Eastdil Takes Return Fire in Newmark Defectorgate

Any war in the human-capital business is fought on two fronts at once. You’re battling over the facts on the ground – what happened, who did what to whom – but also over how you’re perceived by the market, the rainmakers within & without your firm who are always thinking about which flag to fly, and the clients who want to align themselves w/ the ascendancy. Brokerage execs don’t think nearly enough about that second front.

Eastdil recently sued 6 of its former brokers who hopped over to arch-rival Newmark, alleging that they stole proprietary docs and even a live deal. The lawsuit, perhaps conceived as a warning shot for other dealmakers thinking of jumping ship, is instead being perceived by the market as a sign of weakness. One prominent West Coast sponsor put it to The Promote thus: “Rule #1 of real estate: Don’t be a bitch”

New Pod: Rise of Pref & Meridian Out of Agency Jail 🎙️ 

“Would you jump off a bridge because your friend did? If your friend is Blackstone, probably yes, because there’s alpha at the bottom of the bridge.” 🌉 
“One of the things I love about real estate is that there are no rules. You can do whatever you want as long as you get the other guy to agree to it.” 🤷 🤝 
 “As I said, this dropped right before Passover Shabbos. So anyone I needed to talk to about this wasn't available.” 🥖 

Ep. 7 of The Promote Podcast is now live! We dive into the ubiquity of pref deals – it feels like they are all anyone wants to do right now, but they come w/ caveats everyone involved should be aware of. We break down Meridian’s clearance by Fannie, and the perils of the human-capital business. And we look at how the CMBS market is coping (not well) w/ the tariffs. Listen on Spotify here or tune in via Apple Podcasts here. If you’re interested in advertising, hit us up here. And show us 💌 via ratings & reviews wherever you get your pods. 🙏 

Eastdil (Cont.)

The particulars of the case, in which the prominent Joseph Smolen & Geoff Boler multifamily team went to Newmark, are interesting in of themselves: the brokers sued (Smolen wasn’t among them) responded w/ an anti-SLAPP motion, per TRD, arguing that the suit & a separate Eastdil arbitration request were akin to a permanent gag order. 🙊 “Eastdil’s heavy-handed approach invites an obvious question,” their attorneys wrote. “What information is Eastdil so afraid that its clients and employees might learn?” Boler’s attorneys said Eastdil’s actions reeked of enforcing a noncompete – illegal under California law. In Boler’s affidavit, he said that Eastdil wanted 50% of his commissions for future deals, a position he countered w/ what he believed was a fairer offer, but got nowhere. Meanwhile, an OC judge denied Eastdil’s TRO that would have prevented the brokers from discussing company business while litigation was ongoing. An Eastdil rep told TRD that the evidence “clearly demonstrated these individuals engaged in serious misconduct and violated their contractual obligations,” and added that the firm expected the arbitrator would rule in its favor.

But the fallout from all this isn’t just legal. Eastdil is in the middle of a company recap effort, eyeing a valuation that is 4-5x its $400M figure in ‘19. It’s been crushing it on the deal front – $36B on $25M+ deals in ‘24, up 43% YoY and 3rd overall nationally, per Green Street – which is the kind of momentum you need to show to score that kind of faith from capital partners. But it’s also crucial that it retains its best people at this time, and rivals have not made that easy: CBRE nabbed one of its top SoCal life-sci brokers earlier this month; and there are a couple more big defections soon to be announced, per sources. Meanwhile, Newmark has been all over their talent pool, as we broke down on the pod recently 👇️ 

Vibes go hand-in-hand w/ comp, and this is where Eastdil has a problem, at least according to some of its current & former brokers & clients. Its public rivals can dangle stock, and Eastdil’s salary & bonus model is sometimes hard-pressed to compete w/ that. Equity is a balm that soothes all wounds, but leadership (Roy March, Mike VK) would have to be on board for that.

Agency 🌎️ : Fannie Shops NPLs, Freddie Gets Bippy

Couple quick updates from agency land: Fannie is shopping a $206M NPL book across 3 loan pools. TBD on what’s up for grabs – the data room opens mañana. This is Fannie’s first such offering this year, but it’s a thing they’ve been doing for about a decade. The interesting thing to us was the glimpse of the players who have a lock on this lucrative niche: The NPLs are being sold by First Financial Network & BofA Securities, & the servicer on the loans is Shellpoint. Seriously nice work if you can get it.

Meanwhile, Freddie’s about to tweak their SBL program fee structure. Instead of taking their 10 bps later in the game, it’s now going to be upon application, per agency insiders. Shouldn’t make a difference for sponsors committed to going this route, but it will act as a deterrent to the masses who apply & then drop out – Freddie is hoping this tweak will up its hit rate. 🎯 

305 Problems - And Construction is One

Facts on the ground don't give a 🦉 about your "secular tailwinds." Office construction starts in Miami-Dade were at just 651K sf for the 12-month period ending March 31, per a new TRD analysis, the lowest since at least ‘17. Palm Beach County, where Steve Ross is in his own words “spending money like a drunken sailor,” is an exception to the trend, but elsewhere the scene is rough – rates, skyrocketing insurance quotes, lower valuations and jittery lenders are among the pain points.

“We have indeed seen a significant slowdown of office-only towers across the board. That’s basically been gone since 830 Brickell,” CoStar analyst Juan Arias told the publication, re. to Vlad Doronin/Cain International’s runaway success tower. The list of scrapped projects keeps growing: Swire’s supertall One Brickell City Centre, the Giller family’s boutique undertaking in Miami Beach, etc. Bespoke projects (for occupiers, by occupiers) such as Ken Griffin’s venture will be fine, but the prognosis for the rest is bleak for now.  

Quickies

• Healthy buildings, unhealthy cap stacks 

• Sol Asylum: Jane Goldman wants to resurrect case that divided a CRE empire (full rundown here)

• Property that inspired The Shining’s Overlook Hotel wants $300M in muni bonds 👧 👧 🚲️ 

• New home permits in LA down 57% YoY

• Acadia making retail moves in NYC - just dropped $60M in W’burg 👖 

• Witkoff compares l'Élysée Palace to Mar-a-Lago 🗽 💀 

• AWS pulls a Satya: Cloud giant hems & haws on new data center projects

• Jane St. trading revenues nearly double to $20B - that is NOT a CRE story, but I flag it b/c Jane St. is a part of Wall St.’s new ruling class shape-shifting the office market

• Avg. day in the life of a Rialto servicer, per Reddit (h/t Marlo)

Unquotable Quotes

Open invite to Pulte: Come on the pod or do a Q/A for the newsletter, and let's have an unfiltered chat about your vision for Fannie/Freddie. The Promote is the only outlet that talks directly to CRE insiders, and they'd love to hear what you have to say. Plus, all your new colleagues are already reading.