘21 and ‘22 to confusion and panic nowadays.

The deal is classic Chernin: Scope out media properties w/ high-value niche audiences (Hodinkee, Cars & Bids), buy a majority stake, and then stay out the way (good pod on their playbook here).

Double Triumph for the Gangsta of Brick

It’s been a long winter of discontent at Steve Roth’s Vornado, but the REIT has announced 2 big victories: Its JV w/ the Chera family’s Crown has sold its chunk of the Uniqlo-occupied retail space at 666 Fifth Ave. to the Japanese retailer for a steep $350M ($20K/foot!), a deal that will go towards repaying Vornado’s $390M pref at the property. Uniqlo also has a deal in place w/ Brookfield to buy the rest (74K sf) of its space at the building - it’s on floors 2 & 3, but likely to also net a big number.

Vornado’s Uniqlo deal was brokered by Eastdil’s Gary Phillips & Will Silverman, who also did Jeff Sutton’s $1.8B bonanza sales to Prada 👠 and Gucci 👛 parent Kering. “In retail, luxury guys want to be on 1 block," Sutton said of his deals in March. “Every trade on a supply-starved corridor sets up the next deal and ups the scarcity that boosts the price.”

Vornado also dropped the news that it had signed an unnamed tenant to a master lease for 1M+ sf at 770 Broadway, its Midtown South joint that had been a source of concern since Meta cut its space by a third earlier this year. The deals earned it a nice stock pop.

Knives Out for Arbor 🔪 

An investor is alleging that key multifamily lender Arbor concealed a “toxic” portfolio of mobile homes through an intricate web of shellcos 🐚 for more than a decade, a maneuver that the investor likened to securities fraud. Lois Martin is seeking class-action status on the suit (h/t Law360), which leans heavily on short-seller reports from Ningi Research and Viceroy. An Arbor spox told TRD that the REIT “does not own, nor has it ever owned, any interest in a mobile home portfolio.” The lender is staring down a federal fraud investigation as well as a series of attacks from Viceroy. It reported $1B in delinquencies in Q2, up 10% from Q1, and CEO Ivan Kaufman flagged that nearly a third of that bad debt could go REO - “that’s the toughest part of it,” he said.   

Quickies

• 📽️  JPMorgan suit asks: What obligations do CMBS originators have to bondholders? 

• Austin developer StoryBuilt – start here if new to the story – could be in receivership limbo for years 

•  HFZ pleads guilty in $86M fraud case, blames ex-principal Nir Meir (read our snapshot of Nir here) 

• Record pipeline for South Florida multifamily construction - 24K units expected to be delivered by year-end

• More C-PACE action from Nuveen 

• Scheetz & Schrager land $121M to redevelop WeHo Standard

• BDT/MSD nearing $1B CMBS refi for Boca resort - would return $65M in equity to them

• ICYMI: The Quiet Kings of Capital Pt. 1, Pt. 2, Pt. 3 

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