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Your Commercial Real Estate Insider guide. From profiles of the biggest dealmakers to skyline-shaping transactions, we bring you the deals, breakdowns and war stories that move the market — for insiders, by insiders. From bad-boy guarantees to CMBS tranche warfare to syndicator sins, we cover it all.
Each week, The Promote Podcast explores three of the most interesting and consequential stories in CRE, taking you well beyond the headlines and into the heart of the action. Hosted by the award-winning “Bard of CRE,” Hiten Samtani, founder of ten31 media and author of The Promote newsletter, along with no-BS institutional insider Will Krasne. Also check out our 3x/week newsletter for industry insiders at https://www.thepromote.com/
Will Krasne (00:05)
I have complied with your every request, would you agree?
Hiten Samtani (00:08)
I would. Good.
Will Krasne (00:10)
Because now I have one of my own. Run and hide, asshole. I want my people to find you. And when they do, rest assured we are not going hand you over to the police. So my advice to you again is this. Run and hide. That is all that I ask.
Hiten Samtani (00:25)
Now you may think, why are we quoting Ocean's Eleven bad guy Terry Benedict in a podcast about commercial real estate? Well, this is the spirit animal to what SL Greens Marc Holliday said to the neighborhood committee that rejected his Times Square casino bit.
Will Krasne (00:40)
think with the benefit of hindsight, Terry Benedict isn't necessarily the bad guy. That's for another conversation. But Marc Holliday losing it at the committee. He's like, what you have done for the city? Just A plus stuff.
Hiten Samtani (00:53)
Go run and hide, because what you did to community, in this city and state, you have to live with that history forever. Run and hide, asshole.
Will Krasne (00:55)
The benefits you deny this
Hiten Samtani (01:11)
Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani
Will Krasne (01:17)
I'm Will Krasne. We're dropping this a day after our Rosh Hashanah, so a happy new year to our listeners from the tribe. May this new year bring you health, prosperity, and lots of hours binging the Promote Podcast.
Hiten Samtani (01:27)
Let's shout out to that. This week, we chat about one of the biggest real estate winners from Nvidia's emergence as the tech company of the AI age. The Sabrata organization has cashed in to the tune of hundreds of millions of dollars. We then look at how some big players are saying no mass to multifamily development. And finally, Harry Macklowe's back, baby. He somehow convinced a whole new set of people to give him a whole bunch of money for his next Manhattan development project. Or a caper, I should say.
A shout out to our sponsor for this episode, Bullpen. They're a recruitment shop dedicated to CRE, and you'll hear more on them in a bit.
Alright, let's start in Silicon Valley. I'm so glad we're doing this one because it gave me an excuse to read about Carl Berg. What a legend.
Will Krasne (02:12)
Oh man, some of these guys just, we've said it before, but if we didn't have them, we'd have to make them up. We're talking about the Sobrato organization because Tiger Global isn't the only person making money off of Nvidia. It's actually a real estate guy. He has sold now, what is it then, over $350 million worth of real estate to Nvidia.
Hiten Samtani (02:32)
They've cashed in at least $400 million and this is part of Nvidia's billion dollar buying spree, a real estate spree, in and around Silicon Valley. Pretty astonishing stuff, but if you think about it, it's kind of a rounding error for a company that was valued, what, yesterday at four and a half trillion dollars?
Will Krasne (02:49)
Yeah, it really does put everything in perspective. We work so hard for like every 50 cents a foot in leases and in videos. The real estate version of your amazing line from a few episodes ago about the Saudis going into hotels where your hotel room is occupied by a Falcon.
Hiten Samtani (03:06)
It's just amazing when these kind of companies come around, price, normal comps, et cetera, don't really matter. They're the fastest growing company in the world and they just need the space where they want to be. And so anyone who had the foresight and vision to build that kind of space can profit handsomely. And man, the Subrata organization, they really made it rain.
Will Krasne (03:25)
They
always say that you want to buy from a for seller and you want to sell to a force buyer and this is really the case there. But I think part of the reason why we want to talk about this is we want to shine a light on the Sabrata organization, Carl Berg, the history of Silicon Valley real estate, because it's really fascinating. We've talked about the Cowboys in New York and LA, up US one in the Bay Area. We had quite a few Cowboys of our own up there.
Hiten Samtani (03:49)
In Silicon Valley, there's essentially a few great men who've dominated that scene. There's Dick Perry, there's John Arriaga, massive, massive developers out there, and very, very famous son-in-law too, and Marc Andreessen.
Will Krasne (04:00)
very famous developer. Yeah, he was a fellow member of Delta Delta at Stanford.
Hiten Samtani (04:02)
You were in Oriaga's frat?
Incredible. then the third big player in the space was the Sobrato organization. And these two guys are amazing. Let's talk a little bit about the dynamic between Sobrato and Berg, because I went deep down the rabbit hole here on some old school business journal articles and man, they said a lot back then.
Will Krasne (04:24)
It was almost like Twitter before people realized it was public. Let's take a quick step back first because John Zabrato and Carl Berg weren't actually the seed capital for the Zabrato organization.
Hiten Samtani (04:35)
That is correct, there was a matriarch involved.
Will Krasne (04:37)
and Sabrato. So she was in the restaurant business and I guess they had the foresight to buy their building and it was what you know most of a city block in San Francisco. I think John later said that his dad slaved away 18 hours a day six days a week in the restaurant and then they sold the building and made more money off of that than they
Hiten Samtani (04:55)
The basically eclipsed anything they had done in the restaurant business.
Will Krasne (04:58)
That has remained the same 80 years later, but took that seed capital and bought a ranch in what is now Atherton.
Hiten Samtani (05:08)
John Sobrato is basically running the show and he partners with a guy called Carl Berg and their dynamic is really interesting. There was a property manager called Joe Lewis and he described them in this line. said, John was the salesman, Mr. Outside, and Carl was the lone guy, Mr. Inside. This is the dream dynamic. I wonder if people feel like this about.
Will Krasne (05:27)
us. Man, I don't know, I think you might be inside and outside. I don't even know what I am. But yeah, this is a dynamic that you see all the time because real estate, you need a variety of different things to be successful because we've talked about a lot that you are almost the center of a giant circle of people and you just be a connector. You have to know a little bit about a lot of things and you got to know enough about a lot of things to be dangerous in each of those things.
Hiten Samtani (05:49)
very, very, very high stakes project manager is still kind of the best way I've thought about development.
Will Krasne (05:54)
Totally. And you need Mr. Outside because you got to have someone who can get people to sell to him. You got to get people to give you money and you got to get tenants to come in and lease your buildings. You also need the finance guy who makes sure that you're actually paying the utility.
Hiten Samtani (06:07)
Yeah, so here what happened was they started in residential real estate at some point they transitioned into building for tech companies and they built for a company called Amdahl which I'm not even sure is around anymore, but they built 200,000 square feet for them and then they were off to the races Eventually, they kind of gained the reputation for being the go-to for tech
Will Krasne (06:27)
And what's great too is that you might think, how'd they raise the money outside of selling their restaurant? John had a very interesting quote about how they capitalize their developments. He basically said, we borrowed a hundred percent of the purchase price.
Hiten Samtani (06:35)
Please tell me about it.
As you like to say, we used to be a country.
Will Krasne (06:43)
It did used to be a country. Guys like this, you you put it all on the line time and time again. And that's what real estate's all about. He said to himself as he was insanely leveraged.
Hiten Samtani (06:54)
I love this other anecdote from the Business Journal article where Berg admitted that his wife Marianne frequently calls him at 6pm to remind him it's time to go home because he loves his work so much.
Will Krasne (07:05)
What I also love too is that John was quoted as saying that without Carl I never would have done a deal and without me Carl would have gone broke.
Hiten Samtani (07:13)
When you get these kinds of guys together and you have the capital and you have the balls and you have the comfort with that kind of insane leverage, you can really build an empire. And Sobrato did just that. think they had all told about 12 million square feet. You're building this real estate with a very, very specific industry in mind. And when that happens, you can end up in some systemic shock situations. And that's what happened to these guys after the Y2K bubble, they had all this real estate and they didn't really have an industry to lease it from. So that was a really challenging period.
Will Krasne (07:43)
They're talking about buildings being vacant for five years, which is a pretty scary thing. Carl Berg is talking about all his venture capital bets during that period too. mean, in a crisis, everything correlates to zero. The thing is with a master plan community, the thing you have to get is that the underlying value of the land has to compound at a crazy rate. It actually be really interesting for someone to go do is like, what's the value of the land in the U.S. that has compounded the highest? Because I would put Silicon Valley up there.
These guys, the stuff they were buying that 200,000 square feet, sold to Amdahl. They probably built it for like nine bucks a foot. What's it worth today?
Hiten Samtani (08:18)
one of Nvidia's recent purchases. They paid 83 million for 125,000 square foot building. So that's 660 bucks a foot.
Will Krasne (08:26)
That's a lot more than nine.
Hiten Samtani (08:29)
When you have numbers like that, I guess it's an offer too good to refuse.
Will Krasne (08:31)
If someone offers you a crazy price like every day you're not selling your building or technically buying it. That's I Completely agree with him aura is the lowest cost of capital and there's not much more or than Jensen Huang right now So you're not gonna compete with him and cost the capital and if he wants to come buy your thing He's probably gonna pay a lot more than you think it's worth
Hiten Samtani (08:35)
That's what Joey Tabak likes to say.
We've seen these trends pop up every couple of years. There'll be a big dominant strain of tech companies that just wants to own their real estate. We saw this in Manhattan, right? We saw this with Google and Hudson square and suddenly companies that had owned the real estate on the West side were cashing in big time. think Jamestown with Chelsea market is the one I really remember vividly.
Will Krasne (09:09)
This
is also a trend we've talked about elsewhere. A lot of big users now want to own and control their space. JP Morgan, we've talked about building their campus. Exactly. Yeah. So it happens every cycle. People say we want to have asset light and all of a sudden they're like, you know what's great? Real estate. All the real estate guys want to do tech and all the tech guys want to do real estate. And so sometimes the beams cross.
Hiten Samtani (09:19)
retail with all the fashion brands, right?
Will Krasne (09:40)
I want to shout out this Nob Hill Gazette article that you found because I just thought it was John Sabrato for someone this wealthy comes off as about as well adjusted as you can be. So I give him a lot of credit. The Sabrato philanthropic arm is absolutely massive. He's made personal donations outside of the foundation in the nine figures. But now he just talks about, know, we got a yacht. It's been 16 weeks a year on the yacht. It's great.
Hiten Samtani (09:57)
Very impressive.
We
just have a boat which we can move around, he said, depending on the weather, where we'd like to be. We've had the same boat now for 17 years, which is unheard of in mainstream.
Will Krasne (10:16)
Maybe Jensen Wong would offer on his boat and he'd sell it.
Hiten Samtani (10:22)
I don't think he would give that up for any price.
So we talk a lot on the show about how CRE is such a specific, weird world onto itself. So when you're talent hunting in the space, it makes sense to partner with a recruiter who lives and breeds it. That's where Bullpen comes in. They're a talent shop solely dedicated to the commercial real estate industry. They can fill both fractional and full-time positions, and they can hook you up at all levels from analyst to C-suite. Check them out at bullpenre.com to get started. That's bullpenre.com. And please tell our friends there that the Promote sent you.
Will Krasne (11:02)
You really need to be specific in your recruiting. If you're getting a hedge fund group coming over telling you like, this guy really knows risk adjusted returns like no, you need a real estate group. Someone is going over a huge deep dive on Carl Berg and business journals from the 1990s. That's what you need. And you're only going to find that with bullpen. ⁓
Hiten Samtani (11:19)
That's exactly right. Well said.
Alright, multi-family has been the bell of the ball for years. Everyone wanted to do multi, everyone ran away from pretty much everything else. Now though, folks are trying to get out. What's going on?
Will Krasne (11:34)
It's funny because now is maybe the time when you want to be doing multi. Folks are really getting out. it's right as you we saw it's been in every IC deck for the last 18 months is supply is going to be going off a cliff. Once we get through 2024 2025 262728, we're going to see big rent growth because of supply. And part of the reason is because these people are leaving the industry. Fuck you. Fuck you.
Hiten Samtani (12:00)
Fuck you! You're cool! And fuck-
Will Krasne (12:04)
Part of it is so many people have gotten torched and anytime that the stove's been that hot, people really like reach away. specifically if you were not doing this as your core business, if you have another line that was something that was more cordial platform, whether it be multifamily, even acquisitions, property management, home building, any of those things, if that's what you're really great at and you got into multi during this last cycle because it was the hot place to be.
Either your shareholders, your stockholders, your investors are telling you, you know what, why don't you go back to the thing that you actually made some money on?
Hiten Samtani (12:39)
Could you say that the bell has tolled for multifamily? So what are we talking about? Toll Brothers has agreed to sell its multifamily development arm to Kennedy Wilson. So we've talked a lot about AUM Gobbling in CRE at large. This is Kennedy Wilson paying what, 350 million odd to add another $5 billion of assets to their portfolio, 2.2 billion in owned and then a 3 billion in property management portfolio.
Will Krasne (12:42)
yeah.
which eventually is gonna get sold off and maybe they end up picking off some of those deals too. So Toll Brothers, let's take a step back, found about two brothers. They are a Pennsylvania based home builder. They got into multifamily and started building their own stuff and they had Toll City Living, which built a bunch of stuff in New York.
Hiten Samtani (13:21)
Brooklyn, I think they have that project, Brooklyn Bridge Park Pier House or something, I believe is them.
Will Krasne (13:26)
Yeah, I that with, I think Star Wars Capital Group. So they're getting out of the multifamily game because the market's saying, we want you to go back to selling homes.
Hiten Samtani (13:33)
I wonder how much of this is again narrative and just focus for Wall Street.
Will Krasne (13:37)
If you're a public company, what else is there but narrative? Narrative drives price, which drives fundamentals. Interestingly though, Toll has a lot of connectivity to multifamily outside of Toll Brothers. Bruce E. Toll has BET Investments, which has been a big multifamily and shopping center developer.
Hiten Samtani (13:40)
That's right.
It's kind of his family office, right? And he's gonna keep the interest in all that stuff.
Will Krasne (14:00)
Also, the Toll Brothers were early Mitch Morgan LPs back in the day when they had the deal where once they got their money back, they split the profits with Mitch 50-50 and everyone on Twitter went nuts saying that's an unfair split and like, it's good enough for Bruce Toll.
Hiten Samtani (14:04)
I said no.
And so part of this deal with Kennedy Wilson, KW is also acquiring a 29 site development pipeline, which I think they're saying all told will be valued in the multiple billions of dollars when it's completed.
Will Krasne (14:29)
just capital that you can put out. buys great land. Projects are going to be all right.
Hiten Samtani (14:35)
What I'm curious about is like what, how is Kennedy Wilson structured or how is their fund, whatever, structured in a way that allows for this?
Will Krasne (14:42)
So it's very complicated because they're publicly traded company. ⁓ And so they have a lot of different sleeves. I think they have a fun series. They've got balance sheet. They've got
Hiten Samtani (14:54)
They've been buying a shit ton of debt though. They bought PacWest debt.
Will Krasne (14:58)
We got
a credit arm. It's not rhythm capital because rhythm came out of the mortgage bond morass, but they're not dissimilar in having like a bunch of disparate product lines and being publicly traded and using that currency to their advantage.
Hiten Samtani (15:13)
So that's one big example with toll. The other one that really caught our eye was JBG Smith. They pulled a plug on a 1400 unit project in Northern Virginia. And they said, rates aren't cooperating and tariffs have made it infeasible. So that was super interesting.
Will Krasne (15:28)
I would also say it's because the DC multifamily market is not always the strongest. It can be a little soft because all the jobs that are transient, because people just come in and leave. JBG, one of the of foremost DC area developers had a fun series and then ended up, it's an interesting backstory.
Hiten Samtani (15:45)
Have we NATO spin off here? ⁓
Will Krasne (15:47)
Exactly
where I was going. So Vornado bought Charles E. Smith's portfolio. He had office buildings in multifamily and he had a bunch of like seventies office buildings in Arlington, Crystal City that Vornado inherited and then ended up just jettisoning them to see in a merger with JBG to create JBG Smith.
Hiten Samtani (16:07)
Yeah, and JBG Smith was also sort of in the news during the Amazon HQ2 stuff. I believe they were awarded that project.
Will Krasne (16:14)
Yeah. So HQ2 went into basically a bunch of buildings that they had inherited as part of this for NATO merger and JBG again, it was a very common stock play to say, Oh yeah, JBG is going to benefit from HQ2. It hasn't really panned out that way. And now that they're saying, Oh yeah, like multifamily, which has sort of been where we wanted to go because no one wanted to do office. And now they're saying we can't do multifamily anymore. And we really want to focus our capital on our balance sheet on creative office development.
Hiten Samtani (16:42)
like there's been enough dislocation that we have a generational opportunity here. They also specifically called out the Trump tariffs, which I feel like have become a catchall for anything you don't want to do, just throw the Trump tariffs at it and you're good to go.
Will Krasne (16:56)
a hundred percent. You don't want to go like take the trash out. It's cause like the tariffs.
Hiten Samtani (17:02)
So we're talking about all this obviously during a period of extreme consolidation in the multifamily space. We talked about Cortland buying Elm Partners.
Will Krasne (17:10)
It's funny you mentioned this because Cortland bought the assets of Elm, not all of them, but a lot of Elm's assets were in this same market. So they had a bunch of older multifamily in the Alexandria Arlington area, like overlapping with JBG Smith.
Hiten Samtani (17:23)
And then Bell Partners has been shopping itself. So we've talked a lot about how some of the multifamily players are big, but not big enough necessarily to see through this era of uncertainty and high rates.
Will Krasne (17:35)
If you do a lot of things and multifamily is one of them, maybe you want to go do the other things. If all you did was multifamily and it's been a tough several years and the fund vintages aren't necessarily great, you're not in the promote on your programmatic JVs and fundraising is getting harder, maybe now's the time to sell too. Bell has a big development arm. so those projects have probably been tricky and they're getting harder and harder to capitalize.
Hiten Samtani (18:02)
And you know, both of us absolutely loathe talking about rates, but is there anything we need to say about the quarter point cut that happened and how this might play? I just hate it because we pretend to know and no one really knows.
Will Krasne (18:12)
All I would say is that any view that's like very certain or one way is probably wrong. Like I still remember Robert Refkin posting, popping the champagne on Instagram at the first rate club like last year. And the treasury curve went up. And again, rates aren't one-to-one with real estate returns. If we're cutting rates, it's generally because the economy's bad. And so it doesn't really matter if maybe you can borrow a little bit more cheaply if no one can pay the rent on your apartment building.
Hiten Samtani (18:40)
That's the landscape for institutional multi. What does it look like kind of at a more accessible level, let's say?
Will Krasne (18:46)
It's
tough. It's really hard to get construction debt because banks were really like the big place you would go for construction debt. And if they're holding any office, they don't really want to be putting on more risk. It's been tricky. Like, yes, they're debt funds. But if you're doing a small project and you're not an institution, you don't necessarily have a huge balance sheet. You're not going to get one of the Athene origination arms to just give you a loan. You actually might. Maybe I'm wrong there.
Hiten Samtani (19:12)
Listen, with Athene's new SPV, anything can happen. There can be a whole flood of capital coming into the space.
Will Krasne (19:17)
Marc Rowan like come on just non recourse me to death and it's really tricky because again all of these Smaller multifamilies tough to build smart anything's tough to build because the soft costs don't like they aren't proportionately smaller
Hiten Samtani (19:31)
You're right, because when I see even these boutique office projects, let's say in a prime Miami area or something, they generally are these single LP deals. Maeda and Khurana have something and I was like, this project, it seems weird to me. And then I see Eric Schmidt, it was the primary equity on it. It's like an adventure for a rich guy as opposed to a business.
Will Krasne (19:48)
Yeah,
for the most part, I think you could say that about development kind of at large. No offense.
Hiten Samtani (20:01)
forgot to tell you, Jahan started crawling on his seven month whatever you want to call it exactly.
Will Krasne (20:07)
birthday. You can call it a birthday.
Hiten Samtani (20:08)
seven month birthday. It was so fun and he was so excited. He just started shrieking. We've been calling him Attila for the past week because he's just he's climbing over pillows and going, ⁓ it's really fun.
Will Krasne (20:20)
It's very cute and great, but then exiting potato phase is also very stressful.
want to let you know that on October 15th we're launching the Promote Insider, our pre-...
our premium subscription tier with exclusive content that you can't find anywhere else. Think Expertite Dives, in-depth interviews with players in the business, and bonus episodes of this podcast.
Hiten Samtani (20:46)
That's right, we're gonna have some special stuff for Insiders. It's gonna be a hoot, so stay tuned for pricing and more deets on the Promote Insider. Boom.
All right, baby, dirty Harry, your boy. Sailing season's done, unfurled has been parked and here comes Macklowe unfurling in the New York landscape.
Will Krasne (21:06)
Has his illegal Hamptons house been sold yet? What's going on there?
Hiten Samtani (21:09)
I don't know, but the man is back. He is, I believe he's 88 now and he's come and struck another deal in Manhattan for another ultra luxury condo play. God bless this guy.
Will Krasne (21:19)
So Harry Macklowe, it's not been the smoothest of sailing outside of his time on Unfurled. He had 432 Park in which CIM Group did tremendously well. He did less so.
Hiten Samtani (21:30)
We're unclear on the status of Harry MacLeos promote on that super tall tower.
Will Krasne (21:34)
We're pretty clear.
One Wall Street has sort of been a just absolutely epic boondoggle.
Hiten Samtani (21:43)
HBJ the cut the real oil who is like one of the wealthiest men in the world was his LP on that project
Will Krasne (21:51)
What's he gonna do with only like $437 billion?
Hiten Samtani (21:55)
Speaking to some cutleries who are fairly juiced in the Al Thani world, they said, much you think HBJ is worth, add a zero. Such an amazing thing to say. Anyway, he was Macklowe's LP on one Wall Street, which is the office to Rezzi conversion of the, was it the Bank of New York melon building? That did not turn out so well. It did not.
Will Krasne (22:13)
Yeah, I think so.
Well, what's bizarre is they lease the retail really well. He's got Lifetime Fitness. think there's like a Whole Foods. Like that's done really well, but he has the condos much less so.
Hiten Samtani (22:25)
And then Harry Macklowe had a dream of a super tall tower on Fifth Avenue. was called Tower Fifth. It was supposed to rise right by St. Patty's Cathedral. Fortress gave him the money for that. Okay. And then the dream never came to pass. At some point, Macklowe sold the parcel that he would have needed to do this tower.
Will Krasne (22:42)
That was one of the craziest projects that has ever been conceived. I think it had an exterior slide on it. So that was going to be like the main attraction that you could go on the outside of the building 70 stories up in a slide. I swear to God, this is true.
Hiten Samtani (22:59)
is a very Dubai thing. Maybe I'm not reacting as strongly as you might expect. ⁓
Will Krasne (23:05)
So Tower 5th, we hardly knew ye, very sad. But you know, thought Harry Macklowe would just be, maybe he's done, and he's not. And he just showed up and he bought an amazing address.
Hiten Samtani (23:17)
You like this one? 809 Madison Avenue? Yeah.
Will Krasne (23:19)
It's a beautiful, beautiful building as is, tremendous address right off the park, lots to commend it. And it's been a tricky site for its current owners.
Hiten Samtani (23:28)
What's
the deal? So the seller of the site is Churchill Real Estate, which is a very interesting vehicle in itself. is typically or best known as a warehouse lender. What is a warehouse lender, Will, for those unfamiliar?
Will Krasne (23:39)
So the warehouse lender basically provides back leverage to a lot of people. you're a debt fund and you're lending money to a developer, that's not all your money necessarily. You have money from your LPs and then you might go to your warehouse lender and say, loan me at X-ray and then I'll charge Y to my borrower.
Hiten Samtani (23:56)
Churchill is best known as a warehouse lender. At some point, it's unclear exactly when, but Madison Realty Capital, our boys, Josh Ziegen, et cetera, they bought Churchill. So they now control Churchill, which is a really interesting dynamic in of itself.
Will Krasne (24:08)
This is a deep cut from early days of million dollar listing. And I remember I think at one point I went, I searched the real deal for every article ever about Zach Vela, but wasn't Zach Vela and Justin Ehrlich, weren't they early partners on VE equities? was the- is correct. That is the first, yeah.
Hiten Samtani (24:26)
Yeah, and then Zach Vela got on TRT. Yeah, you're right. VE equities. So Justin's a really interesting character. He tied up with this guy, Sorab and a couple of other people. They built Churchill into a very, very active warehouse lender. And then Madison, which was backed by Iconic Capital, the big wealth manager out of Silicon Valley, came in and either bought a piece of them or controlling interest. It's a little bit fuzzy. Anyway, so they're the seller here.
Will Krasne (24:52)
They're the seller and they have not done great. Harry's buying it for significantly less than they paid for it almost a decade ago. So the building's right on 68th and Madison. Yep. And it's inside the Upper East Side Historic District, which is maybe the NIMBYist of NIMBY.
Hiten Samtani (25:10)
I was gonna say this is like the arch nimpy, like this is the final boss of nimbies, right?
Will Krasne (25:14)
Yeah, this isn't like Glass Joe NIMBY. This is like the guy at the end of Mike Tyson Punch-Out NIMBY.
And to get any changes done, you got to go through Landmark Preservation Commission, which is just takes years, takes years off your life.
Hiten Samtani (25:32)
And this, should say, this is what Harry Macleod is pretty naturally talented at. Is like the charisma and the salesmanship of development. Like this is the guy. I would put him right at the top. Of all the things Harry Macleod maybe doesn't do as well, this he does very, very well.
Will Krasne (25:47)
Right, and for better or for worse, can do magic. He has the... Yeah. And so he was able to get LPC on board with his plans. And so they're going to use air rights that he got to expand the building. And he's going to create these huge single floor apartments, which this is sort of the ultimate in New York, as you think of having the elevator open up right into your apartment.
Hiten Samtani (25:50)
Kvorka when it comes to development.
That's the dream, right? That's the dream, yeah. And we're talking about 4,000 square foot pads, each on their own floor. It's not gonna be cheap. 5,000 a foot is kind of the pricing they're kind of talking about.
Will Krasne (26:18)
Well, I mean, you're what? You're two avenues over from 800 fifths, so you get half the price per foot. Is that is that?
Hiten Samtani (26:26)
11,000 a foot for those who come in late. I think at this point Harry Macklowe was immortal in my book.
Will Krasne (26:28)
Is he gonna be alive when this is over?
You guys
horcruxes stored all over the every side.
Hiten Samtani (26:36)
He's picked the limestone Jesus to do the work.
Will Krasne (26:38)
I mean, I hope they got paid upfront. But no, he did. So it's funny, I was thinking about this, like, man, and Mickey was too busy with the 800 fifth. This was the exact type of project he was doing a couple of years ago.
Hiten Samtani (26:40)
you
This is a slam dunk making up tally location for sure. Okay, so let's now talk about so he's partnering with SK development on this project, which is I believe Abe and Scott Schnee. I don't really know too much about them. Do you? So we'll find out for future episode or a newsletter or something. I want to talk about the capital stack here because again, we just mentioned those two projects in the beginning and the question we really wanted to ask is who is willing to give Harry Macklowe money now? And the answer is quite interesting.
Will Krasne (27:02)
Neither do I.
man, it's a lot of people. This is a murderers row of folks. on the debt side, Marty Burger, formerly the CEO of Silverstein Properties currently runs the
Hiten Samtani (27:31)
There's a little bit of confusion here. It used to be called Infinity Global Real Estate Partners, but at that time, I think he was partnering with Andrew Farkas of Island Capital, right? That partnership fizzled right away. And now I believe the company is called Infinite Global Real Estate Partners. So hopefully the hoodies weren't printed yet or whatever. I should say Marty Burger is now asset managing part of the Schwab portfolio for the Germans. so Marty Burger's Infinite is on the loan, but they're partnering with Related.
Will Krasne (27:45)
⁓ fantastic.
funds.
Hiten Samtani (28:00)
Related funds, what are they best known for?
Will Krasne (28:02)
Uh, preff. I do a lot of preff.
Hiten Samtani (28:05)
But this isn't prev, it?
Will Krasne (28:06)
No, it's construction loan. Yeah. There is a lot of prep not from related. So they've got two prep providers. The first is the artist formerly known as Oxf, Sculptor Capital Management has come in.
Hiten Samtani (28:18)
You
know, was looking at the document, I was like, I know there's a predecessor firm, but I couldn't get it. I'm glad you said them, OXF.
Will Krasne (28:24)
Yeah. then Circle Property Partners are providing PrEP. And then it sounds like they're really just like clubbed together this, the LPs here, a handful of family offices, small funds and ultra high net worth investors coming as LPs.
Hiten Samtani (28:37)
there was one guy who was iconic for putting these kind of strange cap stacks together. And he was guy called Howard Michaels, who the real deal famously described as the toughest boss in real estate. Now, Howard Michaels is long gone, but his firm, the Carleton Group, did put this together. So the DNA, the spiritual kind of love for the Harry deal is still there.
Will Krasne (28:58)
You love to see it. And one thing I think we should comment on too briefly here is that, PREF is not something you used to see in construction because again, you're just reserving a ton upfront to pay for it and there's no current. And we talked about it last week a little bit with Gary Barnett. You're seeing more and more of this because banks' debt funds are pulling back on construction. so that money's got to come from somewhere. And it's also really, really hard to raise JV equity for ground up right now because people are saying, I can make this much in credit.
I can go buy way below replacement costs. Why would I go build any? Yeah. And shops that are, that are traditionally developing are saying, I can't build this for X. can buy something existing for 85 % of X. Why don't I just go do that? So it's really hard to raise JV LP equity for development. And so you're seeing more and more pref come in or sort of either participating mortgages, which gets some sort of kicker on the equity side or the hybrid.
Hiten Samtani (29:31)
I can do off just a Rezzi, et cetera.
Will Krasne (29:56)
hybrid capital like a.
Hiten Samtani (29:57)
Was it like Decody, which is what, who is your?
Will Krasne (30:01)
Or like the hybrid, pref equity where it's like a soft pay component, but they get a disproportionate share of the upside. So you're seeing a lot more of these types of structures because CapTech's got to get filled to build stuff and the LPs aren't there. So Harry, he's taken on a lot of pref. He's taken a lot of construction debt to get this thing done. And you might think, man, that's a lot of interest. That's a lot of payments you got to make to get even, but
Because Harry McLeod once told a friend of mine when he asked him about his underwriting, actually I think it was for Tower Fifth, he said, New York will bail me out. That was a true story.
Hiten Samtani (30:44)
That's it for the Promote Podcast this week. We'll be back next week with more CRE insider goodness.
Will Krasne (30:49)
We had challenged our listeners to write some spicy reviews of the pod on Apple, and they obliged. I love this one titled Catnip for real estate psychos.
Hiten Samtani (30:57)
Come on, that felt like a Will Krasny plant. I wonder what strings he had to pull to make that one happen.
Will Krasne (31:02)
It's catching on you just have to admit it
Hiten Samtani (31:05)
I do like that they distilled it down to all bangers no skips because that really is what we strive for week after week. And I think we want more nice stuff said about us, so how do you feel about extending the competition for another week?
Will Krasne (31:17)
Look, my thing was all bangers, all the time. Of course, let's go another week.
Hiten Samtani (31:21)
So yes.
Remember the best review on Apple, get some fun swag from the promote.
Will Krasne (31:28)
shout out again to our sponsor Bullpen. Check out their CRE dedicated recruiting platform at bullpenre.com.
Hiten Samtani (31:34)
Yep, that's bullpenre.com. And as always, reach us at podcast at thepromote.com for feedback on this pod or at partnerships at thepromote.com if you'd like to advertise.
Will Krasne (31:45)
Now that we're not getting an official casino in Manhattan and the Chesterfield sadly is long closed, should we set up a rounder style underground den that can double as a podcasting studio?
Hiten Samtani (31:55)
I wonder if Marc Holliday would offer up the basement at one Van D. We should probably ask him.
Will Krasne (31:59)
at 300 a foot.
Hiten Samtani (32:05)
I'll see you next week, dude.
Will Krasne (32:07)
All right, this was fun. ⁓
Hiten Samtani (32:08)
Ciao!