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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 (00:08)
There's a trope in old Bollywood movies. The patriarch of a dynasty is on their deathbed. A city slicker comes to visit. And through false pretenses, charm, or threats.
Will Krasne (00:18)
or a combination of all three.
Hiten Samtani (00:19)
or combination of all three, he convinces them to sign away their most valuable holdings to him.
Will Krasne (00:24)
Well, it sounds like old Bollywood has found new life in Miami Beach.
Hiten Samtani (00:40)
Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani
Will Krasne (00:45)
and I'm Will Krasne
Hiten Samtani (00:47)
A shout out to our sponsors, Pensford the only interest rate advisory firm focused exclusively on CRE.
Will Krasne (00:53)
Bravo Capital, a leading HUD and Bridge lender that lives and breathes cap stacks.
Hiten Samtani (00:57)
and cohorts, a private, vetted peer group of GPs that are going through the same challenges as you. This week, we discuss Multifamily's mega marriage of convenience. After getting no love from the street for being merely huge, Multifamily reads equity residential in Avalon Bay are considering a merger. Now, Will overuses the word tectonic on this pod, but I think it really does apply here.
Will Krasne (01:18)
The first time I really saw the word tectonic used in a news story was when Eric Schneiderman got me too. He was the former New York Attorney General.
Hiten Samtani (01:26)
I think that qualifies. So we're going to dive in as deep as we can. We then leave the public markets behind for a telenovela playing out at an old school Miami real estate family. Major developer Terra Group's David Martin is being accused of playing the part of a Bollywood villain. This is the exact kind of storyline up we love at the promote, a little meat, a little masala.
Will Krasne (01:46)
It's
gonna be a hoot and we have a big announcement. Huge. Our swag store is now live. I'm using swag colloquially because the quality is much higher. It's not swag. I love them, but it's not Daniel Ricardo's merch, which when you wear it once, it like disintegrates. It's very high quality. Look at this.
Hiten Samtani (02:05)
It's pretty good. We're calling it CRE's Merchant Bank because we're not like that. It's live now through thepromote.com or directly at thepromote.store. That's thepromote.store. Hats, hoodies, t-shirts and more. The perfect gift for the CRE junkie in your life.
Will Krasne (02:24)
Let's get started with the punch list, our signature rundown of the newsiest news in CRE.
Hiten Samtani (02:30)
This week's punch list is brought to you by Dealnav, a map for a CRM and deal tracking tool.
Will Krasne (02:35)
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Hiten Samtani (02:43)
Our listeners get 50 % off their first year. Go to deal-nav.com and use code THEPROMOTE at checkout. All right, let's go.
Will Krasne (02:51)
The hotel Cabo Forna. I wrote this one for anyone to wonder. So we had a court case, the Commerce Bank or Commerce Real Estate, a. The city of the German lender and ABA, ABA.
Hiten Samtani (02:54)
Huh.
What's going on at 11 Howard?
It's subsidiary of the German Lender.
Now I don't know if it's bitter, just what you believe.
Will Krasne (03:14)
and
was completely on accident. So AB, who is known for having a lot of German equity and as well as German debt, is in risk of losing 11 Howard, which is Anadelby's favorite hotel.
Hiten Samtani (03:25)
What's her claim to fame again for those unfamiliar?
Will Krasne (03:27)
She was a famous grifter who, story went viral.
Hiten Samtani (03:31)
Kind of ran amok on the New York high scene for a couple years before she got caught.
Will Krasne (03:35)
tried to buy 281 Park Avenue South. So this was where she stayed and ran up a gigantic bill that she couldn't pay. I think it was a holiday inn. Ooh, okay. When Amy bought it in 2014 and spent a ton of money, converted it to this boutique, super high end. When I think of this hotel, I think of Frederick Eklund in like circa 2017, million dollar listing New York being like, soho. The deal that they struck after delivering this hotel was really interesting.
sold the hotel to Commerce Bank, but leased it back for 10 years with an option for both a further 10-year extension and the option to buy it back over time. So basically, they locked in a certain profit, but then got like schmuck insurance in the form of being able to still operate the hotel. So they blew it out of the water. One of the things is when you're leasing something, you generally have to pay rent. Yes. They sort of stopped doing that.
Hiten Samtani (04:23)
And what is commerce alleging now? So-
There's a great quote and you normally don't hear this from a lawyer for German bank. It's DLA Piper's Anthony Coles said something like, they stiffed us and it's time for that to end. One of the big takeaways for me from this case, a lot of local players are able to strike these unusually creative deals with the dumb blender sitting somewhere in Europe, right? And it's interesting when they unravel.
Will Krasne (04:52)
What I keep thinking of is Waterboy, it's like...
That's kind of what I think is happening to A.B. right now.
Hiten Samtani (05:03)
All right, next one, Newmark's leasing fees rose 20 % to an all-time first quarter high, and they attributed this to markedly higher office volumes. We talked recently about CBRE having a monster quarter as well, in large part by the AI boom in their data center practice. But here Newmark is saying basically leasing has been on a tear.
Will Krasne (05:22)
First of all, I'm following up on this because one thing about me is I will follow up until you die and we're closing the loop. And we said we would follow up with what Newmark did and we're doing it. So net absorption, everyone's been bandying about New York, which essentially means that people are taking more off of space than is being
Hiten Samtani (05:38)
delivered.
Will Krasne (05:40)
And so office is really tight. We've talked previously about the record price per foot New York set twice in the first quarter as well. But this is not just a handful of 5000 square foot family offices from Mexico coming in trying to impress Hermione Granger. It's like depth of demand across quite a lot of space. And there's one we're going to talk about right after this, which isn't even factored into that statistic.
Hiten Samtani (06:05)
All right. So this one, the Biggie, Anthropic is coming in and taking the entire building at 330 Hudson. That's an AEW capital joint. And this is a 465,000 square foot property. And they're like, we'll take it all. And they've done this before. We just talked about an SF. They ran the same playbook at the property that is owned by Blackstone and? Divco West. Just a major shot in the arm for the office market when you have a tenant like this that has insatiable appetite for space.
And that kind of revenue run rate is just, have you seen that chart? Finance, insurance, real estate and legal, those have traditionally been the big drivers of the New York.
Will Krasne (06:36)
Yeah, it's a ludicrous.
work it. But now it's tech and within tech specifically AI. This is a massive lease. You hear about like, it's clear, you got lead taking 500,000 square feet at whatever.
Hiten Samtani (06:51)
Funnily enough, they also just side for, I think, $475.
Will Krasne (06:55)
That's why they were in my I saw it somewhere. It just speaks to if you need space for anthropic, they need it yesterday because to that revenue chart you talked about, what I loved is I think they had 16,000 square feet before this. Generally, you sort of go up the escalator. The move here is that AEW as soon as that ink is dry, this needs to be on the market.
Hiten Samtani (07:12)
This is moving. One of my big takeaways is actually on the brokerage responsible for this. This is a JLL deal. JLL also wrapped Anthropic on the SF building that we just talked about. The reason the JLL is in the mix here is that they bought a company called Rays Commercial Real Estate a couple of years ago. Now JLL has played around LARPing in PropTech for a long time and done really pretty much nothing. But this &A actually moved the needle because a couple of those guys at Rays
have become the go-to tech brokers for the AI boom, OpenAI and throughout big companies like this. And so they're making it rain and JLL is benefiting as a result. Whereas JLL Spark, look at the investments, there's nothing much going on there.
Will Krasne (07:55)
Let's just prop tech writ large. The stuff that matters is the old school bricks and sticks and having these folks out there. Because again, the I-sales, that's the sexy part of this business, but it's the financing, it's the leasing. Those are really what drives revenues and drives earnings overall. Anthropic, their growth rate remains exponential. So too do the tenant rep commissions paid to JLL for this.
Hiten Samtani (08:15)
They haven't yet gone into the construction of data centers, which brings us to our next one.
What's going on here with KKR?
Will Krasne (08:24)
say
what the wise man does at the beginning, the fool does at the end. ⁓ We've just talked about Blackstone a couple weeks ago launching their public data center vehicle. Related has a data center vehicle. So KKR is getting on the action. They've raised already more than $10 billion to launch a company to develop and operate AI infrastructure. Because as you might have heard, this is somewhat of a hot topic.
Hiten Samtani (08:27)
and
How do you not get into this when all your peers are raising billions of dollars and shoring up that AUM? You kind of are compelled to do it. If you're left out and you're wrong, you'd rather lose a bit of money down the road and no one knows, but you're getting left out right now. FOMO is such a powerful force in investing as we've talked about.
Will Krasne (09:04)
Right, and if you're publicly traded, the carry doesn't matter, balance sheet investments don't matter. What matters, what is your FRE? What is the fee stream? How long is it locked in for? And how full freight is it? When the ducks are quacking, you gotta feed them. If you're gonna raise this $10 billion and you don't do it, that's $10 billion. It's gonna go to Blackstone's vehicle. It's gonna go to Related's vehicle. It's gonna go to any number of other firms that are gonna do this. Might as well figure it out.
Hiten Samtani (09:28)
Next one, we had Alan Stalkip of GVL on a couple of weeks ago. Pretty controversial interview, we got quite a bit of feedback on that one. What did he say to us? He said...
Will Krasne (09:36)
I want to do interesting things with interesting people with no obligations.
Hiten Samtani (09:39)
people.
But guess what? Starwood has just stuck him with a pretty fat responsibility. They have won summary judgment in three cases against GVA. One of our favorite phrases, bad boy carve outs saying he personally, Alan Stalker personally is on the hook for tens of millions of dollars.
Will Krasne (09:57)
We've
almost got a baker's dozen worth of tens of millions of dollars since $110 million that they're asking. Multi-family financing is generally non-recourse, but for if you do bad stuff, which is the aforementioned bad boy carve-outs. So these were non-recourse loans that become recourse because of the alleged behavior by the sponsor.
Hiten Samtani (10:16)
With so many of these multifamily syndicator loans gone to shit, lenders are taking a very, very close look at their documents and seeing if there was any chance that sponsors have tripped up covenants and then going after them on these bad boy carve-outs.
Will Krasne (10:29)
Right, because what happens is a lot of these properties have gotten capital starved and so you can't just let it sit extending and pretending on something where the value is not just the value, but like the overall earnings power of the asset is declining. That's where you really get in trouble. And I want to differentiate between value and earnings power because the values depend on a lot of different factors. What's capital doing in that market? What are interest rates?
Hiten Samtani (10:51)
It's
very much both macro and vibes driven.
Will Krasne (10:53)
Right. And earnings power, can you generate more NOI tomorrow than you can today? And that's really what you can control as a sponsor. And so what happens is if a property is struggling, you end up in this doom cycle where there's not a lot of cash. You start not doing the RNM you need to do. You don't staff it the way you need to do it to try to prop up cash flow. More stuff breaks. Occupancy goes down. Bad debt goes up. You don't have much cash. You end up in a little bit of a spiral. And that's, think, what a lot of these lenders, Sarwood and Benefits Creator,
worried about. And those two groups are very capable of taking this over and running these things. And that's always the issues that the old saying, if you owe the bank a million dollars, it's your problem. But if you owe the bank a hundred million dollars, you own the bank. But these guys aren't banks. They're happy to take it over.
Hiten Samtani (11:37)
They're happy to take it over and they're happy to squeeze as far as they need to squeeze. Indeed. That is it for the punch list. When we come back, we'll be discussing a marriage of equals in multifamily.
Will Krasne (11:54)
Highways jammed with broken heroes on a sofa-fueled last-chance power drive.
Hiten Samtani (11:59)
Everybody's looking for protection and Pensford's the place to hide.
Will Krasne (12:02)
In a world full of macro hot takes and LinkedIn fed gurus, Pensford cuts to the noise so you know what actually matters when it comes to interest rates.
Hiten Samtani (12:09)
Whether you're crunching the numbers on a single deal or you've got a portfolio to figure out.
Will Krasne (12:13)
Pentsford's got over 10,000 rate caps under their belts. They know their stuff cold.
Hiten Samtani (12:16)
And their forward curve is the slickest rate tool in the business. Interactive, updated daily, and the THINGER Capital Markets team probably has open on 10 tabs.
Will Krasne (12:24)
Check out the good stuff at pensford.com. That's pensford.com and tell them the Promote sent you.
you
Hiten Samtani (12:35)
Speaking of cap stacks, one of our anchor sponsors, Bravo Capital, lives in them. In just five years, they've become a leading hud in Bridge lender.
Will Krasne (12:42)
They've got a stacked HUD operation and also a bridge to HUD solution so they can do balance sheet senior loans until the HUD takeout.
Hiten Samtani (12:48)
and they're immersed in a space that we've been increasingly obsessed with, skilled nursing facilities, or SNFs.
Will Krasne (12:54)
Sniffs are a total labyrinth of policies and procedures that vary state by state, so it's easy for sponsors to go stray if a lender's not deep in the mix. Bravo is. And they put out good content about this as well.
Hiten Samtani (13:05)
Totally, their white paper, we'll drop it in the show notes, is a clutch primer to understand the investment gap in healthcare real estate. And overall, think Aaron and his team are thoughtful and pretty sharp.
Will Krasne (13:14)
check out their platform at bravocapital.com.
Hiten Samtani (13:17)
and tell them the promo sent you.
Will Krasne (13:21)
We talk a lot on this podcast about AUM gobbling, but there's not really AUM here. This is more like renovated backsplash gobbling.
Hiten Samtani (13:30)
I feel like this is the natural culmination of everything we've been talking about on this podcast for the last few months.
Will Krasne (13:36)
I know, this is like when Bill Simmons turns to end the rewatchables. This is where we are.
Hiten Samtani (13:40)
This is it. So, REITs aren't getting enough love, multifamilies getting hammered for many reasons, only the biggest of the big will survive this next phase, et cetera, et cetera, et cetera. It has all come to this. Avalon Bay, an equity residential. The number four and number six multifamily owners in the country are considering a murder, according to Bloomberg. That's huge news.
Will Krasne (14:02)
It is. Each of their market caps are around $25 billion, so that obviously excludes debt, but they are the top apartment rates in the U.S. when measured by market cap. And so this is creating an absolute behemoth.
Hiten Samtani (14:14)
combined we're talking about 174,000 units.
Will Krasne (14:18)
give
or take. ⁓
Hiten Samtani (14:27)
have a pretty
big concentration in Boston too. In fact, these two companies, when they combine, Boston might be a sticking point because they're going to control quite a bit of inventory, despite what Jay Parsons and some other people say.
Will Krasne (14:37)
Let's get into that first. So Jay Parsons brings up sort of the amount of apartments nationally and then in each of their target markets, this combined pro forma company would own. I think it's telling that one of the first things that comes up here is antitrust. Yes. Because these companies have gotten waxed. There's real threat that this merger would go into antitrust review, even though both of them, the reason they're merging is because they're
Hiten Samtani (15:03)
Dude, badly. We're getting rocked. So why is this happening? Housing, as we've talked about, is the most politically fraught issue in the country. Both the Biden administration and the Trump administration, funnily enough, have made big real estate their piñatas on the campaign trail and otherwise. They've talked about too much power concentrated in the hands of Wall Street. Home ownership is the American dream. It's being threatened by these large behemoths, et cetera. We're also talking in the wake of the massive real page antitrust lawsuit where
A lot of these companies were hit with class action lawsuits, were actually named by the DOJ in the Crusade against Real Page as well.
Will Krasne (15:39)
The reason this is happening is because the companies that are working as public companies. And this has been one of the most challenging environments. It's funny because you look around and we don't have unemployment at 9.5%. Like you would in the Great Recession. You have this burgeoning industry in the US which threatens to change how the entire global economy works. And you wouldn't think all of these apartments are just getting annihilated. These big companies, you think they're insulated. They're not.
EQR stock is down 12 % over five years. Avalon Bay down five. These guys own the best apartments.
Hiten Samtani (16:13)
best of the best. There's been an oversupply for a long time as well. That's impacted rent growth.
Will Krasne (16:18)
quite a bit. That's been a big part of it, but it's also just been, again, valuations. We talked about the difference between value and earnings power. What's happened is the value of these is just lower because if your cap rate goes from five to six, that's a lot of NOI growth you need to hit just to keep your head above water. There's a difference between private real estate and public real estate, which is not just that one is a public reporting vehicle and the other doesn't have to deliver daily liquidity or daily marks. The difference is the asset level financing.
EQR and Avalon Bay, a publicly traded REIT, cannot take the amount of leverage that a Blackstone can, like a GVA could. They can't really use bridge debt. All of the ways that as the market has gotten more efficient, you have to finance your return and create it through financialization. They can't really participate in that. And if all they're trying to do is buy good products and good markets, you just have eliminated this entire swath of return, which is a crucial part of the real estate.
Hiten Samtani (17:12)
business.
And in the meantime, you have this incredibly massive overhead, labor costs have gone up, raw materials costs have gone up, your cost side of the equation keeps creeping up, and you're not able to find the alpha in the capital markets.
Will Krasne (17:25)
These guys are big enough to where being public from a cost standpoint makes sense. If you're one billion dollars or whatever you are below a certain threshold, the SG &A drag is just too, the public reporting costs are too high. These guys are past that. But your point remains owning a multifamily business has gotten worse and you have to do it with one hand tied behind your back. Camden just did a unsecured note at like four eight, I think. I'm like, I got a freaking fanny quote at like four nine.
Hiten Samtani (17:51)
typically
expected at three five or something. Is that what you're saying?
Will Krasne (17:54)
The cost of capital having this massive balance sheet supposed to drive it down and it's just not there. There's no way that the co-host of the Promote podcast should be able to finance his apartment acquisitions the same as Mid-America.
Hiten Samtani (18:06)
Don't sell yourself short. What is so stark here is that a lot of the AUM gobbling that we've been talking about on this podcast has been, let's take that NM8C50 list again, has been the lower depths of that list. We talked about Bell Partners putting itself up for sale and then eventually being bought up by BGA or Apollo with Bridge Investment Group. There's been so many of these, but now we're talking about the very, very top of this list. Besides the antitrust, which is going to be quite a significant hurdle for them to overcome,
There's also the political heat that they're going to get at the local level because as we said, state senators, mayors, et cetera, have had no qualms bashing a lot of these landlords.
Will Krasne (18:44)
I can't wait for some of the hearings where they talk about how private equity is going to control a huge chunk of the market when of course, neither of these are private nor are they equity. And that's a great point because they're going to have a lot of really affluent tenants who vote. And rents are going to be going up, ideally, even though they haven't really been over last couple of years.
Hiten Samtani (19:01)
What is the alpha here? So let's say we have a company that's got 175,000 apartments, which is what the EQR AVB merger would look like. Where are we finding advantages? If you recall our multifamily insider at one of these big institutions wrote a piece for the promote insider and he said, it's the difference between controlling your cost structure and being at the mercy of it. Procurement, centralized leasing, staffing ratios, tech deployment, et cetera. None of it works at 25k units.
it starts to work at 50k units, and at 150k, it becomes a genuine
Will Krasne (19:35)
Well, that would be the only company in the United States that owns more than 150,000 units. Yeah. Yeah. So that should tell you something. It's the same thing as manufacturing where how Amazon turns all of their costs into revenue centers. Yes. Because they have such scale. They can do stuff for pennies that make sense for them that you just can't match as a smaller person.
There's not a lot of people who can sell enough HVACs to service all these people. It's hard to enough ranges, enough stoves. If you're able to do full HVAC replacements at like $5,500 and other people paying $9, it means you can buy more. The market has gotten so much more efficient. That's how you have to eke out these little edges. That stuff matters. I talked to a guy who bought a deal. They're like, yeah, we bought it like 70s vintage, low five cap, basically neutral leverage. But we know we're going to be able to do this one certain thing that we've been able to do at other properties that's going to increase top line.
regardless of happens to market rounds.
Hiten Samtani (20:28)
What does Pacino say on any given Sunday? Inches.
Will Krasne (20:32)
Need
are everywhere around us. I coached high school basketball in the off seasons when I played professional baseball.
Hiten Samtani (20:39)
It would be okay to just say you coached high school basketball. Would you need that extra professional baseball thing?
Will Krasne (20:45)
always
and I gave the inch of speech because I just assumed no one had ever heard it and like afterwards one of the kids came up like I was the greatest speech I've ever heard in my life.
Hiten Samtani (20:53)
Inch by inch. Okay. We clearly see the advantages or the perks of going and making this happen. What about from a Wall Street investor standpoint? Why would an investor look at the combined company and say, this is a better prospect?
Will Krasne (21:07)
It's the same reason you'd see in other industries where people do horizontal integration. Look at coal, not a similarly challenged business, because coal is like a depleting asset over time, in multifamily apartments or not. But something that has sort of struggled, and people are looking to get bigger, reduce costs, reduce overhead, and generate returns that way. That's the same type of thing you're seeing here.
Hiten Samtani (21:27)
The sentiment among REIT iBankers is that this is the biggest push towards getting bigger that they've seen since the GFC. Everyone is either looking to find growth capital or gobble up entire portfolios. The most telling quote is what Jonathan Morgan said when the NMHC came out. think they were number two. Jonathan Morgan, who recently took over from dad said, one spot to go. So we're seeing this fetishization, if you will, of size and just getting bigger and bigger and hitting those economies of scale. It's going to be...
Super interesting, but then there's still room for, as we've talked about, hopefully, the sharpshooters, the people with a very, very defined niche strategy who could figure this out.
Will Krasne (22:05)
That's actually why this is such an interesting potential transaction because that's how these companies started.
Hiten Samtani (22:16)
Let's get right into it. one of our obsessions on the promote podcast is this transition of CRE from the Cowboys to the Suits. And man, the progenitors of these two companies are the ultimate Cowboys. We're talking about Sam fucking Zell and Trammell fucking Crow. These are the two biggest G's in the industry. Can you name the CEOs of EQR and AVB right now? Quick. I didn't think so. Exactly. Because they're faceless people. This is the point we're trying to make.
Will Krasne (22:35)
to the Godfathers.
Shit, I don't
Hiten Samtani (22:46)
We went from Sam Zell who, for real, rode motorbikes in the UAE at midnight with the now ruler of Abu Dhabi and Trammell Crowe, legend has it, he would stand up from his desk, take his shoes off and say, I think better lying down and he would just lie down and the meeting would continue around him. We lament for the loss of kings like we used to be a country.
Will Krasne (23:06)
But you see a country.
Hiten Samtani (23:10)
It's that transition from a personality driven business to an institutional suits driven structured finance kind of business.
Will Krasne (23:19)
Let's talk about how these companies have evolved over time. EQR was founded by Zell as part of the equity group because he had equity office. And then had the mobile home park company too. But this started with vintage garden apartments at scale. Famously, Barry and Starwood Capital Group's first fund was almost exclusively apartments post savings loan crisis.
Hiten Samtani (23:25)
properties.
This is the one where the legend is going to the auctions with a bag of cash.
Will Krasne (23:45)
Right. then Ethan Penner financed them with a CNBS loan, one of the earliest CNBS loans. Legend has it here too, is that when he went to sell to Zelle, Zelle tried to retread the deal in the office and Barry with a young Bob Faith by his side left. Yeah. And left the meeting. was like, no deal. And got a call that afternoon from Zelle like, all right, we're good. And that was an effort to beef up. So think Starwood owned something like a third of EQR when they went public and the shares were distributed.
Hiten Samtani (23:58)
about Faith of Graystar.
These are still the guys who are calling the shots in the industry. Bob Faith now runs the number one landlord in the country in Grey Star and by far the biggest property manager as well. It's amazing when we think about the PayPal mafia of real estate, it's these companies, Trammell Crow, Starwood, they've...
Will Krasne (24:29)
Well,
wasn't Starwood, it was J &B. ⁓
Hiten Samtani (24:33)
we should probably do an episode on this whole thing.
Will Krasne (24:35)
Yeah, let's do a J &B episode. But the point being, he started with scrappy, entrepreneurial, kind of shitty garden apartments in the Colorado Springs. And now EQR are the most high-end coastal markets, super high barrier to entry. Avalon Bay, kind of the same thing. This is all an offshoot of Trammell Crow residential, which is one of the most legendary multifamily development shops. You had Lincoln, Hamilton, Avalon Bay, Trans-Western, Vantage, Speaker, offshoots of Trammell Crow, the baby bells, like when they split and then they all kind of come back together.
And we've saw this type of activity before, as you said, in the Great Recession, laymen took Archstone private, Blackstone took EOP private, famously almost lost their shirt.
Hiten Samtani (25:14)
Almost lost their shirts but then turned it into the legendary deal of that cycle.
Will Krasne (25:18)
So that's the last time we saw this type of activity. And this is kind of what it's going to take. We talked about the NBA being a make or miss league. Being a reed is a make or miss league. You're above or below your NAV. And if you're trading below your NAV, it's not a great place to be. And you got to figure something out.
Hiten Samtani (25:39)
Ever been sued by an LP? Brought property management in-house and instantly regretted it? Worked with a lender who then ghosted you?
Will Krasne (25:46)
Not an LP, yes. Also yes. So I've had all three.
Hiten Samtani (25:52)
You've written some great stuff for us about how lonely the life of a GP can be, you have questions and fears about stuff that you can't really post on LinkedIn, and that's where Cohorts comes in.
Will Krasne (26:01)
The pain points of being a GP are so specific and it really helps to have a peer group of people going through the same thing. Imagine getting on a call tomorrow with six other people building real estate companies that have been through what you've been through and get help with the most pressing questions that you have. Hearing it from someone who's been in your shoes is always more impactful.
Hiten Samtani (26:20)
For sure, and the messier personal stuff too, like building a company while raising young kids, that one is too real.
Will Krasne (26:25)
incredibly easy.
Hiten Samtani (26:27)
Your son sleeps through the night, so it's different.
Will Krasne (26:30)
Apply at joincohorts.com. That's joincohorts.com.
Hiten Samtani (26:33)
and tell them the promote sent ya.
How do you want to get into it? man. Should we just start with the abuela?
Will Krasne (26:43)
Poor, poor Abuela.
Hiten Samtani (26:48)
What is going on? So David Martin, who's the CEO of Terra Group, huge in Miami, five million odd square feet, eight billion dollars worth of product, one of the headline names on the Miami condo scene.
Will Krasne (26:59)
the man of the moment. We're recording on the day of Miami F1.
Hiten Samtani (27:03)
Did it get going? I thought it was raining. What is happening here is that a lot of developers we've talked about more broadly are finding a lot of the classic land or sites for redevelopment are all spoken for. So there are a couple of things you can do. Go into a property that has fallen on harder times, or you can go and do a condo buyout, which we've seen all over Surfside, et cetera, as well. This one is particularly interesting. This is a massive resort property, the Doville Beach Resort.
Will Krasne (27:05)
No, it did. did. me one.
former resort property. So it was owned by the Morello family. Unbelievable real estate, but it had fallen on such disrepair that I think it had to be torn down. And this is as good a dev
Hiten Samtani (27:42)
Miami Beach Prime Prime Prime, it's pretty damn good. This is almost four acres. It's serious real-
Will Krasne (27:48)
So Steve Ross apparently had tied it up and tried to buy it for $500 million.
Hiten Samtani (27:53)
Do you want to just run through the particulars of the lawsuit a little?
Will Krasne (27:56)
the land was owned, I think 50-50 by a couple Morello family members. underneath that 25 % was owned by Abuela.
Hiten Samtani (28:06)
Well, a Belinda Morello, 88 year old matriarch of the family owned a 25 % stake and apparently she sold her stake to David Martin for just $12.5 million. There are always these mispriced deals and striking one or two of them can change the destiny of your career.
Will Krasne (28:24)
So, Hatton, I think we're like burying the a little bit. Under what circumstances did she sign this deal? It was at her 88th birthday party.
Hiten Samtani (28:32)
No way. Yeah.
Will Krasne (28:34)
The lawsuit alleges that at her own 88th birthday party, she was lured into a closed door meeting and then, quote, manipulated and tricked into signing away an interest in the oceanfront property, which the family has fought to keep in the family for years.
That's always the question mark is if you're 88 years old and you're signing a deal like this, are you compas mentis? That's a fair question. When you're selling something for 10 X less than it's worth, potentially. It was a Richard Morello. It's always those closest to you.
Hiten Samtani (28:59)
David Martin, who was his Trojan horse?
Martin is accused of enlisting Richard to get access to the family's inner circle a couple years ago. And then Martin learned about Richard's efforts to take over this property and said, I will.
Will Krasne (29:14)
And
why has Berger once told me that I'm as good as it gets I can never make anybody sell. But I can make them sell with me and David Martin can't go convince these guys to sell but he can find someone who wants to sell or wants something different and a lie himself. That's what you do and that's what the best do.
Hiten Samtani (29:31)
You find the little leverage point in any negotiation and you press there.
Will Krasne (29:36)
And that's what he did. He found somebody who wanted to take more control. And he's like, you're right that your family's been not listening to you. You need to do this. I think you're totally smart and are going to have to. Like Logan Roy said about Matson to Kendall and Roman, he rates you. And David Martin, who is a guy who's dealt with really tricky things. He just got two huge amendments done in North Beach and a dev agreement and a settlement agreement that resolved litigation between the city and the property owners. This is a guy who can roll up his shirt sleeves.
and in there, that's what he's done here.
Hiten Samtani (30:07)
Did you read the texts in this lawsuit? We should read it out for the tape. Can you see my screen? Yep.
Will Krasne (30:13)
Can you talk? Can you talk? Can you talk? Hope you're well. Let me know if you want to connect. Just try it yourself. Call me when you can. Can you talk?
Hiten Samtani (30:20)
We have to convince Abuela to go to her memory doctor. She has repeated herself a hundred times to this broker.
Will Krasne (30:26)
Repeating does not mean her memory is bad.
Hiten Samtani (30:29)
Short term yes because she forgets she just said it.
Will Krasne (30:32)
Stop telling her.
Hiten Samtani (30:34)
Pretty intense stuff.
Will Krasne (30:36)
That's like when you go to the doctor and you're like, doctor, my shoulder hurts when I do this. And they just say, don't do that.
Hiten Samtani (30:42)
It illustrates this broader thing of family feuds. Can rest on these things that happened behind closed doors, one family member said to another. Do remember the massive lawsuit that has taken over New York's old Goldman empire?
Will Krasne (30:54)
It's not dissimilar because you have holding companies under holding companies and who controls what and who's the manager and who's the
Hiten Samtani (30:59)
One of the linchpins of that lawsuit, the Soul Goldman lawsuit, is apparently way back in the day when Soul Goldman wanted his wife back. She was threatening to divorce him. ⁓ To win her back, he took a yellow notepad and he just scribbled, you're entitled to one third of my fortune when I die. And apparently this contradicted his official will. So a lot of the battle, is billions of dollars at stake, is over this note that was on this yellow legal notepad. That's how thin the line can be.
Will Krasne (31:09)
my life.
hard too because this is a site where yes it's essentially worth tons and tons of money but for the morello family to develop it themselves they're gonna need billions of dollars
Hiten Samtani (31:38)
It's impossible for them to do it. No one's going to give them the financing. They don't have the know-how to turn it into what it needs to be.
Will Krasne (31:44)
So someone like this has to get brought in because the other thing about a landslide is that it ain't generating any money. These guys are really wealthy. They're really house rich.
Hiten Samtani (31:51)
The
other twist about this is this might be a rogue lawsuit. One of the attorneys who claims to represent Belinda and the Doval Associates that filed this lawsuit said that it was filed by two granddaughters who went rogue. And this has shades of the incredible Donald Bren statement. This is what the lawyer said. She was very disappointed in her granddaughters.
Will Krasne (32:12)
She's not mad, she's just disappointed. We just talked about how the cowboys have turned into the suits over at Avalon Bay and Equity Residential. David Martin, still a bit of a cowboy because this is how it's done.
Hiten Samtani (32:23)
Remember
when we talked about Ray Washburn and how he heard that this potentially life-changing transaction would happen at the restaurant? How does someone like David Martin get the intel that there is some dissension within the family ranks? You've got to put yourself in position to be able to act on these kinds of things. how do you suppose he heard about this in the first place? Did he have molds in the Doval Resort or something?
Will Krasne (32:45)
Real estate, again, what's great about it is you can do anything. You can get the other guy to agree to it. And you can insider trade. If you're really trying to be successful, especially in this, because he's competing against Steve Ross. He's competing against the biggest guy. You have to be ruthless. You have as big a network as possible. You can get as much information as possible, because you never know what one piece of information can mean if it clicks into place with the rest of the mosaic you've created. All of these guys, too, they know the sites.
It's like how and when are they gonna become available? And so when it's on, it's a feeding frenzy. You always try to be first by having more information than the next guy. As distasteful potentially may be, taking advantage of an old lady who may or may not be able to remember things, this is how high stakes development goes, especially when you've got legacy sites with families that have owned them forever and that have real potential skeletons in those closets.
Hiten Samtani (33:37)
This is
Will Krasne (33:40)
is the business we've chosen.
Hiten Samtani (33:50)
That's it for the Promote Podcast this week. Two mighty multifamily reeds are weighing a marriage for the ages. Will the antitrust folks and politicians speak now or forever hold their silence? And an explosive lawsuit in Miami Beach highlights how family feuds can shape the fate of real estate
Will Krasne (34:05)
We'll be back next week with more CRE insider goodness. Thank you again to our sponsors.
Hiten Samtani (34:09)
Pentsford, the interest rate people who you can find at pentsford.com.
Will Krasne (34:13)
Bravo Capital, a leading HUD and Burgelander? Find them at bravocapital.com.
Hiten Samtani (34:17)
Your go-to peer group of GPs, can check them out at joincohorts.com.
Will Krasne (34:22)
And DealNav, a map for CRM and deal tracking tool, deal-nav.com. Our swag store is at thepromote.store. Hoodies, hats, tees, upper grabs. We're selling pictures of my feet. You never know.
Hiten Samtani (34:34)
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Will Krasne (34:37)
Honestly, when we started this podcast, I couldn't imagine us having one sponsor and then having to read off of that many, including our own merch store. Dream come true.
Hiten Samtani (34:44)
pretty great. I'll see you next week, Will. Thank you. Ciao.
Will Krasne (34:47)
Thank you.