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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 (00:00.46)
Has anyone rocked a deep V better than Michael Schwo?
Well you're asking me who has the best heave edge, it's probably Mike the Situation Sorrentino.
Where has he been? It's like he was everywhere for a decade and now he's gone.
He was in prison.
Hiten Samtani (00:17.164)
Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. Hatan here as always with Will Krasny. This week, we chat about a fascinating deal in the works in SF. Nubon swooping in to buy nearly 3,000 keys that's almost 9 % of the city's hotel stock in one of SF's biggest hospitality real estate plays in a decade. We look at the aftermath of Carl Icahn's failed big short on malls. Spoiler alert, he's mad and he wants Rialto's blood.
Hey.
Hiten Samtani (00:45.646)
Finally, we dive into a super tall capital stack. 125 Granite Street has seen New York's most famous and infamous names pile in. It's a great case study of what it takes to get a skyscraper built, or even half built, in Manhattan. Also, a big thank you to our sponsor for this episode, AirGarage. Let's go!
Hiten Samtani (01:07.768)
So Will, you wrote me in all caps right after the story dropped. You're like, new bond, we gotta lead with this. So what kind of got the juices flowing here?
I love a big contrarian play in general and the fact that these guys went out and bought such a big chunk of SF hotels. mean, two words that are sort of verboten, although SF a little bit is started to come back a little bit.
It's come, you know, the vibes are starting to come back. Just how people are talking about the city. Public safety seems to be improving. The AI boom is obviously helping quite a bit, but there's a little more life in the city.
Yeah, Daniel Lurie's really seem to have caught the zeitgeist a little bit and people are behind him.
Yeah, but with this, we're talking two massive hotels, both downtown, I believe it's the Park 55 and SF Hilton Union Square. Together, that's nearly 3000 keys. And get this, it's nearly 9 % of the city's total hotel stock. You're swooping in with one deal and you could become one the largest hospitality players in the city.
Will Krasne (02:07.5)
Right. And those hotels by dint of being so large are heavily reliant on group business, corporate business, and we might just be heading into a recession. very interesting play. This is not buying a boutique hotel for the 1%, which are sort of have been in vogue, you know, between getting billion dollar offers for the mark.
a bullshit offer, complete nonsense. You know, it's seven million a key. I was talking to our one of our hotel insiders and he's like, this is a, everyone's laughing about this right now. It doesn't make any sense. He's like, even on the best day, your favorite Amman could not even get close to these numbers that would make this make sense. Even for a sovereign wealth.
Yeah, I can do the math.
Will Krasne (02:47.566)
And let me just say folks, listen to the promote and hear it first because Hacks came out with their third or fourth episode and Helen Hawn's character talks about how she hates the Amon. So we're very much ahead of the curve. But back to this, think, so this is, know, more some of Park Hotel's flagship hotel. So Park spun out of Hilton. So Park is the hotel, it has a fabulously named CEO named Thomas Baltimore.
Thomas Baltimore Jr. I'll let you know.
Thomas Baltimore Jr. Sorry about that. these hotels, they were valued at just under 1.6 billion. They had a massive CNBS loan.
Yeah, they had like 700 million plus since the MBS, which they got. Either was JP Morgan originated it. I want to say in 2016.
Yeah, it sounds about right. so Park Hotels essentially decides to give up on these two assets.
Hiten Samtani (03:37.686)
And the way they gave up on it, it's like, so obviously it's non recourse, whatever, but this is the way they worded it. This is your Baltimore guy. This is how he said it. After much thought and consideration, we believe it is in the best interest for park stockholders to materially reduce our current exposure to the SF market. That's basically him saying, yeah, we're not going to pay anymore.
That's basically saying, your problem now and-
Exactly. And so we're talking about a pretty dramatic right town. When this property was appraised, I believe this month, we're looking at a valuation drop of more than a billion dollars. Yeah. So what happened here? Who came in? New Bond. Who the hell is New Bond?
That's real money.
Will Krasne (04:17.262)
That's a great question. So New Bond, the principals are ex Highgate guys. So Highgate is one of the most eminent hotel owner operators around founded by the brothers Kimji.
Kimji's by the way, fascinating rabbit hole. The Kimji's are part of this Ismaili community and they're like this very, very hardcore business community. A lot of them came out of the Indian diaspora in East Africa, Kenya, Tanzania, et cetera. But what they're known for is being very, very good at making money. But the spiritual head of this whole thing is the guy called the Aga Khan. RIP. Yeah, he just passed. The Aga Khan is like this urbane, sophisticated, skiing in the Alps kind of.
the most interesting man in the world. real, he was part of the inspiration, think, for it.
So anyway, that's a bit of a tangent, but the Kim Jee's started high gate, big hospitality player, I think did some of the biggest deals in Manhattan and other prime markets in the 2010s.
They did a lot in SF actually. so Highgate famously made a absolute fortune coming out of the Great Recession. They were very aggressive because they were excellent operators. So they would manage these hotels themselves and they were very early on advanced technology. And again, we're not talking about PropTech vagaries. We're talking about like actual stuff that increases property NOI. So Highgate was very advanced in how they did revenue management. So for hotels, this is really important because
Will Krasne (05:45.91)
Every hotel room isn't worth the same depending on what time you book it, which is one of the reasons why I was so interested to talk about this. San Francisco used to be a very tight convention market. You had Dreamforce, you had the Superbowl's there. So they have a lot of high compression events. And what that is is nights where
whole giant hotels booked, you can't get a room in the city,
Exactly. Rune Knights are sold out across the city. So why is this important? Because if you have inventory on those knights, you may be able to sell a room for a thousand dollars that rents for 200 bucks three weeks prior.
Basically, dynamic pricing is what you're talking about.
Exactly. And it sounds really simple, but it's very difficult to pull off and practice because it requires, you know, you have to know how much inventory you have. have to like know how much demand is coming. That can be the difference between a hotel making millions of dollars in that operating income and making nothing. So I remember I looked at a hotel in a previous life in San Francisco where they made their entire profit for the entire year. And this was a hotel that made millions of dollars in NOI. They made the entire profit during dream force.
Hiten Samtani (06:51.35)
Wow, so like one conference basically is all the gravy.
Exactly because they're the rev par for the whole year extreme force was call it 180 bucks a night and during dream force it's like 1700 and so if you're really good at revenue maximizing and dynamic pricing you could Operate these hotels much better than everybody else so high gate was very early in that and they were really good at it And so they made a fortune
Basically, all this to say that these guys, the principles of New Bond, are kind of steeped in how to run a hotel.
Yeah, these guys know exactly what they're doing. So Highgate had, again, they were operators, but they were owners of some of the biggest hotels in New York. I think they owned the Gans vor, a handful of others, the Royalton at one point.
way, fun, fun little trivia. When SL Green was planning to go public, was Mark Holliday and Stephen Green kind of talking through stuff and mapping out the future of this giant read. And they used to do it over brunch at the Royalton.
Will Krasne (07:49.71)
So these guys come from a shop where they're very sharp operators and they're very sharp on full service assets, which is a key point here. These aren't guys who go by Hilton Garden Inn and Wichita and run it with two and a half people at a 38 % NLI margin and call it a day. These guys know how to buy businesses, which is what these hotels are. These are big operating businesses. So this is a very high gate trade. I'm interested that Highgate didn't buy it themselves.
And you know what we don't know here is like what the number is because it was in I think it was in real estate alert. They just call it a highly structured transaction, which I guess is code for they they got it out of great.
price.
So they're agreeing to kick in more equity to fund basically agreed upon renovations and some other shortfalls. And then I guess they're gonna operate the hell out of this hotel and see if they can make a buck.
These are the type of things you said in the newsletter that this is the type of thing that can make a career. This can make many people's careers, not just these guys. It can make the people downstream of them. So I love the swing. Don't know whether or not they're going to be successful, obviously, but I love the hotspot.
Hiten Samtani (08:55.98)
Hey, he's got it. He's learned how to pronounce it guys. He didn't know it a couple of episodes ago and now he's got it. But this looks to be their biggest deal by far in their new shop. they have a, they have a lending venture, hospitality lending venture with Madison called Madison New Bond. They took over the NPL at the public hotel on the Lower East Side. about Schrager.
You can trade your likes.
They just won the asset management contract for the addition Times Square. if you want to take a guess on who the sponsor of that, they just can't hold on to anything. Well, I think Mayfield is a whole different mess. But so they were runner ups on the Kimpton Eventy Hotel. They thought they had won the deal. I had talked with a hotel insider. They thought they had won the deal for it. And the last minute Blackstone swoops in and takes that one away.
I remember, it was Mayfield.
Hotels are hard,
Hiten Samtani (09:47.118)
So I think they've done about a half billion or so in acquisitions, but this has got to be the biggest bet. It's going to be a lot of fun to see how it chops.
So we don't know who their equity is. They had done deals previously with Rhythm and Apollo. And Apollo is interesting because one of the very senior guys there used to be very senior at Starboard Capital Group on the hotel team there. And so he knows that these guys know what they're doing.
So this is a question I had, I'm just more in general curious about this track record. How much of it is yours and how much of it is the umbrella under which you operate? So when you look at a guy like Luthrä or you look at a person like Van, how much is like, okay, you guys were high gate. Do know what I mean? Like how much can you carry into your new shop?
The short answer is it depends, which is not the sexiest answer. But if you're someone like Tyler Henry Tse, who was lead on many large profitable deals for Blackstone, when you go to start your own shop, I there people lining up around the block. That's your try.
You can call it as something as stupid as town lane and you can raise a 900 million dollars in a few months.
Will Krasne (10:46.272)
Exactly. And for these guys, I think the folks that matter, again, that's why I'm not surprised that Apollo has been equity for them. The hotel world's pretty small and game recognizes game to some extent. So if you're spinning out of high gate and you were senior, like people know what that means.
I'm just gonna get philosophical for a second. I really want New Bond to win here because I want SF to do something interesting and right. It's a great city. It's just been depressing headlines after depressing headlines for the last, I call it five years. So if something goes right here and they're able to revive this hotel and make it interesting again, I think that's gonna be a good thing.
They're a good thing.
Hiten Samtani (11:29.422)
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So let me take you back to 2017 simpler, better time when you could write a 58 page white paper about a short on an obscure mortgage index and the entire world would laugh.
CMBX 6.
CMBX6, I'm talking about, of course, the one and only Eric Yip at Alderhill Management. He wrote a long, detailed, very compelling paper about why he thought that malls were gonna have trouble across the country making good on their debt payments. A bet that has proven to be correct, but unfortunately for him, if you're early, you're wrong. And his fund folded in 2019 before the bet ended up paying out, whereas others did quite well on it.
And this is a guy, I mean, it's so interesting. Obviously, it's a deeply quantitative paper, but he talks about growing up as a kid in his parents' store in a Burlington mall and seeing these patterns play out. I love the human stories that come in before all the wonky stuff. So he wrote this paper that became the genesis of what we're going to talk about. But the guy who really took it forward and bet a lot of money on it was a guy called Carl Eichand.
Will Krasne (13:07.704)
think what's really interesting about it is you've got the unstoppable force and the immovable object running into each other here. No, no, we're not talking about the lagman. I think he's the very movable object, given how he's reacted recently to terrorists.
And we're not talking Bill Ackman.
Hiten Samtani (13:22.424)
Yeah, I think so what happened here is that the mall went into trouble. It was taken over by the special servicer, one of the biggest players in that space called Rialto, Jeff Krasnoff's company, which has been all over the headlines.
major player in the Promote Cinematic Universe.
For sure. And they've been, for that reason, they've been all over kind of the headlines across New York, other markets. They partnered with Blackstone on the Signature Bank book. But anyway, the allegation here is that Rialto as the special servicer basically slow rolled the sale of this Nevada mall and juke the stats, as in tweak the appraisals in a manner that didn't allow ICANN to profit from the trade. That's the kind of the crux of this lawsuit.
Police Commissioner Burrell would be proud of shooting the stats like that.
It's pretty good. And I should say that obviously these are allegations, we'll figure out what happens in court, et cetera. But these kinds of allegations have come up on Rialto before that it intentionally slows down the process to stack the deck in its favor. So what happened here is that ICANN went after Rialto in 2022. He recently folded his CMBX6 trade. I don't think he made a great deal of money. He didn't lose a great deal of money, but it's definitely not the
Hiten Samtani (14:37.43)
megatrade of the generation that he helped.
You know, and the opportunity cost there was enormous, especially given all the other challenges he's facing across his empire.
Yeah, I think he folded a three billion ish of derivatives. I'm not too technical on that, but that seems like a lot of money. That is correct. So I can file suit against realtor in 2022. He recently folds his big short, so he's done with it, but he's not done with realtor. So a couple of weeks ago, a judge ruled that I can suit against realtor can proceed. ICANN's lawyer is basically saying this is a template against special services who've had carte blanche to do whatever the fuck they wanted for so long.
And the one that always comes to mind for me, Will, is the vividly like seared in my memory is, you know Veritas and the multifamily portfolio? So what happened was Veritas lost this giant portfolio in SF and Brookfield and Ballas took it over. But in the process, $164 million were held back by the special servicer. And the whole idea of this is like, they've been able to do whatever they want and sponsors are like, no, no, you can't do that.
I indeed.
Will Krasne (15:39.544)
Well, on the whole back, you know, keeping money from the sale to basically say that's money we're going to pay ourselves, question mark.
In fees? Yeah, yeah, we don't know where it's gonna go, right? It's all fuzzy math. It's fuzzy math. And the idea was like, once it passes through the veil, and it's in this fuzzy special servicer world, don't ask too many questions. That's been the kind of standard operating procedure for a bit. Yeah. But now sponsors are like, no, we're not gonna, we're not gonna stand.
And you keep these things hanging out there forever because you keep getting paid the fees and know astute listeners of the promote podcast will remember that we talked about this in New York where Rialto is taking over the Signature Loan book as Ten mentioned and You could be a nice guy who owns a laundry You know laundromat and your building was you know had a loan with Signature Bank and now Rialto is trying to only take your entire life away and
I think we talked about the transition from D's and Do's guys to Rialto.
Right. And how some more well-heeled, sophisticated borrowers just pumped back and filed lawsuits and Rialto folded. So I think this is part of their playbook. A bird flaps its wings. A man writes a great white paper. And that ends with Carl I. counter Rialto suing each other over a failed Nevada mall.
Hiten Samtani (16:53.676)
You gotta love real estate, man. So I wanna make sure that I read this exact quote from ICANN's lawyer, because I think it says a lot about what could happen in cases like these. Quote, special services often operate on the assumption they're not gonna get sued and legal and practical impediments have discouraged investors from acting as a natural check against bad behavior. This decision creates a template for CNBS bondholders to bring lawsuits successfully against special services. So I think that's a good.
ominous sign of where things could go.
And I think that there's going to be a lot more CNBS workouts than there were last year. So we could be seeing more of this.
the board. Yeah look, special servicers, you've been making a ton of money. Last 18 months or so you're gonna have to get some heat that just comes with the territory.
Yeah, your margin is my opportunity.
Will Krasne (17:50.318)
This is such a like a crap building. It's like everyone somehow saw God snookered into it.
So, bye.
Hiten Samtani (17:56.632)
That's not great.
Marvel's got the Avengers, DC has the dark forces and the multiverse, and lower Manhattan real estate has 125 Greenwich. Every single person left, right, and center was involved in this beautiful disaster of a condo building. And I think it's about as good an example of what it takes to get something built or 90 % built depending on whose valuation you're using. But it's also a great example of how things have shifted in
built.
Will Krasne (18:25.272)
Manhattan real estate over time and the capital markets and who's funding these things and what end users want. So attend, tell us a little bit about us.
Yeah, it's a perfect illustration of all the forces that play out in the capital stack. So you've got EB5, check. You've got Overseas Asian Bank, check. You've got Howard Lorber coming in, check. You have a guy who New York Magazine once described as a permatand Israeli action figure, Michael Schwo. He's the original guy who sources this deal, apparently makes it happen. You've got Davide Bitsy. And then you've got all these other random characters. And now Starwood just came in. The reason we're talking about it now.
Istar would just top this building up with 350 million in fresh financing. It's an incredible tale of the cast of characters of this thing is astonishing. I love it.
I think this was bought when I had just moved to New York and I've been in New York for 37 years now. And Shvo originally bought it. first lender was United Overseas Bank. Right. So Shvo also got convicted of tax fraud over art purchases. So he had to leave. So he got bought out. He was politely defenestrated. And then United Overseas Bank sold the debt.
Singapore Base Bank.
Hiten Samtani (19:32.128)
Leave is a gentle word, but yeah.
Will Krasne (19:40.258)
Yeah, it's a BH3.
Who the fuck do they think we are? Baggage handles? We are baggage handles.
Then BH3 sold the debt to Fortress. They might be the only guys who made money in this entire transaction.
At a profit at a markup Action they made money. Yeah, they made a nice markup here and bh3 is a company that I've been thinking about a lot They've popped up in the promote and we'll be talking more about them and successive episodes for sure anyway So they sell it to fortress mighty old fortress comes in and they they now own the
Well, yeah, and Fortress then could have foreclosed and just forced sale to say, you know what, let's get into some fight icon does. And so they convert. So they convert their debt into equity and become a lead partner. so Howard Lorber, who was in this, he gets bought out. And then there was a Chinese PE shop. They also got bought out. So out of all this cast of characters, we only have busy and certain server.
Hiten Samtani (20:14.178)
let's play some development here.
Hiten Samtani (20:32.238)
No, even Sardar who is basically he's known in New York real estate as being Shvo's frequent backer in many projects and then they famously had a very ugly fallout. So at some point when Shvo leaves, Sardar becomes the equity partner. So it's Bitsy, Sardar, Fortress. And it's confusing for a reason. This is a freaking crazy cap stock.
Got it. Okay.
Will Krasne (20:56.056)
So then they get another loan, get rent from Northwind to give them $313 million financing. By the way, there's a building here that is not getting built at any point for most of this.
And this is not a random, like, I mean, it's a random location, but this is a Rafael Vignoli rest in peace, architect designed super tall building. This is like a very visible what the fuck happened here kind of building.
Totally. And that Northwind financing was no no no for Madison Realty. So less than two years later, the sponsors have come back to the market, they were looking for cheaper debt, and they just got a massive loan. I almost hesitate to call it construction because how much construction is left, who knows?
It's unclear, but it's from Starwood, Starwood Property Trust.
So it's got 271 condos. say it's almost done. There's supposed to be amazing amenities.
Hiten Samtani (21:49.226)
On the amenities point, what's interesting here is they've kind of rejigged generally your money shot condos right at the very top of the building. Here, they say they've reserved the top three floors for amenities. So it kind of reminds me, have you been to the Shangri-La in Shanghai? That's the vibe. When you go right at the very top, there's a business center, there's a health club, it's gorgeous. But yeah, I haven't seen it tried for a long time in New York real estate for sale.
Right, yeah.
Will Krasne (22:03.928)
I have not.
Will Krasne (22:14.03)
And to make this even more complicated, think there was 190 odd million of EB5 money in there too.
Guess who put it together? It wasn't some random EB-5 fund. The man himself, Nick Mastrioni, US Immigration Fund. This is the guy and this is the stuff. I always keep track of the status, who's on top, who's kind of calling the shots in New York real estate. And I wanna say in the mid 2010s, this guy Nick Mastrioni was more important than any single developer. He raised billions of dollars for Witcoff, for Zeele Feldman, for...
It was the man himself.
Hiten Samtani (22:49.088)
a bunch of the biggest developers for the glitziest projects. So I don't know if Nick maintained his full stake or what the deal is after the star would do.
So now you've probably got the cleanest cap stack that the property has ever had. It's almost done and we're in a market where not a whole lot else is getting built. So it'll be a potentially fortuitous time, a cycle or half a cycle later than they thought to deliver these things and get them sold.
It's amazing, it's basically like if you fuck up on every potential turn, you can end up on top.
If you're in New York, potentially, you know, if you're in a lot of other markets, maybe not as a wise old developer once told me, because New York will bail me out.
And if you can stay in the game long enough, that might very well be true.
Will Krasne (23:34.014)
Yeah, it's one of the reasons why it's only in New York because only New York game project that takes this long with this many people and still the question of whether or not it's going to be success is actually quite interesting.
Listen, we're going to wrap up there, but I want you to cook for a minute on what you said in the notes about the tariffs in the industrial real estate market.
Right. So if you think about what has been investable at the institutional level over the past two or three years, it's really been three things. It's been data center, it's been residential, and then it's been industrial. And with tariffs, what we're seeing is that it's throwing supply chains into chaos. Now there may be some good things about this because if you can't import things from China, if you have uncertainty in your supply chain, it may mean you need more warehouse space. But you saw on Prologis' earnings call, they said that we actually might need more warehouse space, but they are cutting their development pipeline.
More interestingly for me, seeing the shift market by market. Now, industrial writ large may be okay, but if you have West Coast industrial, so if you have some locations in the Inland Empire, Los Angeles County, that was already being a little bit softer as more shipping was being done from Europe and coming into East Coast ports versus from China and Asia and coming in through the West Coast ports.
this may just, the tariffs may just accelerate it. So we can see a sea change in sort of what are considered prime industrial assets, prime industrial markets, and then who the real winners are. And if we lose a big chunk of the country that's no longer institutionally investable, it just means that these other assets are going to get bit up even more if there's fewer places that you can sort of go safely.
Hiten Samtani (25:14.19)
That's it for the Promote Podcast this week. Lots to chop up again. We talked about New Bond's audacious deal on the SF hospitality front. We talked about 125 Granite Street, a lower Manhattan development project that has had probably the most interesting cast of characters that I've seen in a long time. And we also talked about Carl Icahn, his failed big short on malls has led to collateral damage for a special surfacer at Rialto. Will, anything to add?
Share, like, subscribe.
this guy.
really appreciate it.
Will Krasne (26:01.516)
Alright, take it easy man.
Ciao.