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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 (00:03)
Imagine there's a real estate company that's the biggest syndicator of retail money out there.
Hiten Samtani (00:07)
Imagine
a real estate company that's the biggest destination for institutional capital. Pensions, endowments, the whole blue chipshabang.
Will Krasne (00:13)
Now, dramatic pause. Imagine they're in the same company.
Hiten Samtani (00:20)
Welcome to the world of JMB Realty Corporation.
This is the Promote Podcast, your insider guide to the money and many of the CRE markets. I'm HIten Samtani
Will Krasne (00:37)
and I'm Will Krasne
Hiten Samtani (00:41)
A shout out to our sponsors who help make this all happen. Bravo Capital, a leading HUD and Bridge lender that lives and breathes cap stacks.
Will Krasne (00:48)
Real Property Captive, the first group captive insurance for mid-market owners.
Hiten Samtani (00:51)
And Loan Boss, the best-in-class CRE debt management software. This week, we're going a little off-piece to bring you a special episode. ⁓ The first in an ongoing series looking at real estate's PayPal mafia. The great CRE firms that not only dominated their era, but also spawned the next generation of great firms. And of course, we had to start with JMB. You can't spell CRE without JMB.
Will Krasne (01:14)
You could argue, successfully, I think, that if J &B didn't exist, real estate syndication would look very different. &A would look very different. And honestly, the heavenly bed wouldn't even exist, which I don't want to live in that world.
Hiten Samtani (01:29)
Totally not. So let's crack open some Hires root beers and let's get back to the beginning. 1960s Chicago.
What is JMB stand for?
Will Krasne (01:41)
Well, it depends on what era you're talking about. So... At the beginning, the real beginning, it stood for Robert Judelson Judd Malkin, and Neil Bluhm So, J-M-B. And I know Judd Malkin has J-N-M, but it's just the M.
Hiten Samtani (01:44)
Good very good answer
The Bluhm and Malkin had been working together since at least the 50s. They were teenagers at the time and they talked to distributor of Hires Root Beer, which I believe is now absorbed into the A &W family.
Will Krasne (02:06)
I
was like, is there any other kind of root?
Hiten Samtani (02:09)
They basically convinced him to allow them to split one job into both of them. So they both worked this route and they were delivering the root beer everywhere. As part of the deal, the driver had to buy breakfast and lunch. After two days, the driver's like, I can't do this anymore because according to Mr. Malkin, he ate too much.
Will Krasne (02:26)
you
Hiten Samtani (02:28)
Jettison was a broker. Malkin was an accountant, but importantly, he also ran a Toyota dealership and Bluhm was the tax.
Will Krasne (02:35)
You generally have the partnerships that are like Mr. Inside and Mr. Outside. They had sort of inside, outside, and down the middle. They covered all the lanes. And these guys went back. They each had their own origin stories. Famously, think Neil Bluhm lived above some shop with his mom.
Hiten Samtani (02:51)
There's also a little bit of myth making in there sometimes.
Will Krasne (02:53)
Exactly. You have to have an angle and that's an all three of these guys did.
Hiten Samtani (02:58)
Bluhm's not the only distinguished tax lawyer who then became a real estate mogul. One of the goadiest of goats falls into that category too.
Will Krasne (03:08)
Exactly. This happens all over the place where the lawyers are doing real estate law and they're like, you know what? These real estate fellows seem to make a lot more money than I am. They're dumb. So let me go try my hand at that.
Hiten Samtani (03:15)
Not that smart.
The Malkin came up kind of in the car dealership world. At one point he said, the mark of a good Toyota salesman was the ability to sell a car with optional rear speakers, but no radio. Because the speakers were like 15 bucks a piece and the customer could come back and buy that radio for 40 bucks. And he said, I've done it.
Will Krasne (03:37)
I can just see this now. He's like, it's just optionality, right? You need the optionality. It's a great place to start. And so what these guys were doing at the beginning was just regular syndication, not different than what Alan Stalkop's doing, not different than what Tides did. It doesn't sound groundbreaking today, but in the late 60s when they started this, it really was. It was pooling capital from country club money, doctors, dentists, lawyers, and buying real estate. And part of it was because
They were able to take advantage of different tax laws, which allowed for passive income to offset active income. Now, these early doctors, how do you go about pulling that money together? Where does it come from?
Hiten Samtani (04:16)
Another great Titan involved here, Jerry Reinsdorf, best probably known as the owner of the Chicago Bulls, major real estate player and White Sox. I loved him in The Last Dance, the way, underrated character in the show.
Will Krasne (04:23)
and why not.
He really was like, I he made out best of everybody. Bar Mitzvah is the time of his life when a Jewish boy realizes he has a better chance of owning a team than playing for one.
Hiten Samtani (04:39)
So, Ryan Storf apparently had a network of doctors. They were the original LPs for a lot of the jamby bets.
Will Krasne (04:45)
Part of their pitch, at the beginning at least, was everyone's doing this for tax loss. What if we did it for tax loss, but actually tried to make money on the real estate?
Hiten Samtani (04:55)
What if we were good at real estate instead of just tax art? That world doesn't exist anymore,
Will Krasne (04:59)
Exactly. What a world.
It kind of doesn't. They say you can still catch a popsicle to a lady with white gloves. Like you can sell optional rear speakers to a guy without a radio. We joke around a little bit, but this got purchased really quickly. So they were able to raise money and then actually got a pretty big bank to buy 10 % of the GP.
Hiten Samtani (05:09)
You
This
is a typical evolution we've seen with lot of these syndicators of the modern era as well, right? They start with the high net worth money, then they find an anchor institutional sponsor. In this case, it was Continental Ventures, which I believe is the venture arm of Chicago based Continental Bank.
Will Krasne (05:34)
And they were really venturing into this nascent syndicator industry and they bought 10 % of company for $130,000, which like real dough.
Hiten Samtani (05:45)
We've talked on this podcast before about how the early performance can really make you. So they raised that money, the 130,000 we just talked about in 1970. In 1971, they go back to Continental, their share of the profits is 750,000.
Will Krasne (05:59)
was pretty good. Yeah. And what happened in 1971 is that they did the first, it was called the Carlisle Public Partnership. Yeah. And so they raised seven million bucks, which they thought was all the money in the world.
Hiten Samtani (06:11)
You know what's amazing is they didn't have underwriters on this thing. So they were surprised when they got inbound from brokers. One of the partners there that said the following, said, the best thing that can happen to you is for people to want to sell your product.
Will Krasne (06:23)
That's what they call a profit market fit nowadays, I think. And what's funny about Continental is J &B bought back the LP steak that they sold for $4.3 million in 1978. Continental Bank has called that the dumbest LP sale of all time.
Hiten Samtani (06:37)
They said that it was probably worth a hundred million if they had held on to it. But again, could have gone south too.
Will Krasne (06:41)
Yeah, could have gone South too. So anyway, they have this early success, but then in 1973, Juddelson, the broker, the J in J &B splits after feuding with Neil Bluhm, ends up leaving to co-found BALCOR with Jerry Rynsdorf. And so that's how Jerry Rynsdorf made his money. The two of them ended up building a BALCOR sold to AMX for a hundred million dollars in the eighties. And then that's how Rynsdorf bought the Bulls and the White Sox and all those things. And J &B ended up going from Juddelson, Malkin and Bluhm to
It was then called just Mocking and Bluhm.
Hiten Samtani (07:14)
What's your takeaway from the early days here?
Will Krasne (07:17)
They weren't just real estate guys. They weren't just tax guys. They had both. You needed to understand the tax implications of all this. But they also needed to be able to generate real estate returns. And anyone could put together a tax shelter. Like, actually underwriting real estate, even today, is really, really hard. Especially today is really, hard. And so the fact that they could do both, that is what separated them, at least at the beginning. But again, like zooming out, like they raised, yeah, they raised seven million bucks. Okay, so did my uncle Irv in...
Council was Iowa. So these guys, they were the same as anybody else. And they weren't.
Hiten Samtani (07:55)
Okay, this is when things really start to pop. We'll get to that right after this break.
Okay, I'm here with Aaron Krowitz from Bravo Capital. Aaron, you've done $2.5 billion or so of deals so far. How are you thinking about scale going forward?
Will Krasne (08:20)
There's a divergence between optimizing for scale and optimizing for quality. And when you're running a debt fund, you have to pick, you have to say, am I really fee driven and do I want to maximize how much I could put out? And the other business model is what we've chose is slow and steady. We want the reputation to proceed ourselves. Investor returns, that's more important for us than volume. If you look at some of the REITs, they were forced to deploy in the realm of two to eight billion a month.
They AUM gobbled, right, as your sweatshirt says, but then they were forced to regurgitate that AUM more rapidly than they really could. Forced them to pick terrible deals. Their returns are negative to just go for scale for scale's sake. That's a short-lived business model.
Hiten Samtani (09:00)
and it for
Thank you Aaron and where can people find you?
Will Krasne (09:12)
find
us at bravocapital.com.
Hiten Samtani (09:23)
Okay, we're back with JMB and things are about to get full NBA Jam.
Will Krasne (09:29)
Catching Fire is my favorite Hunger Games novel, so there you go.
Hiten Samtani (09:33)
A lot of great real estate fortunes have been built on catching the right regulatory wave. I think that's one of the big underrated parts of these epoch-defining real estate companies. They were able to really seize some kind of change in the federal or state law and really run with that.
Will Krasne (09:51)
Yeah, mean, what do they say in margin call? They first be smarter or cheat. So these guys were first and what they were first in was recognizing the importance of the 1974 ERISA Act. Oh, damn.
Hiten Samtani (10:03)
ERISA which is the Employment, Retirement, Income Security Act. This act essentially opened the floodgates for pension money to come rushing into real estate.
Will Krasne (10:11)
Yes. So previously, pensions had to have, they were like approved lists of investment vehicles. And it was exactly what you would think, like corporate bonds, municipal bonds, blue chip equities, super safe. Honestly, like probably should have stayed there. But they were so changed it and replaced the approved list with quote unquote best judgment.
Hiten Samtani (10:22)
safe.
Ugh, those two words change everything.
Will Krasne (10:34)
A
mandated diversification can just be in bonds, can just be in equities. You have to get into alternative assets. Also basically remove liability because if you make your best judgment, we can't come after you.
Hiten Samtani (10:45)
And I'm assuming the bar for best judgment's not very high, right? You don't have to show too much work to say you've landed on a certain vehicle. Correct. Yeah. We weren't born at the time, but that's our guess here.
Will Krasne (10:55)
Yeah, I don't think it's that far afield to assume that. And also we had this just booming amount of, I say booming because of the boomers, folks who had big pensions. And so this is the era of folks with the full vested pension forever. And so all of this capital had to be diversified out.
Hiten Samtani (11:13)
⁓ I see what you mean. There was a massive kitty of money that had to go into...
Will Krasne (11:17)
Yeah,
it had to go somewhere and real estate was one of the places where it went. And the importance of being first is that all of this stuff gets more competitive over time. It's like if you ever talk to your parents and they're like, I went to Duke, but I got drunk the night before the SAT and I had a B minus average. And it's kind of like this now. In 1978, J &B launches their first institutional realty fund.
Hiten Samtani (11:40)
that's akin to what a Mezref or some kind of opportunity fund would be today or?
Will Krasne (11:44)
Zell-Lurie opportunity funds or what have you. They land their first big pension and these are impossible to get now. We've talked today how it's shifting back to retail because the sales cycle for these pensions and sovereigns.
Hiten Samtani (11:56)
Finding
Texas teachers is like a 15-month courtship with very, very low probability of success.
Will Krasne (12:03)
I couldn't even fathom trying to land a pension fund today. Give me a break.
Hiten Samtani (12:07)
Look at this list of LPs, CBS, Inland Steel. What do you get the steel companies in? You really know you're winning right there. Yeah. Xerox, Chrysler, all the go-to corporations of America were investing with JMP at this time.
Will Krasne (12:19)
also one thing feeds the other because it also the syndication machine which they had had for a decade had completely just sort of went parabolic because you just point to say hey, Inland Steel trusts us, Xerox trusts us, Chrysler trusts us, they built America.
Hiten Samtani (12:34)
So you, doctor in the Midwest, you might as well trust us too.
Will Krasne (12:39)
Belongs to spoils. Why you get the fuck out of here before I shove your quotations book up your fat fucking ass. And what they do too is they expand just out of pure play pooling assets to go buy stuff. They become vertically integrated. So they'll develop things in addition to buying them. We talk about how &A would be different. One thing that really differentiated these guys is they were also early into buying real estate companies whole.
Hiten Samtani (13:00)
Not just AUM gobbling here, buying the companies, which is what we're seeing now with so many of these REIT movements as well.
Will Krasne (13:06)
So they bought Federated Stores, Aetna's urban investment development corporation. Alcoa had a big central city portfolio. Because remember in the 60s and 70s, all these conglomerates were just putting stuff together. They bought Cadillac Fairview, which is sort of the beginning of the end. Amfact, the Hawaii Sugarcane Hotels Company. And then two very important ones for later, which were Arvita, which was Disney's Florida, Georgia master plan community development that was led by a young Barry Stewart Cernlich himself.
I love that deal. then Randsworth Trust, which was UK office, that was the deal that JNB had to defend a straight Barry for losing hundreds of millions of dollars. So it wasn't his fault.
Hiten Samtani (13:41)
Yeah.
Let's talk about the scale. So at the peak, they had about $22 billion in assets. Again, this is 1980s number.
Will Krasne (13:54)
call it 90 billion of assets today. How many companies have pure real estate, 90 billion today?
Hiten Samtani (14:01)
handful.
Will Krasne (14:02)
Yeah. Yeah. Staggering. And this is after decades of professionalization and institutionalization of the real estate asset class. 21,000 apartments.
Hiten Samtani (14:10)
This is a massive company.
150 shopping centers, 15 hotels, 65 million square feet of office, three Hudson yards basically. It's a lot.
Will Krasne (14:21)
Crazy. And then on the LP side, they 350,000. Can you imagine sending out the K1s? No wonder that Susan from Seinfeld died leaving the stamps. Huh.
Hiten Samtani (14:25)
Peace. ⁓
They had a vehicle I want to talk about a little bit. had something called a public partnership, which I read as the predecessor to the modern non-traded REIT.
Will Krasne (14:43)
Pretty much, yeah. Never missed a quarterly distribution and generated real returns. They claimed 13.2 % versus 6.7 % industry standard. What do those mean? How are those calculated? Who knows, but it's pretty good. But then they also fell into sort of all the 80s buccaneering. They bought 20 % of the bears.
Hiten Samtani (15:03)
They also made a run at the newspaper business, just like Sam Zell did a little bit later. Those two didn't take, by the way.
Will Krasne (15:07)
They tried to buy Viacom, tried
to Hilton, the Bloomingdale's, they tried to buy all those things.
Hiten Samtani (15:15)
back to the real estate for a second, they're only buying, typically buying kind of market leading properties, top of the line properties. And I think this is important for the exit. These kind of properties are also the magnet for the foreign capital. The Japanese paid more than $600 million for the Merck Anchor, the Chicago Mercantile Exchange, Tower of Zone, Wacker Drive. Just huge exits. If you have the asset, the one the foreign investors like, you know what? I want to diversify into the U S I want to put my name on the map.
I'm gonna go buy this.
Will Krasne (15:46)
It also helps in the entrance because Joe, orthodontist, is going to be like, ooh, the Chicago Merc building. I know that. That's a thing.
Hiten Samtani (15:54)
And we talked about this in a couple episodes ago, Like owning a piece of the skyline in of itself is a return for some of these people.
Will Krasne (16:03)
100%. They call it a dick measuring contest because the things are big. Even today, I talked to a unnamed massive asset manager, has a lot of retail money. They were talking about what deals have you done recently? Like, we only want to focus on cashflow, this, that, the other. I'm like, well, what have you bought? And they sent some really fancy hotel that they bought like a six three cap. Literally, I swear to God, they said this. like, it looks good on the brochure. So they really have defined strategy that, again, seems sort of
Hiten Samtani (16:27)
Hahaha
Will Krasne (16:33)
quaint today because everything is kind based off of the institution of real estate. But top of the line properties, they used OPM and they bought developers, bought companies wholesale rather than trying to compete with folks and kept the management in place with equity. So it's exactly what we're seeing today. What's syndicator money and pensions? They were the best pension fundraisers, the best retail fundraisers. What else is there?
Hiten Samtani (16:49)
Capital fueling all this.
The Cadillac-Fairview deal, believe they were going to put just $100 million of their own equity and then they were going to raise $1.4 billion from outside sources.
Will Krasne (17:03)
They did it in six months with 39 different pending funds.
Hiten Samtani (17:06)
I just wanted to mention one partner on this deal that we're going to talk about in a minute, but the Cadillac Fairview deal, the other 25 % were owned by our guys, the Reichmans. They actually both did.
Will Krasne (17:14)
They both went full Reichman on Forbes.
But in 1988 in the Forbes list, if you were to scroll down from the top, before you got to Henry Kravis, Steven Spielberg, Craig McCaw, or even Sam Zell, you'd see Judd Malkin and Neil Bluhm.
Hiten Samtani (17:30)
That says something.
Will Krasne (17:34)
So given that epic run, you might ask yourself, why isn't the J &B story more well known? More on that right after this.
Hiten Samtani (17:46)
Well what if I told you insurance could become an asset instead of just an expense?
Will Krasne (17:50)
I'd say you're trying to sell me something, but also I'm interested. Fair.
Hiten Samtani (17:55)
Here's the math, you spent $2 million on insurance annually, loss ratio is well under 30%. Over five years, that's about $10 million out the door, zero return.
Will Krasne (18:03)
Painful, but accurate.
Hiten Samtani (18:05)
What if 7 million of that built up in reserves that you actually owned?
Will Krasne (18:09)
That's pretty interesting. Tell me more.
Hiten Samtani (18:11)
Real Property Captive built specifically for scattered site GPs. Top carriers issue policies for lender compliance, reserves stay in your account, and after a few clean years you're converting spend into equity.
Will Krasne (18:22)
I like this because that's what the big boys do.
Hiten Samtani (18:24)
Exactly, and now it's accessible for mid-markets drivers like yourselves too. Check out the platform at rpcaptive.com. That's rpcaptive.com. And tell them the promote sent you.
Will Krasne (18:41)
It's 1986. I'm in the first grade. working real hard to get Mario laid. 1986 changes everything. And not just because it was when Hiten was born. We're violating all sorts of hiring laws by aging him. But the Tax Reform Act of 1986 was a body blow to not only J &B's businesses, but also to all syndication writ large because previously you were able to write off passive losses against active income, which I think
is basically like what syndicators try to pitch a lot of people today, which is not true. So it killed passive loss deductibility and basically made fundraising much harder. So if you were a pure syndicator, your business kind of went away overnight. JNB was somewhat insulated.
Hiten Samtani (19:15)
It's not true anymore.
Right, because they had the institutional business as well.
Will Krasne (19:27)
They
had the pensions, but the syndicating money, I think they raised half as much money in 87 and 86. And you had folks who were literally were worth, you know, $200 million and then were worth negative $200 million like six months later. This happened all over the place.
Hiten Samtani (19:40)
We talked up top about how regulatory tailwinds can make a company, Regulatory headwinds can even crush a company and this is somewhat what happened here. This is the come down after the GoGo80s. A lot of the big LBOs that JMB participated in, they started coming apart a little bit.
Will Krasne (19:58)
peak, everyone's timeline is forever. And a lot of these got bought, assuming you're going be able to refinance your bridge debt or sell off assets at certain values and just ride off into the sunset. That was not the case. So specifically Cadillac, Fairview, Amfak, and Ransworth really blew up big time. We can talk about Ransworth. Barry has mentioned that. That was the reason it got fired, lost $400 million or something like that. What happened is
The syndicating went away really because of the tax law and then they lost all this money for the pensions and then the pensions kind of went away.
Hiten Samtani (20:30)
They were pretty pissed. A couple of takeaways here. One is the broader macro environment that they were operating in. Great quote here from Lehman Brothers, then director of real estate research, Lehman Brothers, which was ironic in of itself. He said, the capital side caused pricing to be completely divorced from supply and demand fundamentals. It was like being drunk.
Will Krasne (20:49)
What he's saying about supply demand is because of the passive deductibility, people just could build anything and people would fund it because of the tax losses. And so what happened is you have just a massive oversupply.
Hiten Samtani (21:00)
Why?
There's no due diligence required.
Will Krasne (21:02)
If you're going to get back 100 % of your loss of your investment year one with passive losses that can offset your active income, the deal is good. just a bonus.
Hiten Samtani (21:12)
so it's like an artificial safety net, basically under every deal.
Will Krasne (21:15)
Yeah, if your marginal tax rate is 50 % and you're able to offset everything you would have paid in taxes with a deal, you pay no taxes and then you have the upside of the deal. So even if the deal fails, like who cares? You've saved on taxes. So what happened is it meant that things got built that didn't offense, that didn't have any reason to exist. It's something that's really taken decades to work through. So we're still oversupplied from a retail perspective because of this.
You have guys like my great uncle who built like 200 shopping centers throughout the Midwest just for the tax shelter. And that's still getting absorbed today. And so what happened is not only did you have eventually an economic slowdown, it was paired with massive, massive oversupply, particularly in office and retail, the most institutional asset classes at the time. And so these people got absolutely wiped.
Hiten Samtani (22:04)
So as we said, they raised one and a half billion dollars for Cadillac, the deal. I think my other takeaway is just don't buy Canadian moles. It never works out for anyone.
Will Krasne (22:13)
The
Catholic Fair of the Canadian real estate developer had their hands in everything. It's like the zeal of like 80s finance in Canada. They've been through everything. And Neil Bluhm raised 1.5 billion in six months from 39 pensions to do that deal.
Hiten Samtani (22:25)
Astonishing. Can you imagine what those road shows look like? This is pre-email
Will Krasne (22:30)
It's pretty internet. It's literally like walking around with like those little slides they put on the projector. Next slide.
Hiten Samtani (22:35)
Do you think he had the Ivan bass key phones and stuff going at all times?
Will Krasne (22:38)
I'm
sure. I'm sure. So anyway, the deal of losing a ton of money is bad enough, but J &B had these massive advisory fees that were coming in. So they were the developer, owner, chief cook, and bottle washer, and they were paying themselves tens of millions of dollars a year to manage these deals. And that's all well and good if deals are going well and people kind of don't notice, but there were a couple of years in the late 80s, early 90s where literally every dollar of cash flow went to pay J &B's advisory fees, the pensions are going, huh.
Not sure we're like really big fans of that. So the pensions, they restructure the company and then terminate these contracts.
Hiten Samtani (23:15)
It's a hundred million dollar advisory contract that's gone.
Will Krasne (23:17)
So, sues, the crazy part is they win.
Hiten Samtani (23:23)
So this is America. Yeah. You got someone to agree to the thing, you got to honor it. Why'd you let him play?
Will Krasne (23:28)
But this was like a real Pyrrhic victory because they won, but at what cost? They lost all these pensions and couldn't raise any more money.
Hiten Samtani (23:39)
Those relationships essentially were fractured. They had to go on and sell the institutional arm of their business. They sold it to Heipman for what, $150 million, which isn't much.
Will Krasne (23:48)
They couldn't raise any money. name was mud. It's one thing if like you lose a bunch of money and you're like, we're sorry, we're going to do better. We're going to work through this. We've talked about this before, but suing your LPs is like kind of a death knell. so JNB ceases to exist really in a handful of years. And now let's say like Judd Mulkin, I think his family still owns a bunch of these assets, legacy assets today. It's done very well.
Hiten Samtani (24:09)
We should have prefaced this. Don't feel bad for anyone in the story. Neil Bluhm is worth probably about $10 billion.
Will Krasne (24:15)
The
best way to be worth a ton of money is to owe the bank a ton of money at some point. Anyway, so there's really this schism, right? Because these guys have made a lot of money. They're gonna have to start from scratch essentially in rebuilding the company. Malkin stays on if they sell the Heitman, but he sort of is checking out a little bit. As Bill Simmons will say, he's like moving into a different phase of his career.
Hiten Samtani (24:32)
I think it brings up an important point. what happened here is Malkin essentially cites a new marriage, grandchildren and golf, right? He says, I have some outside interests and I'd like to spend more time with them. But it's like, are you up for that whole fight? Not many people can do that once, let alone going for round two of having that kind of pressure and that kind of action defining your life for so long.
Will Krasne (24:55)
Yeah, and he's like late 50s-ish at this time too. He's not a young man anymore. Whereas Neil Bluhm takes the opposite tact. Yeah.
Hiten Samtani (25:03)
He does. He says, I don't have grandchildren. I don't have a new wife and I don't golf. And then he also says, I want to get my reputation back. says, it's mostly the action, but a part of it is redemption.
Will Krasne (25:15)
There's something to it because he was, Balloum I think was considered really the architect.
Hiten Samtani (25:19)
When you think about Jambi, he's the one that pops up first.
Will Krasne (25:22)
Barry even makes this point after Ransworth that Judd didn't want to buy anything and so he fired all of Neil's acquisitions.
Hiten Samtani (25:28)
He
just took the talent out of the equation.
Will Krasne (25:31)
So Neil puts together ⁓ Walton Street Capital, which turns out to be a massive firm, 15 billion of AUM. I will say this too, it's very funny. I worked with an ex Walton Street guy and when I moved over to Starwood, he's like, do they still do the models this way? That's how like JNB did it. And I was like, yes, they do.
Hiten Samtani (25:47)
And we're going to talk about all of that. There's a patina of JMB that has lasted part of why we wanted to pot on them. It's outlived them by generations at this point.
Will Krasne (25:55)
Yeah. so Neil built a company that wasn't as big as J &B, but really successful in its own right. Right. Yeah. He owns a bunch of casinos, minority in the Bulls and the White Sox. Neil's doing great. He's totally fine. again, part of reason why we're talking about this is there are lot of successful firms that kind of blew up in the 80s, early 90s. This firm is still around today. It exists in the people who are elsewhere who have founded other companies. And so, like we said at the top, PayPal sort of created this diaspora of
Hiten Samtani (26:01)
As a Rush Street gaming
Will Krasne (26:25)
tech executives. And there's been a lot talk about why that was. And we'll get into why we think that JNB created that right after the break.
Hiten Samtani (26:38)
Well, you've worn many hats in your glorious life so far. Pro baseball player, thespian, tornado remediation specialist. I want to ask, which was your least favorite?
Will Krasne (26:49)
first two, ugh, they were dreams. The third was a nightmare. Turning into a dream though. However, if you asked me a few months ago, I would have said Excel Monkey was my least favorite. Modeling out the debt tab was really, really annoying. Maturity dates, extension options, rate caps, ugh. My spreadsheets were beautiful, but at what cost?
Hiten Samtani (27:09)
Sounds like you had good ROI, but your ROIBD, return on invested brain damage, not so good. So what changed?
Will Krasne (27:16)
I discovered Loan Boss. All my loans live on one screen. No more, let me just pull that up while I jazz hands a capital partner. And the extension option tracking with automatic notice reminders. I used to have a Post-It note on my monitor for that. A Post-It note at 10. But the one-click DSCR testing, every lender adjustment, every unique requirement automated. ⁓ my God.
Hiten Samtani (27:36)
No more getting surprised by your own cap stack. Listeners, check them out at loneboss.com, that's loneboss.com, and tell them the promo sent you.
most defining trait of Jam B is not the incredible enterprise that it built but really the incredible enterprises that it spawned. You want to just run through the names. What do they say?
Will Krasne (27:59)
Say about
Velvet Underground, it's like 50 people listen to them, but they all started bands. Kind of same thing here. So most notably out of J &B, Barry Sternlich founded Star Wars Capital. Have you heard of it? Laid off from J &B in 1989. The origin myth, as we've talked about, is he turned down Goldman Sachs to go work at J &B. It the Wunderkind, as you would say. And then Neil stopped buying stuff and Malkin Foward, all the acquisitions guys.
Hiten Samtani (28:22)
Just fired all the acquisition guys. John Schreiber, big, big name, co-founded Blackstone's real estate division.
Will Krasne (28:28)
Also have you heard of it? But he's really like an unsung hero in a lot of ways. This name doesn't get thrown around that often.
Hiten Samtani (28:35)
Blackstone named some new scholarship after him.
Will Krasne (28:38)
This is potentially apocryphal, but maybe not. Barry says that Steve Schor has been trying to hire him to run Blackstone. no way. Yeah, real estate. And he turned it down to go start his own thing. And then John Schreiber stepped in.
Hiten Samtani (28:51)
So there's two monumental things that Schreiber did. One is he co-founded the real estate division, which eventually overtook private equity to become Blackstone's biggest. Blackstone is real estate based, basically. Yeah. So that's one thing, but he also mentored a young whippersnapper called Jonathan Gray.
Will Krasne (29:01)
Yeah, black suit rules.
Yes, and it's been called out by no less than Roy Marsh.
Hiten Samtani (29:13)
This is an amazing quote. John Grey is maybe the best and brightest in his generation. Maybe ever. But he also has the benefit of the sage sensei in John Schreiber.
Will Krasne (29:23)
It's good to another John. There's so many Johns. God. John Kukral spent a dozen years at JNB went to Blackstone.
Hiten Samtani (29:31)
He was high up in the real estate leadership as well.
Will Krasne (29:34)
out to Northwood investors, is owned, among others, the Palace Hotel. Very eminent firm.
Hiten Samtani (29:39)
can't really make sense of their book. They have maybe a few billion dollars worth of assets, but it's kind of all over the place. Bukral said something very interesting about Jamby we should get into. first day on the job, I show up and they give me a ticket to Denver and they say, here are three apartments that we're thinking about buying. We want you to go figure out what the real rents are and come back report to us. This is completely fresh, no idea about the business. Go figure it out. Over and over, when you look at the patterns of Jamby alum, one of the things they say is they gave us young bucks.
a tremendous amount of responsibility, maybe a responsibility that was a couple of tiers above our current pay grade, but they trusted us to go figure something out because we're young and hungry.
Will Krasne (30:19)
They would talk about almost to a man about it wasn't necessarily a flat organization, but it was one where you had a lot of accessibility to the senior guys. John mentions in the same interview with ULI is like going to Neil's house on Saturdays to like chop up deals and underwrite things. And if you had a good idea, they wouldn't stop you.
Hiten Samtani (30:35)
Imagine an analyst today flying into Schwarzman's compound by helicopter, dropping it, doesn't happen anymore.
Will Krasne (30:43)
Sometimes you have to catch private jet flight with somebody and then fly back, which is the worst, but whatever. But basically the whole high agency, you can just do things ethos of the moment. This was JMB in the mid to late 80s. And that really was how a lot of these big companies started to start with. was a big thing. Barry was a young guy. He's like, I want to go buy Weston. I'm going to go buy our ITT Sheraton. And if you had a good idea, it wouldn't stop you. And you could just go.
The business is different. You're an analyst with Blackstone and you're going to try buy like Sheridan. Give me a fucking break. But that experience is something that they all talk about. Yeah. think it's this name at PayPal where everyone did everything and it was also
Hiten Samtani (31:21)
Everyone did everything, everyone worked like an absolute maniac.
Will Krasne (31:24)
And
it was hard and it didn't totally work all the time. And so for JMB, I think the fact that it blew up is part of why the legacy lasted. You had a full cycle.
Hiten Samtani (31:32)
Controversial thought, if Jambi never ended up going south, it would be less important a company than it is now.
Will Krasne (31:40)
I kind of see what you're saying. would just be Aries or something.
Hiten Samtani (31:43)
which
doesn't have the same imprint or footprint on the industry that JMP does. had a couple more. So we had Jeff Dishner from Starwood as well and Laura Rue.
Will Krasne (31:47)
No, definitely not.
Jeff
and Laura from Starwood, Carl Tash from Starwood, Carl Tash who asked the most questions in IC. If you worked at Starwood, know what I mean. Bruce Duncan, was the CEO of EQR, First Industrial, and Cyrus One, like good Lord. Oh wow. Barry Malkin, Jugg's kid, founded Gen Realty Capital. Could be GEM, I don't know. I've actually never heard anyone say it. John Lillard, Chairman of Winters Financial.
Hiten Samtani (32:04)
data center giant now? Okay. ⁓
John's the one who pioneered the- We also had Mark Mogul. What a great name for a deal maker.
Will Krasne (32:24)
Bill Ackman loves this nominative determinism.
Hiten Samtani (32:26)
He's of Pine Bridge. do a lot of stuff in Europe. And then we had Adam Singerman. We've just talked about mostly top executives, but think of the analysts and the canvassers and the young developers who have probably gone on to so many of these different companies now.
Will Krasne (32:42)
Yeah. And I think it really came down to sort of three things that caused this. So the first thing that you talked about was responsibility. You got it young and you could basically, whatever you could put your arms around, you got, and Barry talked about this, talk about all the time that if you could find things to do, they would do them. There was no access to capital. And if you had a good idea, it was a good idea.
Hiten Samtani (32:59)
stay in your lane kind of ethos.
The other part of it is specifically is giving young people more than they were equipped for at the time and seeing them figure it out. That's the important bit.
Will Krasne (33:12)
Well,
that's how you grow because people want to go there when you get responsibility. And so they're like the opportunity to make a ton of money and the opportunity to do a lot of cool shit. if you worked somewhere else, couldn't really do that in the same way. so Trammell Crowe, which I'm sure we'll do an episode on at some point, had the same thing where it was like the hottest job out of Harvard MBA. Can you imagine moving to Houston to go do real estate? That's what everyone at Harvard MBA wants to do. It's kind of crazy.
Hiten Samtani (33:36)
There was so much opportunity. That was crazy. The second part was growth. Jambi was just a juggernaut. There was so much going on. If you were on that, you just saw so much that your peers at other companies just did not see. So you had the experience, you had the network, you had the balls, frankly, to get big things done on your own when you left.
Will Krasne (33:55)
Barry led the Arvita deal, which, know, a little bit inside baseball because he worked there at HBS in the summer. And then Richard Nunoa, who ended up being the CFO of Disney, was his best friend from business school. And so they kind of like worked that out. But they bought public companies. They were buying the best real estate, the coolest real estate. And they had all the money in the world, seemed. And then the third, really.
Hiten Samtani (34:15)
Timing. You take advantage of the ERISA ⁓ legislation and you just get on your way. And so many things coalesced. The pension money is coming in, syndicators money is coming in, the 80s is just overall. Real estate values are going up. Capital is plentiful, right? There was just so much happening. So Jambi is definitely a creature of its time in that sense too.
Will Krasne (34:28)
values are going up.
Indeed, and they had that other intangible thing that all the truly great firms have, which is just there's something in the water, or in this case, the root beer.
Hiten Samtani (34:57)
So that's it for the Promote Podcast this week. We trust you enjoyed going down the JMB rabbit hole with us. It was a story that I felt needed to be told.
Will Krasne (35:05)
Legends, LBOs, and industry-shaping legacies. Felt like we had to do it, and if you didn't like it, who cares?
Hiten Samtani (35:10)
We had a great time. Thanks again to our sponsors for their support here. Bravo Capital. You can find them at bravocapital.com.
Will Krasne (35:17)
Real Property Captive. Find out how you can get dividends back on unused premiums by going to rpecaptive.com.
Hiten Samtani (35:23)
and Loan Boss so you can find it loanboss.com. I'll see you next week Will, really fun one, really fun one, for sure.
Will Krasne (35:29)
Thank
you. Thank you. And I'm a Celsius guy, but if I could find a Hires root beer, I might try one.
Hiten Samtani (35:35)
Ciao.