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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 (00:03)
Affordable housing is perhaps the biggest knife fight in CRE unless your former partner did the following.
Will Krasne (00:10)
Faked wire transfer codes.
Hiten Samtani (00:14)
hired people to fake Korean accents.
Will Krasne (00:17)
hosted private omakase dinners at his, or not his, Hampton's mansion. And you know what? I bet he used a lot of soy sauce, which just ruins the art.
Hiten Samtani (00:26)
Short up on investment grade wine and gold bullion. Hopscotch money between accounts to avoid credit.
Will Krasne (00:29)
threatened his father-in-law.
camped out in a $150,000 a month Miami Beach rental after losing the Hamptons crib.
Hiten Samtani (00:38)
claimed he's got just $50 to his name.
Will Krasne (00:41)
After all that, bring on those distressed hotel conversions.
Hiten Samtani (00:55)
Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani
Will Krasne (01:01)
and I'm Will Krasne.
Hiten Samtani (01:05)
Shout out to our sponsors for this episode, Bravo Capital, which was one of the market's leading HUD and bridge lenders.
Will Krasne (01:10)
and LoanBoss, which is a best-in-class CRE debt management software.
Hiten Samtani (01:15)
This week we discuss second acts. Ziel Feldman has left the scandal ridden past of his glitzy New York condo development firm behind, and he's reinvented himself as an affordable housing player. And PropTech's loudest voice is now yelling into the fundraising void.
So we've been asked by a few listeners to give a little bit more context about us. For those who came in late, I'm Hiten. I am the founder and publisher of ten31 Media and the publisher of The Promote. I started this after a long, long stint at the real deal. I wanted to create something way more insider, way more nuanced for you guys.
Will Krasne (01:50)
And I'm Will Krasne. I'm a former professional baseball player, current actor. They defined me on season four of Succession, the last season of Billions.
Hiten Samtani (01:58)
profile is it like it's just the schnoz or the side.
Will Krasne (02:00)
profile, the left side, they got my good side. And I am a GP focused on multifamily and industrial acquisitions in the Mid-Atlantic and I previously worked at two large private equity firms.
Hiten Samtani (02:12)
Do remember what you said in the very first episode when you introduced yourself? This is the Promote Podcast from ten31 media. I'm Hiten Samtani founder of ten31
Will Krasne (02:21)
And I'm Will Krasne, who you've never heard of.
Hiten Samtani (02:23)
Well, that's gonna change very soon and I promised the audience that that was gonna change very soon and it totally has
Will Krasne (02:30)
But guess we are number 52 in Israel, so there you go. They know me in Tel Aviv. Let's kick things off with a News Bolton.
Before that, if you haven't already and you're a fan, hit pause and go write us a review on Apple or Spotify.
Hiten Samtani (02:46)
Seriously, it's time to deploy that dry powder of goodwill that we've built up. You gotta tell other people why you love us so more people can love us.
Will Krasne (02:53)
We've actually returned capital unlike most sponsors, so you have dry powder.
Hiten Samtani (03:00)
Let's start with the news. S2, the REAP, do you remember this vehicle? It was very interesting when it came up. Scott Everett's S2, big syndicator in the space, had created this private REAP to kind of absorb about 10,000 of his units in the Sunbelt. And the idea was you're essentially buying yourself time. You're able to create a structure that allows you to get more agency debt and hold onto these assets a little bit longer. Cause you remember, everyone, Alan Stalacov, Tides, Rise, everyone's losing assets left and right at this point.
Will Krasne (03:29)
We've given Scott Kudos one they've been on the acquisition front. They've been able to raise more capital. They just bought large acquisition in Chicago, which we talked about a couple of weeks ago. But this vehicle give him credit because they kept their assets. Some LPs may not have been thrilled. Sounds like they weren't. But at the same time, what did Bill Zeichendorf say? You'd rather be dead at 18 percent than alive at the prime rate? No, it's the other way around.
Hiten Samtani (03:51)
But it turns out the clock's ticking on this too. So S2 in comms that we saw very recently told investors that they basically need to raise about 70 million dollars in prep.
Will Krasne (04:02)
and they're promising 18 % on that pref and they under wrote like a 30 something IRR on it. If you invest in basically they were walking you down the plank a little bit by saying that if they didn't get this, they're going to have to sell stuff at a five and a half cap, which wipes 60 to 75 % of their equity, which.
Hiten Samtani (04:21)
Everyone was losing assets left and right. He managed to this vehicle, very novel structure to keep him in the game a little longer, but let's see if he can pull it off.
Will Krasne (04:29)
This is not a great outcome, but you give him credit because he's alive. And that's really hard. There's a lot of people who aren't. This is the hard decisions you have to make.
Hiten Samtani (04:36)
When Ray Liotta ⁓
Will Krasne (04:39)
bad time. Yeah hopefully he didn't flush the operating counter in the toilet and that was all that we had! ⁓
Hiten Samtani (04:45)
Alright, the next one, billionaire and I'm making massive air quotes here and so is Will. Charles Cohen had a pretty rough week again. 750 Lex, one of his legacy office towers went back to the lender.
Will Krasne (04:56)
where his office is. Yeah.
Hiten Samtani (04:58)
is that right?
Damn. Shout out to our guys at Traded who had one of my favorite. It's so brutal. They had a photo of Charles Cohen, 750 likes, and the price tag was $1,000, which is what the US bank took it back for.
Will Krasne (05:15)
Was it Charlie Murphy or Dave Chappelle? He's like, that was cold blood!
Hiten Samtani (05:20)
So this is not all that Charles Cohn is facing right now.
Will Krasne (05:23)
No, he's got a hundred and what?
Hiten Samtani (05:25)
87. 187, which is, believe, the police code for, you know what, $187 million in personal guarantees.
Will Krasne (05:35)
He's been trying to sell off assets. He's been asking for more time. Fortress is not having it. They're basically saying you're not fit to sell your own assets because you're not getting the prices that you should be. He had one to Vornado, which was like 40 million less than he promised Fortress. What the hell's going on here? And gives this back to Lender. So this is not great.
Hiten Samtani (05:55)
Next one, Cirrus Tower which is what I always call it but it's now known as Willis Tower.
Will Krasne (05:59)
So Blackstone paid $1.3 billion for this tower 12 years ago, sunk $600 million in the renovations. It now has $1.3 billion with the debt. And I will tell you that that is the best debt that money can buy because Blackstone has worked their ass off on this to make no money. And they have approached a few buyers about this to see if there's anyone willing to assume it. Even the best fall down sometimes. Like this is one where 12, 13 years ago when this got done, this is...
one of the iconic assets in North America. And right now it's just another beleaguered office tower. Albeit it does have the sky deck. And part of the issue with getting the assumption done here is that there's a lot of differences in opinions of value. The BOVs? To that sky deck. It's the same thing, yeah. It's the same thing with Empire State Realty Trust where you're seeing the Empire State Building. How do you cap the office NOI versus the observatory NOI? And I think there's some issues here with that as well because it's a big chunk of the building's value.
Hiten Samtani (06:58)
Couple things I want to note here. So Blackstone bought it whenever they bought it a dozen years ago from a pretty interesting seller trio, some of our guys.
Will Krasne (07:05)
boy, the girthy lads.
Hiten Samtani (07:07)
The Brother's Chit-Treat, Joseph Moynian of the Moynian Group out in New York and Yisroel Gluck. So pretty interesting triumvirate who sold it to Blackstone. They did pretty well.
Will Krasne (07:18)
They did quite well. Can you imagine those partnership meetings?
Hiten Samtani (07:22)
Incredible. Absolutely amazing. Has Blackstone made any of their standard offices less than 2 % of our portfolio?
Will Krasne (07:28)
did not see that in the article highlighting this, again, just so everyone knows, offices 2 % of Blackstone's portfolio.
Hiten Samtani (07:36)
That's right. All right, last one. This is why this guy's one of the goats. I read the headline on Friday. I didn't read the story yet. I said, good on Michael. Today, while preparing for this, I saw the size of the deal. So what the hell are we talking about?
Will Krasne (07:52)
So $300 per square foot is rarefied error for office leases. We're talking like Mark Holliday, top of one Vanderbilt. There's another landlord who's chiseled his name in stone in that club and it's Michael Schvoo.
Hiten Samtani (07:59)
top premium New York City.
Listeners will remember a special episode where we looked at our guy. We were wearing black V's at the time. Schwoz had a lot of trouble. His biggest investor, BVK, which is a German pension fund, made a big bet on him through Deutsche Finanzamerika. A lot of that, I'd say, it's gone sideways at best, but he had a nice win here. It was a $300 a foot lease at the Transamerika pyramid, one of SF's most iconic towers.
Will Krasne (08:33)
The only bad thing about this lease is it was for 4,000 square feet in Hiten. How big is the building?
Hiten Samtani (08:38)
1.6 million square feet?
Will Krasne (08:40)
So how much is left? And to be fair, Morgan Lewis signed a big lease at a huge number. They're having good leases at this building. We like to have fun here, but it is just tremendous that this is leading everything when it's 4,000 square feet in a 1.6 million square foot building.
Hiten Samtani (08:55)
when it's time to Shvoh. You just Shvoh, that's, that's you don't ask questions.
Will Krasne (09:00)
Hold on, I have to answer one of my nine cell phones right now.
Hiten Samtani (09:10)
Alright, I'm here with Aaron Krovitz from Bravo Capital. Aaron, let's get right to it. What's the story behind this mythical 100 % HUD approval record?
Will Krasne (09:18)
Pretty straightforward. We have an amazing team. We're pure play HUD. We're focused on bridge to HUD all day. We're both fully HUD licensed and we also offer a balance sheet bridge financing where we can finance deals over $100 million just like we did in Miami, Brooklyn and Jersey City.
Hiten Samtani (09:34)
And what's the secret sauce? How do you put it all together? ⁓
Will Krasne (09:37)
This
is our underwriting. We don't rush deals to market and hope they stick. We know what HUD wants before we submit so there are no surprises and we have a real balance sheet so when we go, we go.
Hiten Samtani (09:46)
You were telling me when we were chatting offline that you closed a HUD Express Lane deal in four days? That's absurdly fast for HUD.
Will Krasne (09:53)
Hit 10, that's why we get up in the morning. At Bravo, we're here to break records, we're here to innovate, and when you have tight documentation, the right underwriting, that means speedy approvals.
Hiten Samtani (10:03)
and speed means the sponsor can close quick. Thanks Aaron, good to have you on. Thanks Hattem.
Will Krasne (10:06)
and you can find us at bravocapital.com.
Hiten Samtani (10:14)
We both love a comeback story. We both love a story of someone getting knocked down but not knocked out and coming back to fight again.
Will Krasne (10:21)
I mean, you're a better person than me. like a story of someone getting knocked down in spectacular fashion.
Hiten Samtani (10:26)
So we're talking about former New York City alpha dog, Ziel Feldman, formerly of HFC Capital Group. They took on some of the most ambitious projects in New York. They paid a pretty penny for them and things went pretty damn south during COVID. So we thought we should talk about this because Ziel's back, baby.
Will Krasne (10:42)
So Ziel famously was partnered with Kevin Maloney from PMG and Gary Barnett back in early 90s running around trying to do deals.
Hiten Samtani (10:51)
There's a famous little line about them like sitting in a like with plastic tables, cobbling stuff together. They made a run at the bellnort even back then and it's funny because Ziel picked it up 20 years later again.
Will Krasne (11:01)
They paid like 18 million for it and 20 years later, he paid 500 million for it or something crazy. But Ziel was really one of those guys, the mid 2010s when it was Asian capital flowing into New York, like there was no tomorrow, across hotels, condos, everything. Everyone was going bigger, taller. 57th Street became its own market billionaires row. Ziel was like one of the guys. It was like him, Gary Barnett, Michael Stern. And he was really the guy who would pay insane prices, high octane leverage, nebulous capital.
Hiten Samtani (11:30)
EB5 financing, foreign investors with a bit of a triggered past. Xeel encapsulated that part of the Manhattan development game.
Will Krasne (11:37)
I remember reading the Reel Deal article when he closed on the land for what is now one highline. Didn't he pay like a thousand dollars a foot or something? Insane.
Hiten Samtani (11:45)
Did you watch my interview with Ziel at the time? There's so much tension in the air. My floppy hair all over the place and I'm in a shiny blue suit and I say, you know, that's a pretty ballsy purchase because he paid close to $1,100 a foot. This is the far west side, far west Chelsea. This was not glamorous at the time. And he paid $870 million to Edison properties. It's a high price per foot, but it's just a fucking high price overall.
Will Krasne (12:08)
So Ziel mid 2010s can do no wrong.
Hiten Samtani (12:12)
Unlike Gary and stuff who were basically building ground up 57th Street, defining new markets, what Ziel was doing, you could see why it was a pretty good play, was taking iconic New York properties, the Bell Nord, the Chatsworth, the Astor, creme de la creme co-ops in New York and converting them to condos. That was one of his big plays along with ground up condo.
Will Krasne (12:32)
And then what happened is the firm imploded. His second in command went to prison, not quietly. And we are gonna have a lot more to say about that in a second, but Ziel had to sell his beautiful mansion in Englewood Cliffs. And presumably as Bill Simmons would say, he was in a different phase of his career.
Hiten Samtani (12:53)
He receded from the limelight and he kind of went away. He was never implicated in any wrongdoing.
Will Krasne (12:58)
But someone was implicated in a whole lot of wrongdoing and that was near-mir. ⁓
Hiten Samtani (13:02)
So where do we start with near-mare that I was trying to explain near to a non-real estate guy and I said something to the effect of Take Adam Sandler's character and uncut gems, right? Dial up the sketch and maybe you get close to a guy like near-mare incredible tenacity Incredible hustle is the Israeli kid not too much education thick accent not the most pleasing to look at shows up and just In the span of five years becomes kind of the most prolific
fundraiser and becomes Ziel Feldman's right-hand man to the point where Ziel essentially took his hand off the steering wheel and Nir was driving that machine for a long time.
Will Krasne (13:41)
He was indeed raised a metric fuck ton of money, I think is the... But then when things went awry, basically had no moral compass and was not just like, there's gray areas for all of this stuff. There's firms, they pay distributions off the sub line or over rate, like whatever. Those are things that happen. Don't fake wire transfer codes. They don't hire people to like fake Korean accents.
Hiten Samtani (13:47)
technical term. Yeah.
for the course.
My favorite one, as we've talked a lot on this podcast, momentum. You've got to keep the flow of money going to create that illusion that everything is okay. As long as the money's flowing, all sins are forgiven in commercial real estate, especially in ground up development where that's really the name of the game is to kind of stay flush until you can actually sell your stuff. So at some point the spigot was running dry and Mayer said that he had found a new investor or Korean investor. What he had found was an actor.
who could do a very nice impersonation of a great investor.
Will Krasne (14:40)
That is literally a plot in an episode of Party Down.
Hiten Samtani (14:45)
Unbelievable stuff. The walls are closing in on this guy. One of the most bizarre things I've ever read. CIM was owed money by HFC and they're going back and forth within the air and saying, where's the money? Where's the money? Where's the money? he sends them the wire transfer confirmation code, which turned out to be fake. Kind of stuff you don't see at this level of the game typically.
Will Krasne (15:08)
No, this is the stuff that those little Ponzi schemes for like wealth building or passive income, not for the 11. Exactly. Or the Belnord or the Chadsworth. Just crazy. And then when all this goes down, you might think, okay, let's like bunker down, really try to make sure we can fight our way through it. No. Yeah. It goes the other way. I live my life a quarter mile.
Hiten Samtani (15:29)
time.
camps out in a $150,000 a month Miami Beach rental. He's going to ZZ's club. He's just living hard in Miami.
Will Krasne (15:42)
Spending hundreds of thousands of dollars a month on wine, believe.
Hiten Samtani (15:45)
All right,
it's investment grade wine.
Will Krasne (15:47)
Investment grade wine, sorry. ⁓
Hiten Samtani (15:49)
Like
any great alleged criminal, he was stacking up on gold bullion as well, which is like straight out of some James Bond movie, I love it.
He's awaiting trial. spent about a year in Rikers and now he's, I think he's on conditional release. This is one of the largest development related fraud schemes in recent New York memory. There's been contractors that have been implicated, GCs.
Will Krasne (16:12)
yeah, HFC, there was a huge kickback scheme where people were getting decks put on their house in exchange for approving contracts.
Hiten Samtani (16:20)
the firm actually pleaded guilty to grand larceny and tax fraud as well.
Will Krasne (16:23)
So the 11, which was their signature project, which is hit 10, said he $870 million for, ended up going to Witcoff and Access Properties. They took it over mid-construction, and I think they've done really well.
Hiten Samtani (16:37)
One nugget, think, to encapsulate just how go-go Manhattan development can be in the near mayor heyday. I went to the sales launch of this thing. went to the 11 sales launch. I'm a whiskey guy. They had McAllen 25 on tap.
Will Krasne (16:52)
You know it's good when Hiten pulls out a, went to the launch party for this. I think he's like done that twice. It's both an excellent.
Hiten Samtani (17:01)
And reason we're painting this picture is because now Feldman has essentially gone the opposite end of the spectrum in CRE when it comes to glamour quotient.
Will Krasne (17:09)
This is like when a heroin addict like finds a religion and becomes a priest. Exactly.
Hiten Samtani (17:14)
So what is he doing? The Promote recently learned that Ziel Feldman is a silent partner in a company called Good Homes, which is an affordable housing developer, national focus, and their buy box is essentially extended stays, distressed hotels, and medical facilities.
Will Krasne (17:29)
They're focused on converting those into multifamily, which are targeted at folks making 60 to 120 percent VMI.
Hiten Samtani (17:37)
You've got the capital A affordable housing, is section eight, light tech, et cetera. And then you've got what is known as NOAA, which is naturally occurring affordable housing or workforce housing. This is the latter strategy here.
Will Krasne (17:49)
Right. And so when we talk about 60 to 120 % of AMI, that's important for permanent financing because through Freddie and Fannie, they focus on mission driven housing, which means is it affordable to folks making 80 % of AMI or less? And so you can get significant breaks in your rate if you're catering to those types of tenants. So that's a very, very crucial designation.
Hiten Samtani (18:13)
The reason a lot of these stay in the pocket is that the units that you convert here, you look at the unit mix of Good Homes, which has now close to 3,000 units in its portfolio. They're primarily studios and one beds.
Will Krasne (18:25)
It's important because those units are cheaper. When you qualify for being affordable for AMI, it doesn't factor in score footage. It's just what's the street rent. So the smaller the unit, the more affordable.
Hiten Samtani (18:38)
The other part of this game that's really important is as we've talked about one of our pet topics is tax breaks and other kinds of public financing. Totally. So good homes applied for tax exempt bonds rhymes a little bit. Remember our coverage on the traveling HFC PFC game in Texas? It rhymes a little bit with that. You team up with the public authority, which are these nebulous state and local bodies. You basically create a JV structure and then you're able to apply for this tax exempt financing.
Will Krasne (18:46)
There's some schemes involved here too.
Though this is a little bit different because again, are providing, albeit very small units that are affordable to folks making 60 to 120 % of AMI. So it isn't not having to do anything. They do have to self restrict a little bit to qualify for these. ⁓
Hiten Samtani (19:24)
little
interesting wrinkle here, not in Good Home's case, in many cases, do you know what a lure is? Yeah. In many cases, you can self attest. You can basically, I saw one from a Good Home's competitor, which is basically saying, I pledge to keep this affordable. And you're just pledging to yourself. You're talking to yourself in a room. That's it.
Will Krasne (19:43)
I do that all the time, so right up my alley.
Hiten Samtani (19:45)
Just to be clear, Zeele Feldman's name is not on any of the public documents, is not on any of the deeds.
Will Krasne (19:52)
The Feldman name is on many of the documents.
Hiten Samtani (19:55)
So one of the build co-founders is Layla Rosenberg. Layla Rosenberg, Nay Feldman, is Ziel's daughter. Adam Feldman, Ziel's son, his name's on all the docs, et cetera. And then they've also put a lot of the HFC band back together. Their head of construction was a long time, I think a decade plus at HFC. And they have another construction super who was also an HFC guy.
Will Krasne (20:16)
They had lot of success. You know, got a couple of bad apples, you throw them out there in Rikers and you don't have to worry about it. Local governments are just dying for affordable housing. And this is really a topical strategy because it allows you to ride the coattails of the national housing crisis and go and say, look, we're going to provide these things and we're actually going to like self restrict or commit to self restricting or test to it in a room by ourselves in exchange for these property tax abatements.
And that's going to help us make our return and you're going to get affordable units. So it is something that is of the moment in the zeitgeist and it is the exact opposite of how Zio Feldman made his name in real estate.
Hiten Samtani (20:57)
Isn't it amazing? When Zille Feldman was playing his game at the highest level, he was like a central character in this universe, Press all over the place from the big mainstream dailies to all over the trade publications. He was a celebrity. You go from that to being... Have you seen the Good Homes website? It looks like it was designed on GeoCities or something. It's like old school fall...
Will Krasne (21:17)
That's perfect. You don't want any of this here. If you're an affordable housing developer, like you don't want anyone to know who you are. You don't want any of this.
Hiten Samtani (21:35)
So, Will, you violate any dead covenants recently?
Will Krasne (21:38)
So funny you should ask. I have been in technical default recently. I mean, who among us? Right. But not since Q4. Ooh. And that's not because I paid off the loans, because that's when I started using Loan Boss.
Hiten Samtani (21:51)
I can't believe how old school some of our listeners are. They're still crunching DSCRs in Excel and all that.
Will Krasne (21:56)
Total waste of time, risky business to boot. Loan Boss runs the entire process for me. One click covenant testing, incredible. Instant cashflow forecasting, impeccable. And my favorite nerdy delight, the live forward curve. So I hate having to go download the forward curve and then it's always vertical and you gotta alt HVT to have it go horizontal. Make sure the index match works, like ridiculous. ⁓
Hiten Samtani (22:20)
It just got it sorted here for-
Will Krasne (22:22)
Much better. So thank you, Lone Boss.
Hiten Samtani (22:25)
Listeners, check them out at loneboss.com. That's loneboss.com. And tell them the promo sent you.
What is PropTech, Will?
Will Krasne (22:40)
man, that's a question that a lot of people have been asking. So, PropTech is, of course, property technology, which is a little bit anachronistic because properties often are really not receptive to technology. And technology can actually be a roadblock in you generating returns.
Hiten Samtani (22:42)
Well, peace of been asking.
Yeah
What are we talking about here? So Fifth Wall Ventures, is one of the largest and definitely most vocal VCs in the PropTech game has halted fundraising, which is a big deal. Incredibly prolific fundraiser. They had about $3 billion in AUM. They have raised the largest PropTech fund in history, which is $866 million. They were in the midst of raising another $500 million fund and boom, they had a wall.
Will Krasne (23:25)
They really did.
It's important to just talk a little bit about how we got here with the wall and really like the product sector. So real estate, again, it's the largest asset class in the world. technology and VCs have been coming to tell real estate how to do its job and how they can do it better for a long, long time.
Hiten Samtani (23:47)
long time. Yeah.
You and I could probably recite the pitch from memory, right? Largest asset class in the world, biggest potential TAM in the world, historically a laggard in technology. You'll hear all these phrases kind rec-
Will Krasne (24:00)
Exactly. And here come the tech bros who are going to help you generate more returns in real estate.
Hiten Samtani (24:07)
They're going to speak of thesis driven bets. They're going to speak of innovation in the space. They're going to speak of omni-channel. They're going to say all that.
Will Krasne (24:15)
Moving the customer experience, helping the landlord get higher satisfaction score.
Hiten Samtani (24:21)
and improving the planet.
Will Krasne (24:23)
of course, yes, you have to improve the planet. I don't want to live in a world where someone makes the world a better place than we make it.
Hiten Samtani (24:30)
God
forbid.
Will Krasne (24:35)
⁓ Fifth wall was founded by Brennan Wallace and Brad Grierie. Brad was like one of the junior guys like in the founding of invitation homes.
Hiten Samtani (24:44)
today's the largest SFR operator in the country.
Will Krasne (24:47)
And Brendan had been at a couple startups, incredibly well credentialed. And these are like young, good looking guys who had a really compelling pitch, which is basically, we are going to find the best product that's, we are going to have our LPs be the biggest real estate firms in the country. So if we're pitching you the founder, we can help you with distribution because all the guys you're going to sell through are our LPs. And on the LP side, they're basically saying, hey, we're going to go find all the best people who are going to help you generate returns.
So give us a bunch of money and then in return you're gonna help us.
Hiten Samtani (25:17)
It's a very innovative, like, we are the middlemen. Back to our office space example, we can talk to both the bricks and the bites. I have people skills. Right? That's basically what they were saying. And they stacked the deck in their favor by having your property management startup. You want to talk to Cushman Wakefield? They're an LP. That was the pitch.
Will Krasne (25:34)
They raised a ton of money over a bunch of funds and at one point have like pretty serious mark to market. They were huge in the SPAC.
Hiten Samtani (25:44)
my god, they were all over it. They sponsored the smart rent spa-
Will Krasne (25:46)
They sponsored a parking spack. They were the investor in DOMA, Hippo, Bland, Opendoor, Industrius, lot of stuff.
Hiten Samtani (25:49)
Correct. Yes.
Not
only were they the investor Brendan's kind of special sauce was was they were the most vocal investor They were everywhere. They were creating this media buzz the run of press they got from let's say 2018 to 2022 is Hall of Fame or the like every major outlet just sitting down with everyone working reporters just incredible momentum built around the narrative
Will Krasne (26:18)
that says it all is that they're $3 billion from not nothing. it's not Citadel. Friggin Axios reported that they stopped fundraising. What's crazy is like I'm on the fifth wall distribution list and I got an email on Friday when this got announced highlighting a bunch of good stuff that had happened. And was like, did anything else happen this week? But I think it's important to also talk about the investments haven't necessarily turned out that great. I think Brendan especially is the emblematic person for a certain type of real estate adjacent.
investor, operator, what have you. Incredibly charismatic.
Hiten Samtani (26:50)
Honestly, one of the best salesmen I've ever met.
Will Krasne (26:53)
problem though is that again, like real estate at the end of the day is like a very, very simple business and it's really hard to disrupt because of how simple it is. And so all of these things that get added on the top, they're costs. The landlord has to pay for it. And I think the thing that's gotten missed with PropTech is that real estate is a shitty business. is super capital intensive, margins are not great, really low return on equity. And so every dollar that you're spending on Domo, whatever that is, or Hippo,
Hiten Samtani (27:22)
Smart locks, whatever. ⁓
Will Krasne (27:23)
Any
of these things that you have to get significant dollars back and in a lot of cases you don't like even think about something like latch, right? That's a great idea as a consumer. It makes a ton of sense. I lost my keys all the time
Hiten Samtani (27:36)
You know what else Slatch lost? Their financial statements.
Will Krasne (27:38)
No.
But that's exactly my point. If you're a renter not in a gateway market, I remember talking to a large property manager about this. like, what do you think of stuff like latch? And like, latch is great. I would love to use it personally. I'm like, are you going to roll it out? I just laughed. I'm like, hell no. Are you serious? Like you think anyone's going to pay for that at a 1980s garden complex? Cost me five bucks a month. Am I going to get five bucks a month in rent because of that? No, of course not. And that's the case with a lot of these products. It isn't about flash, isn't about huge rounds. It's about getting Joey bag of donuts to buy your product.
And the way to do that isn't an amazing customer UI, colors, a fucking exploding thing when you turn your key in the door. It's to make Joey bag of donuts more money. none of
Hiten Samtani (28:24)
So either increase his income or shave his cost. That's it. That's all that matters.
Will Krasne (28:29)
more than what it costs to buy the thing. What did Logan Royce say? There's this fancy new business theory. It's called make more than you spend than you cunt. A lot of these things couldn't do that.
Hiten Samtani (28:37)
King.
The is that the reality of the real estate business, which you've just so eloquently fleshed out, is meeting the reality of the VC game and the fundraising business, which is all about the hype, creating the mirage, creating the momentum, all of that. Fifth Wallet is the poster child of this. They popularized PropTech. Obviously it had been around for a while, but they got to give them a bit of credit for creating it as a broad category. They were very much in the thick of that.
When climate investing became hot, because remember the whole thing about stranded assets and you know, your tenants, your investors, everyone's going to ask for this, blah, blah, blah, blah, blah. They were right in front of that. remember Brendan very tellingly changed his bio on Twitter at one point when the climate thing was at its apogee investing in climate optimism was his bio. And they raised a $500 million fund off of that. Think of the management fees on that pretty good.
Will Krasne (29:31)
And he really tried to build this into a one-stop shop. They were trying to be a broker dealer. They hired a very fancy senior guy. Jeremy Fox. To come in and lead that. And they were all over the metaverse.
Hiten Samtani (29:42)
that they have a lot of shades of A16Z, right? The one stop shop for tech, is A16Z's whole cradle to grave thing with every suite of services you could ask for. Fifth Wall was trying to create that.
Will Krasne (29:52)
That's a great comparison, but it's just much more difficult because you can't have sort of the super right tail outcomes on the product side. Like industrious sold for. It's like, yeah. And like, that's one of the biggest outcomes in pro tech history. Breck sold for 5 billion and people are like bitching about it on Twitter. And the other thing, speaking of like momentum is that industrious when they sold in early 25 and fifth wall was like, were the first big believers. were actually in the series C.
Hiten Samtani (30:02)
What? 800 million.
Will Krasne (30:22)
they tried to raise this new fund around that momentum from industrious. And again, like CBRE already owns.
Hiten Samtani (30:29)
They own a chunk of it already, yes.
Will Krasne (30:31)
So it wasn't like they were just coming out of the blue. They're buying the rest of it. Now I will say great name for this fund. Fifth wall react. Really like that. Pretty good.
Hiten Samtani (30:41)
Well, it's available now. They're not raising, so go for it.
Will Krasne (30:43)
Yeah, but they only raised 130 of a target of 500 and it's really telling that they weren't in the market for that long. So the reaction must have been really severe to not keep going. think a lot of people are saying like, where's the DPI? A lot of these things went public by SPAC at big valuations, but there's lockups. That stuff goes down. Like if you're a Figma insider, you're living that in real time.
Hiten Samtani (30:54)
say a little bit more about that.
for the record, Doma, Hippo, Bland, Opendoor. Opendoor became a meme stock and broke out of that universe for a bit, but they were down 85%, 90%, 95%. Smart rent was at risk of being delisted, but hemorrhaged money for investors.
Will Krasne (31:24)
LPs are probably saying, where's the DPI? We've been saying that across the real estate space for years and fundraising has been difficult and a lot of big funds that people recognize are like having trouble raising money. so especially something like this, where if you're so public, you live by the sword and die by the sword, in this case, they might've been foisted by his own petard.
Hiten Samtani (31:42)
Well, one of them was very public. The other one was very much in the background. So Brad left kind of without any fanfare. He went to run Quartera, which was Lenar's property arm and now is part of TPG, I believe.
Will Krasne (31:55)
TPG bottom. good for Brad, going back to his roots. What does Brendan do next?
Hiten Samtani (32:01)
What does it mean practically if you're not fundraising anymore?
Will Krasne (32:05)
I mean, you got to work through your existing portfolio. So it's helping the stuff that you've invested. There was a famous story, I think about Sequoia, I want to say in the tech bubble where they just decided to not raise another fund because they're vintage into the tech bubble was in real trouble. And they worked for like five years. Nick famously like didn't take management fees. There was no carry. Didn't have to worry about that. But they just like sat there and worked their asses off to make a one one for people.
Hiten Samtani (32:19)
Yeah, those partners just kind of hunkered down.
Now I suspect that's not going to be the case here.
Will Krasne (32:32)
I probably not because I think those businesses were probably fundamentally better. The ones here are a little bit more troubled, but not fundraising right now is probably the right thing to do. Go out there, buckle down, like fight for every dollar. There's no shame going out in your store. Yeah. People will be mad if you lose that money, but if you fight your ass off and you get them back 75 cents on every dollar they put in when it like easily could have been like 30 people build real firms around that type of thing, because that shows character when you're really out there working for free. I remember when I was at Carlisle, one of our operating partners was
way out of the promote on this huge portfolio and they were just working their asses off and that just like sticks with people and that firms enormous today. What you do when things are hard, it's really easy to be on LinkedIn, be on Instagram, flying all over, posting about your wins, all these things when rates are getting cut and things are going to the moon. It is really hard to sit there and make no money and just work and stare at it.
for two years, three years, four years, five years. If you can do that though, and get people back more than they would have gotten with an average effort, people remember that and you can build a firm.
Hiten Samtani (33:50)
That's it for the Promote Podcast this week. Whatever you do in life, you've got to attack it with full zeal. Even if you move from sexy condos to unsexy rundown hotels. And PropTech is a category in the crosshairs, with its most recognized investor under the cosh.
Will Krasne (34:06)
A shout out again to our sponsors, Bravo Capital and Lone Boss.
Hiten Samtani (34:10)
You can find them at BravoCapital.com and LoneBoss.com.
Will Krasne (34:13)
We'll be back next week with more CRE inside our goodness. And remember, right as to review on Apple or Spotify, we will shout out the tastiest ones on air.
Hiten Samtani (34:20)
then she promised to do a dramatic reading as well.
Will Krasne (34:23)
yeah, I'm like Ron Burgundy, if you write it, I'll read it.
Hiten Samtani (34:25)
Alright dude, I'll see you next week. Thank you. Ciao ⁓
Will Krasne (34:27)
Thank you.