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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)
Will and I are both rocking black muscle tees tonight.
kind of guess who we're about to talk about.
Will Krasne (00:10)
There's just no business like Shvo business.
Hiten Samtani (00:16)
Welcome back to the Promote Podcast, your insider guide to the money and mania of the CRE markets. I'm Hiten Samtani Here's what's on tap this week. Grey Star struck a settlement deal with the DOJ in the real-page antitrust saga. Now, this has massive implications for the multifamily market and its use of algorithms and technology. And then we dive into the singular life and multiple dramas of Michael Shvo the impresario that somehow managed to convince Zizhamen's Zizhamen's? To give him more than $700 million.
Will Krasne (00:22)
Will Krasne
Hiten Samtani (00:46)
for Skyline altering bets. A decision they've probably come to regret since then.
Well, should we start on the hallowed halls of the RFK building? All right. So this is a massive legal case that's been going on for now. It started with the Biden administration. It's bled into the Trump administration. And it's basically this giant antitrust case brought by the DOJ against some of the biggest landlords in the country, Grey Star, Camden, Cortland, et cetera. And what they basically alleged is that by using a software called RealPage, which is pretty standard across the industry,
Will Krasne (01:00)
Ja, volt!
Hiten Samtani (01:26)
they're essentially colluding and they're price fixing in a sense. They're using this algorithm to set rents. And this was probably the biggest story in institutional multifamily for about a year now. And we've seen some interesting capitulations from the landlords recently.
Will Krasne (01:40)
Just at a high level for those who sort of aren't familiar, when you own a multifamily property, like an institutional quality multifamily property or quality of a certain size, you need a rental software. Like you can't go around with pen and pencil and collect checks and have your little ledger. Like that's not really how it works anymore. You need to have a real ERP. Your tenants want to pay online. So if you use Yardy, Entrata, RealPage, any one of these software providers, your tenants can pay online. They can make maintenance requests online, all that.
The part of the software that's in discussion for RealPage is called YieldStar. Yeah. And essentially, it's an algorithm with... Exactly. And it looks at other rents in your market and then gives you a recommended price for your unit based on what other units are achieving. Now, some of you might be thinking like, well, rents aren't private data because they have to market apartments. Yes. Publicly. Sir, you are correct.
Hiten Samtani (02:17)
It's a recommendation engine in a sense.
Will Krasne (02:38)
like this is absolute nonsense and Essentially what the yield star algorithm does is goes and says you have a two-bedroom in this zip code in Dallas What's the highest two-bedroom rent in this zip code in Dallas and tells you you should lease your apartment for that rent isn't? The main issue is that it's like non public data you're looking at other competitors rents, but
Hiten Samtani (02:55)
it's just kind of aggregating all the comps.
In a sense, the argument is, and neither of us is a legal expert, so massive grain of salt here, but... So what they're trying to say here is that because of how much inventory these guys control, right? Greystar, for example, manages 950,000 apartments nationally. So just collectively, the big boys control or property manage millions of apartments. And by swapping notes, if you will, they're doing unfair collusion. That's the crux of this thing.
Will Krasne (03:08)
speak for yourself.
How many units did you say Graystar manages? 950,000? So that is like a whopping like less than 2 % of all of the units in the United States. Interesting.
Hiten Samtani (03:32)
950,000. Yep. Okay.
And you know that Will and I are not industry shills in any way, so for us to say this is a big deal.
Will Krasne (03:44)
This whole thing is just absolute nonsense. Ever since people have been renting apartments and the multifamily industry has been an industry, you call around to other properties and say, hey, like, what are your rents for today?
Hiten Samtani (03:55)
What
does occupancy look like? How have you kind of set up your pricing?
Will Krasne (03:58)
Do
that every week. I'm telling you, like my first work trips, I only went because I was the only guy who was in the Target demo for the apartments that we were scouting. And I would go in and say, hi, my name's Will. I'm looking to rent an apartment. What are your one bedrooms? What are your two bedrooms? Do you have an application?
Hiten Samtani (04:13)
You
were the upwardly mobile executive yuppie.
Will Krasne (04:16)
I would go around to my VP and they're like, you're the only guy in their 20s, you gotta go. Now I'm like the creaky old guy, like doing continuing care communities.
Hiten Samtani (04:23)
Will
runs half marathons as a hobby, just don't just discount that nonsense. But anyway, go on.
Will Krasne (04:28)
130 so the whole industry is based on data and frankly like Knowing what your market rents are is literally the most important thing you can do as a multifamily investor I get that everything is computer now You know it takes away the ownership of the people at the property and those are people who are running it your business plans only because your worst on-site person and so For the DOJ to come after this and basically say hey, there's this algorithm that just tells you to push rents It's not even just call arounds. It's secret shopping. I mean, it's literally something that if you
Hiten Samtani (04:38)
You
Will Krasne (04:57)
a responsible owner of a multifamily property, you need to have your onsite team every two weeks going around to all of your competitors and being like, are your rents? Because the market rent isn't just like something that gets blasted in like the Fort Worth telegram and you can see what it is. Like you have to figure out what it is.
Hiten Samtani (05:18)
And this is where these software's came in and then obviously because of the stakes involved here, they became very lucrative businesses. So RealPage is now owned by
Will Krasne (05:26)
Tomarabo. mean, Intrada is a huge business. Yardi is an enormous business.
Hiten Samtani (05:30)
They're
basically an operating system for your multifamily property or
Will Krasne (05:33)
Exactly. It's vertical software. But this whole thing is just, again, about something that's like not relevant because no two apartments are alike.
Hiten Samtani (05:41)
Why
is this happening? The reason this is happening is that because big landlord is like kind of like big tobacco. It's an easy punching boy. This has been across Republican and Democratic administration. So this started in the Biden administration, as I said, using big real estate as a pinata on the campaign trail. But even if you look at VP Vance, he has come out, he said the following quote, institutional landlords completely crowd out the availability of homes for people who want to just buy a piece of their community. His argument is that.
Because Blackstone, et cetera, are in the mix.
Will Krasne (06:14)
Black rock is considered the boogie man in this space.
Hiten Samtani (06:17)
poor Black Rock could just take so much friendly fire here. But because they're in the mix, it crowds out the everyday American from potentially owning a home. It's like some kind of corrosion of the American dream is the argument. And I'm going to read you another line and this is specifically about algorithms. The Biden administration's DOJ, its head of antitrust, the following. You ready for this? The modern machinery of algorithms and AI can be even more effective than the smoke filled rooms of the past.
Will Krasne (06:39)
I'm ready.
you
It's a ludicrous statement. And it's not based on these algorithms because again, it's all scraped from data that's like public because every unit that's leased goes on their website. It goes on Zillow. It goes on apartments.com. These rents aren't secrets. it's just a matter of, again, the algorithm just pushes you to the top. A lot of property managers are biased towards wanting to fill rooms and maybe the rents are artificially low and this tells them to push it higher and higher.
That's not collusion.
Hiten Samtani (07:22)
I guess the question is, does it matter, right? This is one of those, you can't bring facts to a feelings fight.
Will Krasne (07:26)
That's why Courtland's settling, that's why Greystar's settling, because they're like, all right, well, like, we're not going to use real page. We'll go use Entrata.
Hiten Samtani (07:32)
Cortland's actually developing kind of their own in-house capabilities here. ⁓ I'm sure a lot of the big landlords are moving to that. saying, listen, if we give any illusion or any appearance of cooperating, colluding, whatever you want to call it, with the other guy, we're going to be in trouble. So let's just put this to bed. Let's figure this out in-house. So it's going to create a lot of opportunities for smaller players to partner with them and create something.
Will Krasne (07:54)
The other thing to note is that all of these softwares are terrible. None of them are good. And RealPage particularly, because they just bolted on every single workflow. You can listen to the Toma Bravo behind the deal and they're like, we love RealPage because they kept acquiring workflows and nothing talks to each other. So I think that's right. You'll see smaller groups put stuff together. But this has been a very lucrative industry.
Hiten Samtani (08:14)
Yardi is also facing pretty serious legal heat as well. They're gearing up to defend themselves in a price fixing lawsuit. think the RealPage one has captured kind of the national zeitgeist, but Yardi in the background is also fighting its own war. And ⁓ signs aren't great.
Will Krasne (08:30)
You hit the nail on the head when you said like big landlord. Yeah, is it just an easy punching bag? It's not causing anyone to pay higher rents than they would have otherwise You know if you tour an apartment in New York, that's in a lease up You know the rents are good for like three hours because they change so often
Hiten Samtani (08:46)
Do you think the capitulation kind of happened because the heat and the press on this was so bad, right? Like, so there was FBI raids, right? And now an FBI raid could be as simple as like a lone agent knocking on the door and asking for some files. But obviously when it's out there, it evokes the image of like dropping down a helicopter, charging into the offices, all of that.
Will Krasne (09:10)
You know, got Bobby Axelrod saying, like, I'm just worried about windbreakers. know, Chuck Rhodes is like walking in. Call Arndt back. Call Lara. It's bad for business. That's why I think it's smart for Cortland to settle. It's smart for Greystar to settle. Like, just get this out. I was going to say, like, what happens to Toma? If Greystar's not using them, that's massive client.
Hiten Samtani (09:26)
What you think happens to real page?
Did your boy just buy a giant apartment on the park somewhere?
Will Krasne (09:36)
Orlando Bravo is suing the Zeckendorf's because he said that they're they didn't tell him that he could have lost his
Hiten Samtani (09:42)
Oh, correct, because of Barnett's Tower coming up. Yeah, amazing. Amazing. In general, when private equity buys a business, correct me if I'm wrong here, they buy it with an exit kind of on the horizon, five, 10 year horizon, whatever it is. When Toma Bravo goes again and tries to sell real page, is there a markup here?
Will Krasne (09:44)
Yeah, at 520 Park.
They're going to take it public. And yeah, it's a huge problem. If you just lost your biggest comment, then yes, that's an enormous problem. But I think it's also indicative of the multifamily industry. It's not an efficient marketplace in terms of knowledge. And so in New York, you can't charge broker fees anymore. You can't charge more than one month of security deposit. But in a related note, people are coming after the so-called junk fees.
Hiten Samtani (10:23)
So what does that mean? I'm imagining an Airbnb when you say, oh, 250 a night. And you click on it and you get to the final page. You're like, wait, what was that? Five nights for 9,000? What the fuck happened? Is it similar to that?
Will Krasne (10:34)
Pretty much. mean, it's when you got to apply, what's your application fee, then like on a monthly basis, like, are you paying an amenity fee? If you live in a garden community, you can be charged like valet trash fees, water, sewer, reimbursables, if you're not paying direct. And in a lot of jurisdictions, it's actually illegal to like use water and sewer reimbursables as a profit center.
Hiten Samtani (10:49)
Killing the cicadas feet, yeah.
Will Krasne (10:58)
I've seen this where I've looked at properties and I'm like, they're like, oh, look at like all this other income we have. I'm like, you're breaking the law. But it's a really big source of juice because the margins on it are enormous. And if that goes away, that's really meaningful for value.
Hiten Samtani (11:09)
quite large.
more broadly zooming out I think there's a push by local and federal governments to essentially force the biggest landlords to create more transparency in their pricing. That's part of it. There was a recent move by Greystar to kind of front run some of this stuff too.
Will Krasne (11:31)
They'd been sued about this in a couple of jurisdictions. And the FTC had a final ruling on junk fees taking effect this year where they basically said that rental housing doesn't culminate in a single transaction. You have to lay out all of the fees because, you know, it's not like you just pay once. You're paying every month. In Grey Star laid out the total monthly leasing price calculator.
Hiten Samtani (11:35)
multiple times.
Yeah, gotcha.
Will Krasne (11:54)
So that'll help prospective renters estimate the total cost of living in any gray-starred managed home by factoring in rent and recurring fixed costs like pest control and trash services.
Hiten Samtani (12:01)
administrative fees. Uh-huh. Uh-huh.
Will Krasne (12:04)
This is, again, ways to pay a higher effective rent. And frankly, this also foots to a lot of the algorithm questions, because two units can have the same face rent. But if one has tenant paying, pest fees, trash fees, admin fees, and water sewer, the other property has all of that on the landlord. That's a markedly different overall price that the renter is paying each month, which, again, the algorithm does kind of factor in.
Hiten Samtani (12:32)
I gotta ask, do institutional investors in these funds understand all of that?
Will Krasne (12:37)
It's hugely
important because it's one of these things that sort of gets black boxed when you're underwriting. Because if you look at the total revenue number and that's it, but if you look at back, you're like, wow, there's a ton of tenant damage reimbursables. There's a lot of late fees. There's a lot of other fees that aren't necessarily sustainable. That's hard for you to match. And that can really impact the value of the property if you don't keep those moving forward. It's huge because if you can't charge or don't charge pest fees, trash reimbursable, all of that.
It just comes straight away from your bottom line. It's just one dollar for dollar takes away from your NOI, which in turn hurts value.
Hiten Samtani (13:15)
This basically throws down the gauntlet to other landlords to do the same thing. And you're going to see everyone kind of debut their own transparency fee. So, hey, what you see is what you get kind of.
Will Krasne (13:24)
Yeah, I think so. And if you're underwriting a deal and you're like, I'm thinking about BTR specifically, where a lot of these things are in their own HOA, so they're charging HOA fees on rental communities, like you might have trouble right here in River City. ⁓
Hiten Samtani (13:42)
Was this not worth fighting for? They would win this if they were willing to put in the work.
Will Krasne (13:50)
I mean, I think you're right. Again, I think it's totally without merit, but it's also one of these things that it's a huge hobby horse. The public opinion is just going to be, the nuance is going to be lost.
Hiten Samtani (14:00)
That's so bad. And you're getting hammered in the press every single day in the communities that you're in. Yeah. This comes back again. The rhetorical war, the war of perception is like, these guys strive to be seen as good stewards of their communities. And my God, if like evil algorithms clicking away at the back, like click, click, that's not good for them.
Will Krasne (14:19)
a paternity case like did you really win it?
Hiten Samtani (14:22)
Ha ha ha.
Alright man, Michael Shvo.
Will Krasne (14:35)
Michael Shvo, what else is there to say?
Hiten Samtani (14:38)
I know where we start, I mean there's an origin story which is fantastic.
Will Krasne (14:42)
I think we got to start with the New York Mag profile, which is again one of just like my Mount Rushmore of real estate profiles. You know, you've got this, you've got...
Hiten Samtani (14:50)
⁓
at
⁓
Will Krasne (14:57)
Our boy Ryan from Cadre. ⁓ Thanks for shouting us out on Twitter. Ryan, we love you.
Hiten Samtani (15:03)
Well, what are we talking about? So New York Magazine back in 06 had written a profile of then broker Michael Shvo and it was called No Business Like Shvo Business and they described him in this immortal line, quote, a permittent Israeli with an action figure physique, which I think is still true 20 years later. Credit to Michael on that.
Will Krasne (15:23)
I mean, you know, maybe there's a little bit of a difference in the hairline, but you know, he looks great.
Hiten Samtani (15:28)
What I've always found fascinating about Michael and a lot of people, and I should say like I know Michael little bit, so it's gonna be fun, is that most of the real estate people, even the really wealthy ones, are kind of trying really hard and are kind of like, they wanna be seen as a cool kid, where I think Michael Shvo really is in with the cool kids. Like he's hobnobbing with Daniel Ballard and Peter Marino and LaLanne and chilling with, what's her name?
Will Krasne (15:52)
I saw Michelle Yeoh at Cafe Milano one time.
Hiten Samtani (15:54)
Nice. So he's really in there. He kind of lives the life. He's a handsome, imposing, charming creature. And I use the word creature very deliberately. Like this guy is a, he's a really unique specimen and is a great salesman and is very, very, very smooth. And I think those qualities made him the top selling broker in Douglas Elements history. He actually unseated Dolly Lenz, which was unimaginable at one point. And to the point he got so successful that they basically made new rules for him.
Will Krasne (16:24)
Yeah, there was some stuff in this profile about how he was like stealing people's leads like you would get to the office early and just like take faxes off people's desks and stuff.
Hiten Samtani (16:31)
I mean for him it was all like, listen we're all competing so fuck it, I'm gonna do what I need to do.
Will Krasne (16:35)
I totally respect it and he's made the rare jump from broker to the principal side.
Hiten Samtani (16:40)
Backtrack
a bit. He was a big broker. 2009 happened. Everything went to shit. A lot of his projects. Because what he did, he pioneered kind of the showmanship of the new development condo. Do remember the one, the Philippe Stark building? That's my favorite. I think it's called 20, either 20 pine or 20 broad.
Will Krasne (16:57)
Was that the one where he's with the New York Magazine writer? Yes. And he has like his five phones out and like it's like one o'clock in the morning and he's like. Yeah, smashing Diet Cokes and he's like, I don't even know how many apartments I own right now.
Hiten Samtani (17:12)
What Michael did, and I think that even his haters would credit him for this, is like he turned condos into an aspirational good in the same way that a supercar or a piece of art would
Will Krasne (17:23)
Very well said. So basically what Serhant doing, any of the other big brokers where it's really the lifestyle, you're selling the Instagram version of life. He was the first to really do that in a big way and was tremendously, tremendously successful at it.
Hiten Samtani (17:33)
selling access.
But the market crash happened. All of these kind of projects took a particularly heavy hit. Shvodekam to my hometown. He went to Dubai for a bit. He became an art collector. And we didn't hear about him for a long time. In fact, he already had a memorable piece called, Where Did Michael Shvodekam Go? And so he just sort of like did his thing, pieced out for a bit, and then comes back, I want to say in 2013 or so, and pays a record 800 a foot for dirt on the High Line.
Will Krasne (18:08)
It was a gas station and then he did an art installation with goats.
Hiten Samtani (18:13)
It's sheep. We're bringing all this history up because this pattern is something we saw over and over again. Chauveau came in, he was the front man, the showman. He sold this vision of a boutique condo project. I believe it only had five units or six units.
Will Krasne (18:28)
Yep, I think that's right. One of which I think is bought by Bob Smith from Vista.
Hiten Samtani (18:32)
Yes, that is correct. And I think he paid like close to 50 million bucks for it. There is another buyer who's kind of up your street as well for the commercial condo. Jay Tomlinson. That's correct. So he paid 4,500 bucks a foot for this commercial condo that's just gonna house his incredibly extensive art collection. It is. And so Chvo was able to kind of put these kind of deals together. But in the final equation, it's hard to say
Will Krasne (18:40)
Tom Hill. Jay Tomlinson Hill.
one of the biggest flexes.
Hiten Samtani (19:01)
how he ended up. I don't know exactly where he ended up on the Getty, but I think Victor Group was the primary developer.
Will Krasne (19:07)
And first of all, that took forever to sell out. In the middle of all this, he gets indicted for trying to avoid sales tax on his art. Oh, and a far right. Which again, this is like a plot point out of billions too, by the way. So there's a lot of overlap between Michael Shvo's real life and the fictional world of-
Hiten Samtani (19:14)
Ferrari too.
As Voltaire said, know, Michael Shvo didn't exist, we'd have to invent him.
Will Krasne (19:27)
That might stop a lesser man, but he endeavors on.
Hiten Samtani (19:32)
We have talked in previous episodes about 125 Krenich, another deal that he sourced and then was eventually pushed out of.
Will Krasne (19:37)
Yeah, he partners with, ⁓ he finds more capital. wait, wait, wait,
Hiten Samtani (19:42)
Turk. So much more capital. you're not even talking. Okay, I'll get there. I thought you were talking about the Germans. Germans. He partners with the Turk and you're not talking about Solotso here. Sorry, Sardar, if I mess this up, like Biljoli. He becomes like his equity on a bunch of different projects that he gets into. They have a nasty falling out that's playing out in the press and lawsuits, etc. But then he goes and finds a lot more money.
Will Krasne (19:48)
No, no, no, not yet. With the turn.
NOS, CERDAD
Not the most money because that's you know, PIF like maybe like the seventh most
Hiten Samtani (20:17)
It's quite a bit of money. So what is BVK?
Will Krasne (20:20)
It's a German fund like who the hell knows
Hiten Samtani (20:23)
BVK is an investment manager that manages money for German pension funds. somehow, through a subsidiary or an affiliate called Deutsche Finance, not related to Deutsche Bank in any way, it invested 700 million plus in Michael Shvo-led projects. so with this, armed with this insane war chest, Shvo went on probably one of the most epic buying sprees that I've ever seen.
Will Krasne (20:50)
So he bought, gosh, the Raleigh in Miami, the Mandarin Oriental in Beverly Hills, the Coke building in New York.
Hiten Samtani (20:58)
right. Transamerica pyramid and SS.
Will Krasne (21:00)
Transamerica Pyramid in San Francisco and then my personal favorite Big Red in Chicago.
Hiten Samtani (21:05)
So we're talking about like both ultra luxury boutique condo projects and some of the most iconic skyscrapers in the cities that they're in. So Transamerica, like you go to SF, it's there. Same for Big Red in Chicago.
Will Krasne (21:19)
any aerial of the city in a movie or something you see these buildings and he paid outrageous prices for them.
Hiten Samtani (21:25)
Unbelievably high prices. Yes. And this is what right before the pandemic?
Will Krasne (21:29)
Right before the pandemic. Beautiful. And not only did he pay super high prices, he then said, I'm going to spend another insane amount of money renovating all of them.
Hiten Samtani (21:37)
Casual
listeners here, like you think of the Empire State Building, the Chrysler Building, et cetera, One of one type buildings. They're fucking dog shit to lease. There's so much capex required. They're so old, they're so clunky in many ways. They look beautiful from the outside, but they need a lot of love to make them work for the modern tenant.
Will Krasne (21:57)
And then you're also dealing with the pickiest clients and you've got to offer tons of free rent. It's very tough to make the numbers work, especially when you're at, I think is basis in trans America. I mean, I've done the math in a little while, but it's like 2000 a foot or something crazy. Oh boy.
Hiten Samtani (22:12)
And so some of these did not work out very well and very fast. So Transamerica is still a big TBD, but Big Red, we can safely say, is like hella underwater.
Will Krasne (22:21)
Yeah, that's, that's not great. That's why. And then the Raleigh's had delays.
Hiten Samtani (22:25)
I think you're putting it too mildly. The rally is in quite a bit of trouble. They're looking for a recap right now. Nahla Capital, which is a former investor in Mickey Naftali's projects and also basically pools money from the Middle East, is looking to take the project over from Chvo and Chvo might be able to find another partner who would keep him in the deal. I don't think that one's going to work out too well for him. The Mandarin Oriental in Beverly Hills, he defaulted on his $200 million plus loan and the
condos went up for sale as a bulk offering. And for those who don't know, when condos go up for sale as a bulk deal, it's generally not a great sign.
Will Krasne (23:02)
because generally speaking when you buy in bulk you get a discount which is not what you are looking for as a real estate developer.
Hiten Samtani (23:08)
That
is correct. So safe to say his promote was wiped out there.
Will Krasne (23:11)
Yes. Now, the fees. The fees. The fees might not have been wiped out, which the reason we're talking about, Michael, is that just it is chef's kiss perfect that with all these projects, underwater delays, lawsuits, everything, this guy has the balls to go to BBK and say, you owe me $85 million in fees.
Hiten Samtani (23:34)
Board man gets paid, dude. What are you gonna say?
Will Krasne (23:37)
Yeah,
board man gets paid and he filed what he filed an arbitration basically saying that They failed to pay him 27 million dollars And payments that various properties 21 million and carried interest for transamerica, which I don't know how that works because they haven't had a liquidity event and You know that this is real because the head of real estate investment management bbk is gone And then the guy who oversaw bbk's investments
Hiten Samtani (24:05)
is gone.
Will Krasne (24:06)
So yeah, there's something a little sketchier. ⁓
Hiten Samtani (24:10)
TVK
was hauled up in front of Bavarian parliament to ask them about what the hell happened with this money. And they said, hey, you you guys gave hundreds of millions of dollars, which is a lot of euros to a convicted tax offender. And a lot of these investments are now in trouble. Explain yourselves.
Will Krasne (24:30)
I think the answer is like, we don't totally know what we were doing. And they kept saying like, we made 3%, which is above our actuarial needs. And the statement here is just fantastic. Please. It is important for us to emphasize that any losses in individual investments in a broadly diversified investment portfolio such as ours have no impact on the pension benefits of our members, insured persons, and beneficiaries.
Hiten Samtani (24:36)
Which
It's an embarrassing incident for them. But this is, I think this illustrates a broader thing here. The best salesmen, and Michael Shvo, I would put him at the top of any list of great salesmen, are able to convince people to give them a lot of money. And when they're kind of taken by the charm and the aura, which he does have, I really wonder what those deals look like. What was the promote structure here? How is he getting paid? How is he owed 85 million according to this?
How did he structure this thing? incredible.
Will Krasne (25:25)
I mean, it's like 12 % of the equity that they invested in the deal. And there's definitely like, I mean, is it a European waterfall? Is it an American waterfall? Like, how does this work? And more importantly, I mean, how is he in an org chart for any loan with a conviction of a fraudulent conviction on his record? I mean, that's a huge issue.
Hiten Samtani (25:46)
By
the way, that was a problem with 125 Greenwich. He got sidelined. I don't know if they were looking for an excuse, but he got sidelined right around the time of that indictment with the art.
Will Krasne (25:56)
I mean, he got booted out of the Amman in New York and the same thing. I mean, it's literally a form, a question you have to answer on every single loan application form is like, have you been convicted or pled guilty to a crime of dishonesty and he pled guilty to tax evasion? Now, if you think that BVK is the only person that or Sirdar are the only people that Michael is having an issue with. So he was sued by Core Club, who was this private members only club that he was going to put in a couple of his properties for $600 million, you know, which is
Fantastic. And then he says that they actually defaulted on a $750 million loan, which these numbers are just fantastical. Like this is like a 3000 square foot club or something. Like it's very tiny. But he just won a positive verdict from the New York Supreme Court, I think, ⁓ where the court club has to pay him like a million bucks or something. And the original suit that was ongoing. So this was a separate lawsuit. It's so complicated. I don't know.
I'll tell you what, is that if his attention's on this, it's probably not on like, actually selling out the Raleigh.
Hiten Samtani (27:00)
The rally is particularly interesting. As I said, Nahla Capital, ⁓ it's run by guy called Genghis Hadi, former Carlisle guy, pulls money from Middle Eastern investors, and they've won a bidding process to buy the property for $275 million bucks. Cheveau though has a ropher on the property apparently, but who's going to give him the cash to buy out his partners and execute it is the big mystery.
Will Krasne (27:23)
Maybe he wins this lawsuit against Core Club.
Hiten Samtani (27:26)
And then the debt stack here is really fascinating. So my boys BH3, the baggage handlers that we've talked about. They hold the Mez. The senior loan is held by JVP that we've talked about before as well. And related has a slice of the Mez too.
Will Krasne (27:32)
Who think we are?
He did buy great real estate. The Raleigh is phenomenal real estate. It's just, again, great real estate's not always a great deal.
Hiten Samtani (27:47)
The price is blending at apparently 5,800 bucks a foot for 40 condos.
Will Krasne (27:52)
That's crazy.
I
mean, it's true, you know, costs, it takes a lot of time to get them. The thing I don't understand is that whenever these like crazy foreign capital vehicles come in, they're never just like, you know what we really want? Like cash flowing B apartments in like the Midwest.
Hiten Samtani (28:12)
Stop talking your book.
Will Krasne (28:15)
It's always like, let's do the splashiest development that kind of doesn't ever pencil. Michael said that his relationship with Dolly Lentz ended when he made more money than her. So what happens when everybody else makes more money on his failed projects than he does?
Hiten Samtani (28:36)
The thing about Michael Chveau is that he manages to stay around the action. I don't know if this is just having an amazing network. I don't know if this is just being a great salesperson. I don't know if this is just having the aura of success, even if the projects themselves aren't very successful. He comes across as a guy like who knows what he's talking about, knows what he's doing, clearly understands sales and new development extremely well. What is the next act for someone like Michael Chveau? Once this is all done and dusted.
Will Krasne (29:05)
I think in the next cycle, you're going to see him again doing another project and he's going to find another pot of capital because to your point, like the guy is unbelievably talented and he's going to find another pot of capital. He's going to find the next hot city and he's going to go do this again.
Hiten Samtani (29:23)
Michael Shvo, multifamily investor. Michael Shvo, industrial mogul. There's so many different avatars this c-
Will Krasne (29:29)
I don't see that, but I do see, you know, Michael Shvo, know, ultra luxury something.
Hiten Samtani (29:37)
Maybe he could go work in-house at LVMH?
Will Krasne (29:41)
God, know, if he's like, getting the keys to some of their great real estate, that makes a lot of sense. I could see that.
Hiten Samtani (29:48)
does but I don't know about the black tea then.
Will Krasne (29:51)
I mean, LVMH sells some very expensive black teas.
Hiten Samtani (30:07)
And that's it for the Promote Podcast this
Will Krasne (30:09)
Grey Star is settling with the DOJ. They're releasing their rent transparency tool to help eliminate junk fees. This is tectonic stuff. That's 3%, 5 % of net operating income at all of these properties across the country. Like it's poof on a big chunk of valuation.
Hiten Samtani (30:25)
And you're talking about like something unsexy, but very, very impactful to the bottom line. Our next story is the probably the opposite of that. Michael Shvo, sexiest man alive in real estate, but I don't know if he's been able to move the needle on the bottom line as much as his investors would have hoped. We'll be back next week with more CRE insider goodness. Will, where are people going to find us, man?
Will Krasne (30:44)
All said.
they should reach out to partnerships at thepromote.com, which is manned by Hiten Samthani. ⁓ Do not reach out to me.
Hiten Samtani (30:58)
to
Will when you have really nice things to say because he doesn't like any kind of critical feedback. So please reach out to me with all your stuff. We really appreciate it. By the way, we also really appreciate the incredible feedback you gave us on the Tom Cousins episode like that. We had a blast doing it as you guys could tell and really glad it resonated. So thank you for that.
Will Krasne (31:03)
No, I don't.
real estate, again, it's why we all fall in love with it, it's because of guys like Tom Cousins, and to a lesser extent, guys like Michael Shvo. So thank you very much for that. We love the feedback, both positive and negative, but if it's negative, it goes to Hiten first so he can filter it to me.
Hiten Samtani (31:31)
Well this was so fun man, I appreciate you, thank you. So normally I end with my standard chow as listeners would know, but this time I'm gonna end by saying happy birthday, happy first birthday to Nico Krasne.
Will Krasne (31:43)
My gosh. Thank you so much. Touches my heart. The little guys won. His first word was cap rate. That's two words, but there you go.