Anatomy of a Deal: BSP-NewPoint

The agency-lending game has a new player: Benefit Street Partners struck a deal to buy NewPoint, giving the CRE-CLO heavy hitter control of a triple-threat (Fannie/Freddie/HUD) license holder and a hefty loan-servicing book.

Agency licenses are scarce & highly coveted – we’ve seen CRE’s biggest players go through various gyrations to score them. But w/ Fannie/Freddie privatization looming, it’s harder to price them: privatization could boost the value of them b/c of increased dealmaking, but it could also hurt their value if licenses become a free-for-all. Mortgage-servicing rights, in contrast, are as close to a sure thing as exists in CRE finance, particularly for an active lender like BSP that can fold their deals in. And so you’d expect BSP to have to pay up handsomely for the privilege, which it did: $425M in a 75-25 cash-stock deal expected to close in Q3, per its investor presentation reviewed by The Promote.

The deal is poised to be a massive – and much-needed – windfall for NewPoint’s owners, PE firm Stone Point Capital, Barings & Meridian Capital Group. At that price, ownership will be nearly doubling its money in just a 4Y period, according to sources familiar w/ the matter, and it’s worth diving into how they propped up such a beast so quickly. So let’s do it.

The Promote Podcast: Our Pilot is Here 👂️ 🎙️ 

Ever since The Promote took off, the most-demanded addition has been a podcast: something CRE junkies can kick back with, rich w/ unfiltered behind-the-scenes commentary on market-moving deals. No fluff, no bloat – just our signature spice 🌶️ 

We’re thrilled to share our pilot episode w/ you: This week, Hiten & no-BS institutional insider Will Krasne 😍 break down 3 stories capturing the market’s attention: Bad Boy Guarantees, a Skyscraper Ransom in Midtown (14:20) & why “Aura is the lowest cost of capital.” ™️ (21:27) Can promise you that though we both have a LOT to learn about podcasting – and your feedback is deeply appreciated – the level of detail & candor you’ll hear here is radically different from anything in the space.   

Listen on Spotify here or Apple Podcasts here. If you’re interested in advertising, hit us up here. And please, smash that subscribe 🖋️ button and leave us a rating ⭐️⭐️⭐️⭐️⭐️ if it’s your jam – especially in the beginning, we need the ten31 community to really champion this thing to help it get discovered 🙏 

NewPoint (Cont.)

First, in Jan. ‘21, a Meridian/Barings JV acquired Barings Multifamily Capital & tapped former Freddie CEO David Brickman to lead the venture. That initial acquisition was priced in the low $100 millions, per deal insiders, and gave the JV control of those 3 key licenses. In June, it formally launched NewPoint, but there was more work to be done to beef that baby up: In Dec., NewPoint closed on the acquisition of Housing & Healthcare Finance, giving it more juice in healthcare & sr. housing deals (our rundown of key players in that world here) as well as a bigger loan-servicing book. It also had to build out its origination & servicing team, stand up various funds (bridge etc.) and other 🔔 & whistles. All told, ownership’s investment in NewPoint was in the low $200 millions, sources said – Stone Point’s PE money was potentially supplemented w/ a corporate-level loan (fuzzy on exact $, but $100-$130M) made by NYCB to Meridian around the time of the NewPoint formation, as The Promote reported last month.

Meridian ran the thing beautifully: NewPoint is now a top 3 HUD sr. living/healthcare lender 👵 , a top 10 Freddie lender, and has a $55B loan-servicing portfolio. But it’s been the only refuge in an otherwise hellish 18 months for the brokerage – see here, here, here – and sometime last year, Stone Point tapped BofA Securities to steward a sales process for NewPoint. Initial talks floated the potential of a buyer also acquiring Meridian as part of the deal, but suitors balked – they wanted the baby, not the bathwater. 👶 

The buyer shortlist included asset managers Bayview & Rithm Capital, but BSP won out. For it, the MSR play might be the most lucrative component, particularly given how active a lender they are and how in a higher-rate environment, the NewPoint loan book will likely remain outstanding for longer. Walker & Dunlop’s financials provide a potential comp: W&D values the MSRs associated w/ their $135B servicing portfolio at $1.4B – NewPoint’s servicing portfolio is $55B, and BSP could bulk that up significantly w/ its own loan book, something it notes in its presentation on the deal.

Jumping back to One Battery Park Plaza: The chatter among those within Meridian HQ’s walls, and those no longer there, is whether former Meridian rainmakers who had invested alongside ownership in NewPoint will be able to fully participate in the upside from the sale. 🔮 
 

Chetrit Megadeal Sparks Big Bank Battle

A real estate titan & a convicted mortgage fraudster walk into a bar… and 2 of the country’s most venerable banks get into a bar fight.

Wells Fargo is suing JPMorgan over the Chetrit Group’s $522M multi mega-acquisition from convicted fraudster Tyler Ross’ ROCO. Wells alleges that JPM knowingly used fraudulent financials when originating a $481M ‘19 loan for Chetrit on the deal, debt that was then securitized. ROCO artificially juiced NOIs by 25% on the 43-property, nearly 9K-unit portfolio backing the loan, and JPM learned of this – the suit notes that a JPM analyst described the financials as “made up” and “ridic[ulous].” However, instead of investigating, the bank “plowed ahead as if nothing unusual had happened,” alleges Wells, which is the trustee for CMBS bondholders.

Here’s the telenovela of the lawsuit 👇️ 

Wells is seeking to have JPM repurchase the entire loan (outstanding balance $285M) or pay that in damages. It’s also suing the Chetrit ownership entity, alleging it too turned a blind eye to the mishegas, and principal Meyer Chetrit over his recourse guarantee.

Our favorite detail in the suit involves a scrivener 🖋️, the kind of humble clerical employee you only hear about when they fuck something up. Here, Wells alleges that an “egregious” error by one such scrivener led to a deed of trust neglecting to include one tract of a property (Shadow Creek), and that the Chetrits allegedly exploited this error by fraudulently transferring their interest in the tract to a newly created entity to evade their payment obligations. 👀 

Rise48 Pref Capital 🤙 

Multi syndicator Rise48’s “No Capital Calls ever” claim might be tested. The extra cash, says Rise48’s Zach Haptonstall, is needed to buy a rate cap 🧢 for a struggling Phoenix-area property. Here’s his pitch, and here’s a look at the rescue pref fund Rise48 is raising for its own deals.

Quickies

• 🎥 Can the Chetrits trade their way out of this mess? 

• Morgan Properties poised for $500M ($175K/ 🚪 )Midwest multi buy 

• CBRE poaches bigwig Eastdil LA office/studio broker Stephen Somer

• There it is: Extell pays Solil $103M to upsize Lenox Hill site 🍟 

• State Bank of 🇮🇳 deal means L&L’s 425 Park now fully spoken for

• Lenders Reuben Bros. push for sale of Benedict Canyon site 

• Amazon takes 193K sf in sublease at RXR/Walton St’s 237 Park

• Only in 🇺🇸 : Promoter Don King hit w/ industrial foreclosure 🥊

• Dealing w/ a rent-stab holdout in 🗽? Here are your options 

• Feeling 😥 ? Need an award, any award? RED’s got you covered 

Unquotable Quotes