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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 Samtani (00:00.494)
Given what we've seen from the early actions of the new administration, we don't currently expect any material direct impact to our portfolio for new government policies. That's what the parent company of Aries said in early February. We don't currently expect any material direct impact to our portfolio. Then came the Trump tariffs. Aries was down 15 % day one.
I mean, for all we know, he could have been right. I mean, they don't mark those to market daily, so maybe there is no, in fact.
just a black hole in there.
Hiten Samtani (00:34.542)
Welcome back to the Promote Podcast, where you're insider guide to the money and mania of the CRA markets. This week, we've obviously got to start with the Trump tariffs. They've unleashed fear and loathing in the markets. Yeah. We see the immediate hit to fund managers, but there's also the long-term implication to new construction that we got to talk about. We look at Mickey Naftali's stratospheric pricing targets at his upcoming Fifth Avenue condo. New York's so back, baby. And finally, we get into Starwood's mega deal in Texas.
Why Barry Sterling went from sleek hotels to masterplan communities?
What would you rather have, 11 master plan communities in Texas or one building on Fifth Ave?
I'm a Manhattan guy so I think I'm gonna go with the 5th Ave condo but man this basis is pretty damn scary.
Hiten Samtani (01:21.838)
So we got to start with the tariffs. It's just absolute chaos in the markets. Keep seeing hot takes out there. We should preface that no one really understands what's going on yet, which is kind of why we're seeing this tanking.
real estate people 100 % understand.
Oh yeah, they completely get it. But let's say for the most part, no one really knows what's going on. There's a couple of things that are already happening. One, the major fund managers, call it Blue Owl, Carlisle, KKR, they got rocked in the market right after this was announced. I think they were down 15 % or so, day one.
Yeah, it was carnage. Though no one did as bad as Gary at Restoration Hardware. That was epic.
Oh yeah, that was so rough man, was it 40 % or so?
Will Krasne (02:04.428)
Yeah, while he's on the call. wow, I didn't see the chart.
the fuck shit. That was excellent. given that, know, given your past life as a guy who worked at one of these major funds.
two of those major funds. Sorry about that. It's okay.
Why are investors reacting so violently to this? I mean, the S &P is down as well, there's bloodbaths everywhere, but I think the alts have taken an even bigger hit.
Well, yeah, because you see a lot of real estate guys saying, all right, the 10 years down, yes, this is great. But the problem is that when the rates go down like that, means everyone's poor and there's a recession coming. And no one can rent your apartments or no one can buy your smelting company. And no one wants to take your health care services biz in a continuation vehicle. And so all those things lead to the alts being down significantly.
Hiten Samtani (02:59.246)
There's also a lack of transparency, is kind of what private equity that really means something. It's a bit of a black hole into how they allocate, where the revenues are coming from. If you think of the geographical breakdown of some of these funds, it's not very clear. So investors might be like, well, without any certainty into where this money is or where it's allocated, this might not be the best bet.
Yeah, and know, private equity is trying to optimize for shareholder value. In a lot of cases, that means offshoring, manufacturing, and those are the types of businesses that get taken to the woodshed.
And again, we're not macro experts. don't want to try to be macro experts, but where is the impact? Why does this matter to commercial real estate? There's two things I think that are happening, right? One is on the kind of the bigger role that private credit and private equity play in the real estate capital stack.
You know, the issue isn't even so much that I think it's more just the inputs because to build stuff like you need lumber, you need steel workers, you need gypsum. Like, I don't really know what gypsum is, but it's fun to say. And all those things just got way more expensive. so yeah, construction financing is coming in because of, you know, where rates are. mean, everyone's going to be trying to sprint and refinance everything they can right now. I mean, go talk to your friendly mortgage broker right now. And they're, you know, their hair is on fire.
RE-
Will Krasne (04:16.206)
But I think the bigger issue though is just uncertainty. And so everybody hates uncertainty. obviously this administration has brought a lot of uncertainty and these tariffs could get taken away tomorrow. They could get extended. They could be worse. I mean, we just don't know. And so as long as that uncertainty is there, I think people are gonna be fearful and that's gonna lead to more people buying bonds, which means the rates go down. But again, it's not a good thing.
I'm going to read you this pretty astonishing quote I read in Liana Ora's Allocator newsletter, which was, it's all nonsense. It's Ferris Bueller's day off, but for running the world economy. I don't think any manager can do anything. It could all end with a tweet at 4pm today. Now this is ahead of a major US insurance general account. To your point, the uncertainty is the problem. No one knows where things are going. And I also think about like those, let's go sub-institutional for a second. Those developers who spent years kind of
perfecting their supply chain, right? Outsourcing here, scoring material here. It's like a pretty intricate art to figure out exactly where your pieces come from. A lot of that is now moot.
Totally. We saw during the pandemic that we kind of just in time the entire economy. When there's disruption, we saw what happened at the supply chain. This is not at that level, but it's incredibly disruptive. And so, you we talk about bringing stuff on shore, but you can't set up paper mill or a lumber mill, you know, in a year.
Hypothetically, what kind of conversations do you think are taking place between developers and suppliers or developers and GCs at this point?
Will Krasne (05:52.446)
It's just your costs are completely a swat.
But what are we talking? 30 %? 20 %?
What are we talking? mean, you almost don't even know enough to bid. If you don't have anything with a fully bought out GMP right now, like I hope you're holding on your hat. Yep. Cause all that stuff's going up. mean, particularly if you were trying to get steel, if you're trying to get lumber, which is basically every project. mean, the folks who are going to be better positioned are someone who has an enormous warehouse of inventory to build at scale. like if you're a production home builder, I would guess that they have enough inventory to last for a little bit.
But yeah, if you're just building one project or you're not DR Horton, you're not Lennar.
And so help me understand as a non-real estate person in general, do you kind of get financing to score some of these materials? And if so, what kind of conversations are probably happening with lenders at this point?
Will Krasne (06:46.222)
Well, I mean, you get a construction loan which pays for all of it. you know, the good thing is that rates coming in. The bad thing is your inputs are going up more than your rates come in. And the bigger issue is just time because in development projects, time kills everything. And if you can build the same project with the same profitability, it would take six months longer. It takes a year longer. The interest expense alone will just eat you alive. Your carry costs will just eat you alive. And so it's not even necessarily the cost. It's just going to be like, can you get the stuff? When can you get the stuff?
And that all combined creates the uncertainty that makes it really tough to pencil.
So who's got like, who's got the blue magic at this point? Blue. Like who can step in and deliver? Nobody. No one's got the blue magic.
Magic! That's a brand name.
Will Krasne (07:31.412)
No, like this whole thing is insane, like there's nobody-
But in any crisis, just zooming out of it, any crisis of any kind, there's someone who can kind of make an opportunistic bet, right? So who would your money be on in a case like this?
I mean, people who own existing stuff, because you can't build anything else and it's going to do much better. mean, I'm dead serious. Like if you own assets right now and your demand isn't collapsing or won't collapse, like you're in much better shape.
Interesting to see how it goes and again as that Ferris Bueller quote guy said I mean it could all end with a tweet tomorrow or next week. We don't know because there's no rhyme or reason to a lot of this stuff. It's sort of a chaos agent thing. What's the quote from Alfred? Some just want to watch the world burn. That's it.
Hiten Samtani (08:25.006)
The New York Times, 1886. It is the ambition of the New Yorker to live upon Fifth Avenue, to take his airings in the park and to sleep with his fathers in Greenwood. Look, both of us are drawn to developers who really, really go for it, right? Last week we chopped it up on Gary Barnett and the amazing stuff that he was able to do birth a whole new asset class, Billionaire's Row, 57th Street, et cetera. But then there's real New York and Fifth Avenue has kind of always been the epitome of real New York living. Last month,
Mickey Naftali, big developer in New York, went into contract to buy a Frufru rental at 800 Fifth Avenue from Elliot Spitzer for $800 million. That's an absolutely astonishing basis for a site that could yield maybe a 350,000 square foot tower. without retail, and we'll talk about why there might not be a retail play here, but without retail in the mix, we knew that Mickey would really, really have to go for it with pricing. And wow, is he really going for this guy is looking at
achieving a blended pricing here of $11,000 a square foot. $11,000 a square foot blended is just like astonishing numbers here.
It's really something, but I'll tell you what, you you don't really want to bet against Mickey Napatali because he's done really well. He's timed cycles really well. He's delivered the exact product the market wants over and over again, just like we did over further to the east during the pandemic with his limestone.
He's done well.
Hiten Samtani (09:53.006)
And I remember when he bought the land there, everyone's like, this guy is crazy. He's paying ridiculous prices for the dirt. It was obviously less than half of what he paid here, but still it was very high for that site. Totally. But he delivered and he knocked it up.
Yeah, and he's doing the same thing in Williamsburg right now. That site's considered a little bit... Out there? Yeah, and you know, just got a really good retail tenant, and apparently the early signs are pretty decent on the residential portion of that. But I will say what the broker's statement implies by saying that it's a land basis is that they're gonna knock it down and build with the zoning FAR, which is... What? Like, that's crazy.
Why wait, what do you mean? What's the conventional wisdom here? What would you normally do in a case like this?
I mean, to be totally clear, would never do any of this. Just because I'm a wuss.
We talked about risk tolerance and pain tolerance before. This is definitely a risk tolerance thing.
Will Krasne (10:47.096)
Yeah, but you could do sort of what L &L did at 390 Madison or 425 Park where you remove the slabs but you keep the existing skeleton of the building to preserve the FAR. That can be as expensive as tearing down the building and be maybe a little bit quicker. So again, time kills everything in development, but you get more space. If you knock it down, then you lose the existing FAR, which I believe is non-conforming. So you end up getting less.
But again, then you'd get a pure building. So you could have cleaner floor plans. You wouldn't have to convert. You wouldn't have to combine units. You could get really prime way out. So maybe that's what he's going for.
to live on 57th Street. Like if I had the money, this is kind of where I want to live. This is real New York and this is the best part of the park. It's still very much, you kind of feel like part of the city as opposed to those glassy behemoths that we talked about, 157 and the rest, where you're helicopter people, right? You're separate from the city. This is part of New York. Very frou-frou part of New York, but very much
And there's a reason why all the Vanderbilt's built their mansions right here. It's great. I mean, I've lived in New York for 10 years and every time I walk up that part of Fifth Avenue, you still think like, oh my God, I'm in New York.
Do you think $11,000 a square foot, my god, I'm in New York?
Will Krasne (12:00.684)
It wouldn't shock me. mean, to be honest, if you're going to make a bet, you got to make a bet on the best. I think it's one of those things where it's always going to be expensive. They're not making any more beachfront. They're not making any more right on fifth ave. And I'm always more scared when you need a big number for something that's not super prime.
This is super prime, let's just put that number in perspective. A 5,000 square foot pad here would ask 55 or fetch 55 million according to the NAFTA LA team's projections. A 10,000 square foot pad would crack the a hundred million mark. And actually the generally the priciest pads in these buildings tend to be even more per square foot. So we could well exceed that. A couple of benchmarking numbers here. The highest price pad that ever went in New York was Ken Griffin at 220 Central Park South.
And he paid $238 million, but that comes to somewhere in the 9,000-10,000 square foot range. The priciest per square foot pad is the Amman, New York, where they sold a unit for $11,400 a square foot.
Can I go hot for a second? Yeah. Let me just say this about the Amman. Don't come for me. The Amman sucks. That building sucks. The hotel sucks. There's nothing there. It's just so bland and quiet and an olive cost $47. It's awful. You can go sit there and you have a beautiful view of the HVAC units on top of Bergdorf's. know, that place sucks. Sorry. I know people love the Amman. I hate the Amman. The Amman is terrible.
Well Vlad Daronin is going to be coming after you for this one, but that's your problem, not mine. So we have a couple of like greatest hits that have achieved way higher prices per square foot. As I mentioned, the Amman New York 11,400. Joe Tsai, who's the Alibaba co-founder bought Daniel Oaks Penthouse at 220 Central Park South. And he paid, get this, $19,000 a square foot for that apartment. But again, these early, these one-off resales or absolute cap to the universe things.
Hiten Samtani (13:53.166)
There has never been a blended price per square foot north of 10,000 in Manhattan ever. So it's a pretty damn like they're going.
for it. There's also never been a building developed by Mickey Naftali on Fifth Avenue before either. And it wouldn't shock me if some of the folks who are 220 Central Park South, who are right 15 Central Park West, or at, you know, 520 Park now go by here because it's a new project. It's going to be the single hottest condo in the city bar none, if not the country.
this point you made, think I want to double down on it because it is true. There was a fascinating article in the journal a while ago about this game of musical chairs where you had buyers from 15 CPW move over to 220 because it was the hot new girl in town and it was like the same kind of buyer, Moneyed, elegance, et cetera. They moved from 15 to 220. So potentially five years down the line or whenever this thing is ready, you go from 220 to this and you're willing to pay up for the privilege.
Absolutely, wouldn't shock me if Ken Griffin buys the penthouse here. This is the absolute master of the universe address. And just to bring it back to talking about the best guy to do it, Barnett, we talked about, and I love Barnett and he builds stuff, but Naftali has done it with just such panache. I think his design is impeccable. He picks excellent architects and he picks architects that fit the market.
We still do not know who the specific main equity on this project is, but he did give us a little teaser. So the promote had something last week where we had, had a guy in the lender data room. He was just like chatting me some details. And that's where we got this 11,000 square foot number. And he also had, fascinatingly, the conservative case was 10,900 a square foot. The base case was 12,000 a square foot. So that's kind of the range we're talking about.
Hiten Samtani (15:48.366)
Then from the equity side, all it said is, Miggy's working with the family office that has done seven deals with them. I don't think it's Access Industries, which is Len Blavatnik because they've only done a couple of deals, but again, it depends how you slice it. The other option here could be, I don't know, this is speculation, Nahla Capital, which is a family office that pools Middle Eastern money and pumps it into New York. I don't know if they've made a bet quite as big as this.
I mean, they're big projects right now too. The Zeckendorf project on Clarkson, just announced their initial pricing. That I think is going to be a good bellwether because those are guys too who don't miss. They build the right projects.
you mean downtown with Atlas? Yeah, they got a $900 million loan, I believe, for that. Mickey's looking for only $700, I believe, at this point, but obviously that can change over time too.
They did.
Will Krasne (16:36.61)
Yeah, because again, he's a, I really have tons of respect for him because he gets this stuff done. gets done quickly. So to come in with more equity, knowing that every day matters and especially in a project that's going to be this complicated, makes a lot of sense to try to over-equitize it.
Can you break that down over equity?
Sure, so when you're doing a development project and you have a construction loan, you're not paying the interest on it, it accrues. Or you have an interest reserve against it. So essentially, if you got $100 million, you might have $5 million of interest reserve, which is held back from your proceeds. So you really only get $95 million. Okay. The longer the project takes, the more interest accrues and kills your returns. And so if you come in with more equity, obviously more equity
coming in means like a lower IRR, your multiple is going to be lower but you'll make more nominal profit but it also protects your downside in a development where you're just you have less interest expense because you have less debt so it just makes it that you buy yourself more time.
So Mickey Naftali is going for it here, 11,000 square foot, but this is Fifth Avenue. This is real Fifth Avenue and it's Mickey Naftali, hard guy to bet against. So we'll see where this goes.
Will Krasne (17:47.118)
And the last thing I would say is that this isn't going to be a ton of units because if they only build 350,000 square feet, it's going to be 80 units, 75 units, which makes it a lot easier to chew through then. Yeah, like Central Park Tower, I think had like 40 units over 40 million by itself. So it'll be hopefully a little bit more bite size.
57 or those other ones. Yeah
Hiten Samtani (18:09.228)
You say had at Central Park Tower, it's very much a has situation with the condo inventory alone that they got. Well, Mickey, good luck to you, man. We'll see how this goes. Definitely one we're watching close.
Sorry, you're correct.
Will Krasne (18:21.454)
wouldn't bet against him.
Hiten Samtani (18:30.289)
When's the last time you were in a scrap, like a real scrap?
My kid tried to Patrick Swayze Roadhouse throat rip me the other day.
that counts. underestimate your opponent. But I was thinking about this pre-fight hype talk that we used to get into in school when you're about to fight someone and you talk a big game and in reality, maybe you push each other a couple of times, someone lands a punch and it's all over. It reminded me of what Floyd Mayweather just came up with in Upper Manhattan. He'd been talking about buying a $400 million portfolio from Black Spruce, which is Josh Gottlieb.
But it turns out, according to Business Insider, all he did was buy a minority stake. And he has an option of some kind, some really fuzzy option to buy the rest. But it's just this fugazi thing that can happen when showbiz mixes with commercial real estate.
To be honest, it's basically what a LinkedIn syndicator says when they talk about having 80 million AUM. It's the same thing. Good for Floyd. I'm glad he's interested in affordable housing and helps New York. But yeah, there's not a lot of there there. He's not showing up with a big old cashier's check, I don't think.
Hiten Samtani (19:42.766)
Yeah, have you noticed how all in Floyd is in the New York real estate scene recently? And has a connection to a pretty shady character in New York real estate called Jonah Rechnitz. And apparently this guy is the conduit for a lot of his deals. Yeah. The guy, look, the guy has money. He has real money. I would imagine he's like a billionaire or close to it. He made some incredible for that bullshit fight with Connor. think he made a hundred million plus. It was one of the most disappointing things I've ever seen on TV, but
bought it.
Hiten Samtani (20:09.314)
for him to say that he spent $400 million on a portfolio when in reality he would have spent maybe hypothetically even as little as 10 million, which is kind of classic New York real estate hype talk.
He's a real estate guy, got way less cash than you think.
Hiten Samtani (20:27.362)
Well, right at the top, you'd ask me an interesting question about if you had $800 million to play with, know, one day in Charlotte and some life, would you rather buy an 800 Fifth Avenue type rental tower, which you can convert into fancy condos, or would you buy a master plan community in Texas? I assume you're asking for a reason.
Yeah, well, you can actually buy 11 master playing communities in Texas. So Starwood just paid $800 million to buy 11 NPCs in Texas from Heinz, the global developer and a whole, you know, left side of the menu of capital partners from Heinz. So this deal is 11 master playing communities, 16,000 units still left to sell.
600 acres massive.
massive and what's really important in a master playing community is that all the infrastructure is in and they're in advanced development stages, which means that they're selling lots to home builders.
Paint a picture for us. you coming in when you're buying the bones? What do the bones look like? Is there a little bit of muscle insinu on them already or what?
Will Krasne (21:27.81)
Well, it depends. So my first job was in master plan community development.
Do I have Electrical? Yeah.
We would buy raw land, get it entitled, get it zoned, get utilities there, finish lots, and then sell them home builders. And it's the most risky area in real estate, but it's also potentially the most lucrative. But it takes forever. mean, Howard Hughes is still selling out master plans that were built 40 years ago. I mean, the Irvine Company is a master plan community, and they're still selling that out, you know, 50, 60 years later. Wow, yeah.
But again, then Donald Bren is one of the richest, if not the richest man in real estate because he's been at it for a long time.
Exactly. So this can be incredibly lucrative, but you need a long time horizon and you generally can't use a lot of leverage, which means it's not often a private equity play. So Starwood, you know, led by Barry Stern, like thrives on complexity and there's not a lot that's more complex than land development. And they started a venture.
Hiten Samtani (22:28.29)
This is like, if you think of zero to 10 construction risk, this is a hard 11.
Totally, because it takes forever. It's going be more than a cycle. you have all the normal development risks, then you have cycle risk, and then you have maybe the product that the market wants shifts while you're developing it, which is always a huge problem. But Starwood did really well with Starwood Land Ventures. They were one of the earliest players in single family rental with Starwood Waypoint Ventures, which they eventually merged into what is now Invitation Homes. And then they formed ST Residential when they
an invitation home.
Will Krasne (22:58.968)
bought the Corus Bank assets, which was an incredibly complex deal with the FDIC, with like Perry Capital, with Lefrak, and that had several thousand condo units in various stages of development. So they're not scared of complexity. And what I think is really interesting is that traditionally their funds had been a quarter hotel, a fair amount of office, and they were sort of less indexed to multifamily and industrial than others because their view was we love complexity, we can find alpha there.
And that's sort of been a tough bet with rates and everything last, you five, 10 years, but now they're back.
So, were telling me the Barry Sternlich splashing New York Times deal book feature about the hotel reinvigoration was just a little bit of fluff.
That's fluff. mean, this is what's real is they're buying industrial, they're buying data center, and then they're buying this. I think it's a pretty interesting play because you're taking the biggest risks out of the equation because you're buying stuff that's already in the advanced stages, which means like roads are there, which means community centers have been built, which means utilities are there, which means home builders are already buying and taking down units there. So there are cash flowing.
your end buyer in this is a Lunar or a Toll Brothers or that kind of
Will Krasne (24:09.23)
Yeah, so the way this works is that they're going to continue to finish lots and finishing lots means basically you deliver a flat pad with utilities there that you can sell to a home builder and a home builder can go stick up a house and You they take their margin but you make you know your markup and you have a lot of beta because the land is 20 % of the home value and if rates go down and Home prices go up land goes up more. It's like super levered
Yeah, this isn't Wichita, Kansas. These are real markets.
No, these are super prime. Yeah, Dallas, Austin, and like really good areas. they're at the, so these things work like a J curve where you spend a ton of money upfront and you don't see money for a long time. But then once you do, it's basically all profit. And so they're trying to, they're buying these things where I'm sure Heinz did phenomenally well here because they took the biggest risk and did a ton of the legwork. And now, you these things are going to cashflow.
there's a lot of it upside because you're still developing and if the cycle works in your favor, you can really do well here. And so I think this is also a bet where, you yeah, it's going to be hard to, you know, tariffs are going to be tough. Like we talked about the top building homes is going to be really challenging with supply chain, but it also means that if you own in good areas and people can't build, you know, home price appreciation should be pretty good. And hopefully that land becomes more valuable. So I think it's a really interesting play and it's a pretty big check because you can't lever this stuff. So.
think it's a really interesting play and I think you're gonna see, if you read the PR release from Starwood, it says, you know, our continued strategy of buying Prime MasterPlaying Community. So I think you're gonna see them doing more of this.
Hiten Samtani (25:45.838)
February release from Starwood is very, very intentional. know how to, like, I think what makes Barry one of the goats is he knows the business of the business, but he also knows the narrative side of the business, which we've talked about a bunch on this pod.
Absolutely. So it's a big number, but you're buying great stuff in what should be really growth markets and they have a history of doing this. So they know how to execute because this is obviously very operationally intense, but they know how to do it and they've done it before.
I love the story and I'm so glad you nominated it because in general, we're biased towards the cities. We talk about Manhattan, we talk about South Florida, Miami, et cetera, but there are these giant, giant bets in markets that we don't really think about. Suburban Dallas, suburban Houston, et cetera. So when we do have a player that we do care about coming in and taking a big swing in these markets, it's really, really interesting to break down.
Hiten Samtani (26:40.088)
wonder if Floyd Mayweather is an investor with Starwood and this one you never knew.
Yeah, you just bought $800 million worth of NPC sites.
Hiten Samtani (26:50.732)
That's it for the Promote Podcast this week. The biggest thing breaking everyone's brains is the impact of the Trump tariffs, and obviously we had to chew on that, even though no one really knows what's going on. Will Mickey Naftali set a new high-water mark for luxury condo pricing in New York? We shall see, but he's a hard man to bet against. And finally, Starwood is back in the business of land. A lot of big bets. A lot of deals. We'll see you here next week. Same time, same bad channel. Ciao.
Hiten Samtani (27:20.238)
That was nice.
I was trying to do Kapow like Adam West.