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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/
Hiten (00:00.514)
Well, I've been meaning to ask you, would you rather have Roy March's hair or Gary Barnett's capital Rolodex?
March's hair. Why? Have you seen it?
Pretty good. Stiff competition with the amount of money that Barnett can pull in.
you
Hello and welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE market. I'm Hiten Simtani, founder of 1031 Media, and I'm joined as always by Will Krasny, my go-to no BS institutional insider.
will (00:32.492)
Many people will debate my level of BS.
This week we're talking Wells Fargo accusing JP Morgan of hanky panky over a massive loan made to our favourite girthy mogul, Joe Chatrete. We've got Gary Barnett who scored another billion dollars plus for another Manhattan showstopper. keeps doing this. We look at the state of play at everyone's favourite dead lender, Signature Bank. And we close out with Eastl versus Newmark, two mighty brokerages that seem to live to one-up each other. You ready to do this?
Let's go.
Well, last week we talked about problems at the Chitrid Empire. The Brothers Chitrid staring down a billion and a half dollars of defaulted debt and more to come. Then, wow, just in a week, things have escalated so fucking dramatically. The Chitrid's troubles have now become the focal point of a battle between two massive banks, Wells Fargo and JP Morgan. Wells, which is the trustee for bondholders, is accusing JP Morgan of turning a blind eye to financial chicanery in the portfolio. The suit's hella juicy and
What's your favorite detail? Cause I have a couple.
will (01:36.782)
Man, think my favorite, and first of all, just love, you know, Jojo Treat. The best. He's definitely one of the main characters of the Promote cinematic universe. 100%. And I think my favorite of the many details in here is that when they discovered a Scrivener's error that showed the transfer.
only hear about Scriveners when they fuck something up.
Yeah, or when it's Bartleby and they it wasn't properly transferred to the company that sold it to them. And instead of going to the trustee, know, hat in hand, hey, we found this error. There's a problem. We'll fix it. They immediately thought, how do we get this out of the collateral as quickly as possible and transfer it to an unrelated sub.
In layman's terms, what does that mean? Like a piece of the property wasn't recorded, correct?
Yeah, so one multifamily property consisted of two separate tax parcels and one of the tax parcels when you when they transferred the deed to the group that sold it to should treat The deed wasn't recorded properly. So technically the property didn't transfer So it wasn't part of the collateral that the treats got the loan based on Technically when the treats realized this that the property hadn't been transferred properly
Hiten (02:40.974)
amazing.
will (02:52.202)
Instead of generally going and fixing it they thought well this isn't part of the collateral Against the loan that we're having problems with so why don't we just like take it over here? Away from a good old Wells Fargo and transfer it to an unrelated subsidiary of the bar
Is it like, so Nico is six months old, your son, congratulations by the way. Thank you. When he doesn't want to look at you, he can just cover his eyes and he thinks that you can't see him, right? It's something like that. Pretty clear. I can't tell if it's better than my favorite, but you could convince me. So my favorite detail from this thing is that, I love internal comms and lawsuits. There is an exchange between a JP Morgan analyst and a colleague of his saying the financials in this portfolio are quote,
class.
Hiten (03:39.628)
made up and ridiculous. Like he's basically telling a colleague, this is all fugazi stuff.
Yeah, I think that guy's last name was Nagana. Nagana was a w-r-r-r-r
work here anymore
Hiten (04:01.998)
They can never subpoena air. That's a good one for our potential mortgage fraudsters who might be listening.
seller that sold a portfolio that you treat for half a billion ish is a guy called Tyler Ross, one of your favorites.
Yeah, he's currently serving time.
A year and a day for Mortgage For All.
You got to make sure you serve that extra day to avoid short term capital gains tax. But yeah, he I we generally say allegedly here, but not in this case because he was convicted. He completely fabricated financials and essentially showed that your tree group, a set of financials that had seven million dollars more of N.O.I. than the properties actually generated. And again, for those of us who are listening, don't have a ton of real estate experience. That's a lot. Yeah.
will (04:53.102)
So that's a huge deal. And what doesn't really pass the sniff test to me is that when this was found out during the process by JP Morgan and JTREAT, they got a $65 million purchase.
What? We $7 million for $65? That's
I know that's crazy. I mean it's more than a 10 cap. This is a property that probably sold it of what four and change? It probably should have been at least twice the purchase price reduction. It should have been closer to 130, 140 million versus 65. So something doesn't really pass the smell test here.
And I think, you we talk about the Scrivener and the analyst, but obviously the heart of this lawsuit is the misstated financials or artificially inflated financials where Wells Fargo saying that when Chitrid and JP Morgan found out about the chicanery, they just kind of plowed ahead instead of maybe saying, hey, if we're finding a little bit of mold on the cheese, maybe we should throw out the cheese.
I would posit that it's a lot of mold on the cheese.
Hiten (05:49.898)
It also speaks to the broader systemic contagion in the CRE industry, right? The last 18 months have seen a pretty big reckoning in terms of mortgage fraud for sponsors, for appraisers, for title companies, for brokerages. Many firms have been blackballed. Some people are facing prison time. We've talked about it quite a bit in the promote. So this is probably the most dramatic example of something that's been happening for a while.
100%. This
will (06:17.806)
The other thing too is that this loan is non-recourse except for the bad boy carve-outs, which we talked about a couple of weeks ago.
We're back to our favorite concept, yeah, when we did our pilot.
Yeah, and we should add have a running list of things that are, you know, naughty boys. And one is not telling your lender when a property catches on fire and burns down. Another is stealing a property from your lender by transferring it away from them unknowingly.
I guess that is technically stealing. Again, these are all allegations, but yeah, that would be pretty damn bad, which is why Meyer-Chitrete is named in the lawsuit because he supposedly signed a PG here. Wells is saying that JP Morgan and Meyer are on the hook for about $285 million, which is the unpaid balance on the loan.
Right. And the way to cure that is to try to sell the properties, which are probably worth less than $285 million.
Hiten (07:06.792)
true. A lot of class BC Sunbelt crap in there. This is a CNBS loan, but I think a broader case like this of such a high profile mortgage fraud comes back to the whole shakeup that's happening in agency lending. Fannie and Freddie. Totally.
So Fannie and Freddie are two of the biggest liquidity sources for debt and multifamily. And with all of the fraud that's happened, it's gotten much more difficult to get through those processes. And generally, those processes are hard, just period. You're dealing with the government. And people were willing to deal with them because the terms were so much better than you could get from a bank or a Lifeco or a debt fund.
It's basically your couple points lower is worth the brain damage that you have to go through, right? That was just the deal.
Yeah, 50 basis points spread, more IO, non-recourse, except for the bad boy carbouts. And if that headache gets worse and the terms get worse because they're not going to be as aggressive, then what's the point? And I think the broader question for multi writ large is what happens to structural cap rates in multifamily if Fannie and Freddie aren't going to 70, aren't going to 75?
aren't underwriting to the same debt service coverage ratios because they're worried about the integrity of the financials that they're receiving. And that's a bigger question that's gonna take a long time to shake out.
Hiten (08:28.782)
When we talked to lot of people in the market, due diligence at the agencies was more of a t-shirt slogan than actual practice. But now there's been a ton of new guidelines and much more stringent guidelines. We'll see how it shakes out. But again, this is a pretty crazy lawsuit, right? We've got Wells Fargo, JP Morgan, two of the country's biggest banks going at each other over Joe Chitrete, Meyer Chitrete, the Chitrete Group. It's a pretty crazy story. Brings it back to the multifamily fraud, bad boy carve outs.
things that we love talking about at the Promote. So we'll see where it goes.
Hiten (09:10.264)
Dude, Gary Barnett's back at it. I mean, but this is just like how many times can he do this over his career? He's pulled in another billion three for a project in the theater district. It's called The Torch. The rendering is absolutely ridiculous. And apparently there's a bank that stepped up to give him the senior and the mez. And then he's got a hotel operator who he's got assigned LOI with and he's going to be able to finagle another 150 million of mez because of that deal. Just how does he keep doing this?
Was he ever gone?
will (09:38.74)
What's crazy to me is he keeps getting the folks who are going to be running the space and occupying it to keep putting money in. So I mean, he got IKEA to finance his office building. Yeah. And he's getting the hotel operator kicking a bunch of money and then guarantee the meds. It's he's the best. There's a reason for it. I mean, you asked up top.
Was that 575th? Crazy.
Hiten (10:00.302)
you rather have Roy March's hair or Gary Barnett's capital?
It's just Roy March's hair is so good, but like it was a hard decision for me. Like he, yeah, and he finds new sources. used to be, you know, the Middle East, then it was, you know, China, and then now it's Sweden. I don't know where this group's from, but he keeps finding them and good for him. And he's made great use of the Tel Aviv stock exchange too.
Close second, yeah.
Hiten (10:28.79)
Right. Israeli institutional investors were able to give you debt at 4 to 6%, quite a bit lower than you would get your debt in the US for long time. The problem with the, so it's cheap debt. It's been a big source of funds for everyone from related, so kind of cream of the crop institutional, all the way down to kind of the deep Brooklyn guys. And there's been a lot of drama around some of those loans. If you know of a guy called Joel Goldman, well, that's probably one of the best examples of how things can go wrong.
I mean, I think it's a good way if things went right. I truly enjoyed all of it.
But the catch with the, and the reason we can talk about the story right now, the catch when you raise money in Israel on the bond market is you have to kind of incorporate. And when you incorporate, you have to open the financial kimono a little bit, which is why we have a lot more detail about a famously, famously private company like Excel than we normally would.
Yeah, and again, this is not for the whole of XTel. It's just for this part that's relevant to each deal, but it's still more than you get normally. And it's a gargantuan amount of money. And give it to Gary. I mean, he can just repeatedly pull rabbits out of his hat.
And you know, he does this, he has done this, the other project that he's working on still, he's trying to sell it out is Central Park Tower, which is a super tall, once known as Nordstrom Tower. He's got about 18 units left there and he's got a condo inventory loan coming in.
will (11:57.486)
But when you say 18 units, people might think, it's almost sold out. I mean, those 18 units are what, like a billion dollars?
That's the money. It's generally so in these projects, those last units are kind of where the developer makes their nut, right? Exactly. And so Israeli institutional money is coming in for that. But he's done this before and he's raised money for that tower from let's kind of run through it. Chinese municipal money. Shanghai Sovereign Wealth Fund. We've got the Rubin Brothers, which are these two billionaire British guys. JP Morgan.
Don't forget Nordstrom who without buying their tower this thing wouldn't exist.
Just every source of capital that then becomes a big thing, you generally find Gary Barnett right at the top, just picking it up. It's quite impressive. I mean, he's a whole different podcast almost. So let's save some of that for later.
green.
Hiten (12:55.623)
One citizen is equal to another. But perhaps this one.
in the eyes of the law is slightly more equal than the others.
That's a quote from Silvio Berlusconi. And I thought of Bunga Bunga when I saw the new details about related bid for one of the biggest prizes in commercial real estate finance, which is the loan portfolio of the now dead Signature Bank, the rent stabilized section of that loan portfolio related to comb the grand prize, which is a 5 % stake in this giant book, despite having a bid that was 36 % lower than the next guy. How does that happen?
Hall, thanks baby.
It's all politics, it's crazy. We had Mayor Adams write in to support relate its bid, which was made in partnership with the CPC and another community group.
will (13:42.606)
This was back when that was a helpful thing.
Listen, you can't count the guy out. He keeps bouncing back. But he wrote to the FDIC, which was administering the receivership of Signature Bank and spoke up for related. They got a leg up. Brookfield, which was one of the bidders that was jilted, actually wrote to the FDIC crying about this.
Yeah, and they were partnering with Treadway, which will blot its firm. And they're basically saying why we paid more, why didn't we get it? And when the FDIC is involved, it's the government and there's more to it than just maximizing shareholder value. There's the whole part of this, which is these are rent stabilized apartments. It's about affordable housing.
Housing. And this is by the way, this is like a radioactive asset class. Not only is it affordable housing, but it's affordable housing in New York City. So any move is super scrutinized, right? So you want to make sure, I guess, as the government that you have the right partner.
Yeah, and give a lot of props to Related for partnering with a nonprofit to bid on this. It's a really savvy move because it's a lot harder to say that the nonprofit entity is going to maximize the value of the distressed debt. They're going to try to make this affordable places for people to live. And the way they deal with structure, they don't need these loans to get paid off at par.
will (15:04.866)
I Related is getting huge servicing fees and management fees just based on the unpaid principal balance. it really, they don't need to go in and like fix all this up and sell it and make three extra money. Like they're getting paid a ton of fees off the bat and just being in it is winning.
I'm so glad you bring this up because this is one of the other core concepts for the promote that's been coming up a lot, fee juicing, right? It's all about kind of repeatable income through fees. sources had told me the kind of the fee structure here, which is 90 bips management fee on unpaid balance and another hundred bips if you are able to improve credit quality of the loan book. That's why they're doing this. They're not doing this for that 5 % slice for which they paid nothing.
I hate to plug another podcast because I'm a narcissist, but I think Hunter did a great job, Hunter Hopcraft on business breakdowns with Matt Russell. Yeah, because he talked about how private equity, the constraint had always been forming capital and being on the treadmill of having to create new funds to raise more money, to generate more fees and how having long-term, long-duration capital that's fee paying constantly is huge. This is exactly what that is in the real estate industry.
the Apollo one?
will (16:15.256)
So it's a really savvy move by Related to partner and figure out that, we don't need to come in at the top. We need to be strategic and put the acceptable face of big landlord on this portfolio.
And this is one of the, I really, remember when this thing dropped, this was like one of the most coveted prizes in commercial real estate.
Yeah, I think that if you look at how a lot of the great fortunes or a lot of the great track records have been made in real estate, they've been made out of this exact circumstance, which is a government entity having to puke out private assets. And so anytime that happens, it's really interesting. And it's even more interesting when it's done in a way which is not the highest bidder getting it.
That is my reason for liking the story is like in a private deal, you're like, okay, are you good for the money? And are you paying the most money? Those are the two main criteria. In a public private deal, it's a lot murkier. It's like, do you have political juice? Have you partnered with the right people? Do you know the right people? And that's why this story kind of is a little bit more interesting than the average bid. So that's on the rent stabilized side, but on the other side of this as well, the non rent stabilized. office, market rate, multifamily, et cetera.
We have more players who came in. So Blackstone, big old Blackstone partnered with the Rialto who we've brought up before on this podcast and CPP, which is the Canadian pension plan, the fund. They bought a 20 % stake in a $17 billion book for 1.2 billion. They sold off a chunk right away, which is the classic Blackstone playbook. You buy a big thing, you de-risk right away a little bit. And then they went to Rialto and said, go forth, my friend. And so what happened here was
Hiten (17:55.5)
Signature Bank's book, was, sponsors are used to dealing with, one of my favorite phrasings ever was when someone described Signature Bank as D's and Do's guys. sponsors are used to dealing with these really friendly, sweet relationship banking driven guys. And suddenly through no fault of their own, they're dealing with Rialto.
Yeah, that's not fun. mean, it's reality seems to have taken the stance on this like in The Rainmaker when the insurance company just denies every claim and see who then like comes after him. I hope that you are astonished as I am at the lengths to which a wealthy insurance company like the defendant will go. Like that's literally what's happened here. They just denied everyone's extension and then like the people who sued, they're like, OK, fine, you got us like.
Yeah, we're who did this. So Carrie kind of came back and stood up to them and that's been worked out.
Yeah, mean, real estate is, you it's a knife fight and it's not always the guy who brings the howitzer to the knife fight who wins. The subtle knife can sometimes take it.
a subtle knife and in this case it's related, it's political juice. They've been doing this for a very, very long time, right? And they're connected, they're so politically connected because of the mega projects they've worked on.
will (19:12.46)
And think of where I related cut their bones. is product type, so they know exactly how to play it.
stole this one. mean, this is a heist.
Look, Tansa.
will (19:26.862)
concert
Hiten (19:36.44)
Well, the last story I want to talk about this week is this Newmark-Eastill rivalry. No love lost there, obviously. The two alpha brokers at Newmark, Batman and Batman, Harmon and Spees, used to be kind of ruling the roost at Eastill. There's been a very, very definitive poach of Eastill's talent pool recently by Newmark, starting with Jonathan Firestone, their main debt guy. And it's been happening a lot, but at the same time, Eastill is doing very, very well. They topped...
the office broker ranking, which was a surprise to me. They topped the hotel brokers.
It's all, you still are investment bankers. They're not brokers.
True, sorry, yeah, Roy March would definitely take issue with that. But they basically cleaned up on hotels and offices. There are CBR and JLL, which are a lot bigger, but I feel like these two punch well above their weight and they have very, very different models. it's quite tasty to see the drama between the two.
Yeah, I mean, in a business like this where human capital is so important, there's really only a finite amount of people who move the needle and, you know, you can know who they are. Yeah. We just talked about how sometimes not paying the most, you can win something, but in here, you can just pay the bust and you go get them. And, you know, it's no different than any other human capital industry. Like we talked about a couple of episodes ago. I mean, you can go look at any of the pod shops and people just can shop around. I mean, even
Hiten (20:49.998)
We can pay the most
will (21:02.914)
down if like your warehouse worker at a big exit off the Jersey Turnpike, every time there's a new building, you can just walk across the street and go ask for a buck an hour more. This is that on steroids.
Estill famously pays a salary plus bonus, which is more of a, I guess a Wall Street model and Newmark and all the rest, they pay commissions.
Yeah, and I think it's just, you it's a different way of doing things.
You know, I would think that too. I would think there's an Estill kind and then there's a Newmark kind. again, Harmon and Spees, Estill guys, now Newmark guys. Firestone, hardcore Estill guy, now is crushing it on the debt side of Newmark. And I should say that even though Estill has done incredibly well on the sales front, Newmark has, in my opinion at least, has been the go-to on the debt side. And they're crushing it in these new asset classes. Data centers, they're kind of cleaning up.
And those debt assignments can be so lucrative because they come around way more than sales and the cogs on that business are not very high.
Hiten (22:06.22)
We just talked about the FDIC and Signature Bank. That portfolio was also kind of handled by Newmark. So here we have, would say, traditional brokerage that's using its status as a public company and levering up and trying to be the of the number one brokerage in the history of the world.
Whereas Eastill, you know, came out of Ben Lambert put it together.
And Ben is a super interesting character. mean, he's kind of the pioneer of buying and selling pieces of a company based on what's happening in the capital market. So he bought it out of Eastman Dylan in 1970, sold it five years later, bought it back again in 1980, sold half of it to Nomura in 86, bought the stake back again in 94. Wells came in in 99. And now Eastl is again looking for capital. they have Singapore's Temasek as a partner in Guggenheim.
but now they're going out there looking for a bigger war chest.
Yeah, and I think what a significant premium to what they bought out most of Wells' stake at, you know, however many years ago, so really good for them, but yeah.
Hiten (23:08.014)
2019 was the valuation in 2019 was 400 million. There's now saying it's four or five times that. And I guess the, is there pressure when you feel a new mark, a public company coming at you in this way, is there pressure to say, okay, we kind of need some cash to beef things up and make sure we don't bleed out more talent?
Yeah, pretty good.
will (23:27.35)
Yeah, definitely think so. I think having a public currency versus not is a meaningful difference. I think you can pay people through the stock, both in terms of giving them shares that vest and also it latches them to you for longer because they have those shares have to vest. But also, I mean, a lot of these companies, I looked up Newmark recently, but pay pretty healthy dividends. And so that's another way to get people money tax efficiently. So if you give someone one hundred thousand shares of your stock and it pays a two dollar per share dividend, I you gave them an extra two hundred grand a year that's taxed, you know,
Very paper place half or less than what the commission income is. So it's a big way to have an advantage over a private rival because they have to stump up for cash because it's hard to get a liquidity mark on private company stock. So it's a really it is a bit of an arms race. You need now offer everything. You can't just do sales. You can't just do sales on one product type. You got to do debt. You got to do leasing because it's the way to create all season, all weather.
earnings.
What you're describing is basically Newmark's more recent pitch, which is like we're generating momentum across the industry from our debt platform and equity platform working kind of side by side. We've got leasing, we've got advisory, and they're saying that putting that together, it makes them a pretty unbeatable combination. We'll see how that plays out. And he still keeps talking about this kind of each part of, or every team and he still works for the same result, whereas Newmark is, I mean.
Newmark is like any other brokerage where everyone is fighting over whose name shows up first in the story.
will (25:01.102)
Yeah, and they fight over clients too. So if you're doing deals in separate geographies, like you're trying to get debt, who's the debt broker? Who gets the credit? And more importantly, who gets paid? So I think that that can lead to a lot of headbutting. But if you have these alpha guys, mean, those are the guys who get the terms for people, those are people who are going to come to.
So Newmark recently picked up the Smolin Bowler team, which is a big West Coast multi-team. They got Justin Sheppard, who was probably East Hill's top healthcare broker. So they're making pretty serious inroads. Whereas East Hill has generally been known for kind of internal development of talent. They did hire Silverman and Gary Phillips, those two guys. I mean, very prominent brokers in New York. Yeah.
But you still also too would hire people like in the analyst rotation program, like they very much pride themselves on like giving you an investment banking offer. And I think that's part of the whole, their whole deal is they want you to come up, you know, through the firm as opposed to just grabbing the top dogs from other folks.
See, I find this rivalry fascinating because we've got one firm that has built a very distinct identity in the market for 40 plus years, which is Eastle Secured. We're an investment bank. We're not a brokerage. We don't kind of jump into the mud with the rest of them. And we have a compensation model that reflects that. And the other, which is the most aggressive of what I would call the traditional brokerages, know, fighting for deals, fighting for commissions, making it all happen, is taking on a more holistic approach to the market now.
And I guess that's part of the reason that they can poach some of this talent. So in the brokerage wars, this is the one that I find the most interesting.
Hiten (26:41.08)
That's it for the Promote Podcast this week. Pretty damn juicy docket again. We Wells and JP Morgan going toe to toe over a Chitreed Mega Deal. We looked at some pretty intriguing politicking over the carcass of Signature Bank. And finally, we looked at the poaching wars between Newmark and East Hill. Two brokerages that are kind of the polar opposites of each other. Will, anything to add?
No, this is the industry that keeps on giving. There's always great stuff to talk about, so it's fun to do this every week.
It really is fun and we'll see you back here next week. Please write in with your feedback at 1031.media. That's T-E-N-3-1.media. And where can we find Will? I'm not sure because he's anonymous on Twitter.
because I don't write anything down because no one's ever gonna subpoena my air.
Never do that. Never write anything down, especially if you're thinking of committing mortgage fraud in the near future.
Hiten (27:30.904)
That's it this week, thank you so much to our listeners, and well, thank you dude. Ciao.
Thanks, Hiten.