Fannie Expands CRE Blacklist

A fortnight ago, Lindsey Bass, who for 6+ years was the anti-fraud czar at Freddie Mac, dropped some personal news: she would be taking her talents to Fannie Mae, where she would occupy a similar perch and help the agency crack down on one of its most pervasive problems: mortgage fraud. Rarely has a LinkedIn post sent CRE players into hives like Bass’s did – and it’s because in multifamily finance circles, Freddie is thought to be well ahead of Fannie in having processes in place to prevent dodgy deals. Now, the thinking went, Fannie would rapidly get up to speed.

Things did indeed move fast. This week, Fannie-approved DUS lenders were provided an updated do-not-fly list, The Promote has learned, people whose involvement in Fannie transactions would no longer be allowed. Among the names: Abe Hirsch, a veteran Meridian Capital Group dealmaker, and Jeffrey Zwick, a go-to attorney for convicted fraudster Moshe Silber.

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Fannie Blacklist (Cont.)

Hirsch is a 20Y+ vet of Meridian, and rather than being a rainmaker in his own right has long been known as the point man for 2 of the firm’s alpha originators: founder and sr. chairman Ralph Herzka, and fmr. dealmaker Jacob Katz. The news of Hirsch’s Fannie ban comes just months after Meridian was cleared for business by Freddie - albeit w/ a host of restrictions incl. loan repurchase rights. Reps for Meridian didn’t respond to requests for comment.

And then there’s Zwick, the head of Brooklyn and Lakewood-based law firm J/Z Legal (also known as Jeffrey Zwick & Associates). His firm is a volume beast in the boroughs, as evidenced by this ‘19 TRD ranking of top law firms on closings. It has, notably, worked on multiple deals for Rhodium Capital, the firm controlled by Moshe Silber, who was just sentenced to 30 mos. for mortgage fraud. (On one of the deals, Silber’s debt broker was Jeffrey Seidenfeld, who was also recently blacklisted by Fannie.) Zwick didn’t respond to requests for comment.

It’s unclear what specific transactions led to these dealmakers getting dinged. There are a handful of other prominent names on the updated list, but The Promote wasn’t able to verify them by press time. Stay tuned 📺️ 

Tariff Reaper Comes for REPE 

Editor’s note: Given the market carnage after the Trump tariff announcements, I speed-dialed Hunter over at Lewis Enterprises and asked him for a quickie on the immediate impact to REPE. He came through, as always - enjoy! - HS

By Hunter Hopcroft 

Investors “shot first” Thursday, rather than wait to gauge the potential tariff impact on PE giants. The major alt managers dropped 14%+ on avg yesterday, w/ Blue Owl, Carlyle & KKR all falling more than 15% during the day. By comparison, the S&P 500 ended down by 4.8%, while the regional bank index shed 10.3%. The dumping of publicly traded PE likely comes down to the very things that give it its sex appeal: Opacity, illiquidity, and leverage. 

Private equity lives up to its name. Only minimal levels of disclosure on portfolio makeup and performance are provided. Wondering about the geographic revenue breakdown of a PE vintage fund? Good luck. Private credit, by contrast, offers a bit more transparency via publicly traded BDCs. On Feb 2., Ares Capital Corporation ( a publicly traded pvt credit vehicle) said: “Given what we have seen from the early actions of the new administration, we don't currently expect any material direct impact to our portfolio for new government policies,” adding that its view was “based on a pretty exhaustive numerical analysis.” ➗ The vehicle fell 4% on the day, while its manager, Ares, declined by more than 15%. 

Alt managers are valued chiefly on their fundraising ability. Fund performance has a big impact on future fundraising, and without clarity about the tariff exposure in these portfolios, investors aren’t waiting around to find out what lies beneath. 

Managers may be conflicted about rates as their legacy equity business needs lower rates to facilitate attractive takeouts, while their growing floating-rate loan businesses benefit from higher rates. The 10-Year Treasury yielded 4.23% before President Trump unveiled his posterboard; it ended the Thursday session below 4%. A tariff-related economic slowdown could force the Fed to cut more than expected, just as pervasive uncertainty could lead it to extend a pause.

CRE finds itself whipsawed by all this. Directly, of course, from the uncertainty, but also from the ever-growing role PE and pvt. credit play in real estate capital stacks. Should Mr. Market’s initial assessments prove out, CRE prices may also feel the chill of lower PE fundraising. 🥶 

Manhattan’s New High-Water Pricing: $11,000 psf 😲 

“It is the ambition of the New Yorker to live upon Fifth Avenue, to take his airings in the Park and to sleep with his fathers in Green-wood.” - The New York Times, 1886

Miki Naftali is buying 800 Fifth Ave. from the Spitzer/Winter families for $800M+, a whopping sum that, per the Newmark team that did the deal, makes this the highest land PSF price paid in NYC history. When news of the deal broke late last month, we started doing some math on what he could build given the site’s zoning. It’s all up in the air (no pun intended) for the moment, but what we could say definitively is that Naftali would really be going for it on the luxury condo pricing here. Now, c/o of a nugget revealed in the lender data room reviewed by The Promote, we know what “going for it” really means.

Naftali’s new development consultant (Compass) is projecting that the condo that would rise on the site could achieve blended prices of $11,000 psf 🤯 . That would be the most ambitious sponsor pricing we’ve seen yet – the current sponsor unit psf sales record in New York is held by the Aman New York ($11,444), but that was for one of the penthouses – overall target psf pricing was far lower. Michael Stern’s currently asking $9,500 a foot for his top penthouse at 111 W 57th. Other units at the city’s top buildings have resold for far higher – Alibaba co-founder Joe Tsai paid ≈ $19K/psf for his $188M deal at 220 CPS – but AFAIK there has been no overall pricing target even close to what Naftali is going for. At that price, a 5K sf unit pad (w/ Central Park views, natch) would fetch $55M. A 10K sf pad would crack the $100M mark – likely more b/c the $11K/estimate is blended, while the best units could be even pricier. Manhattan’s current overall sales record is $238M (Ken Griffin) at 220 CPS.

Naftali is looking to score ≈ $700M in debt for the project, CMA reported last month. No definitive word yet on who his equity is here, but we do know via the lender room that it’s a large family office who he’s partnered w/ 7 times 👀 

Merchants of Doom

Fascinating decision just dropped on the Cachet Hotel dispute in Midtown Manhattan: A judge has ruled that the guarantors – Robert Roche’s Sand Hollow and Merchants Hospitality – are responsible for $66.4M on a non-recourse carveout for admitting insolvency in writing and trying to surrender their ground lease to the landlord. The 105- 🔑 hotel was abruptly shuttered in fall ‘23. Last Feb., the lender decided to pursue the guarantors over the PG. Now, the lender’s motion for summary judgment has been granted in its entirety, while Sand Hollow’s cross-motion was denied.

See also: The Promote Podcast’s discussion on bad-boy carveouts 

Quickies

• 🎥 Bank OZK takes back keys at Sterling Bay’s Chicago megaproject

• First American CEO charged w/ assault over cruise-ship choke 🛳️ 

• Cushman’s change-in-control payouts – M&A prep? 📊 👶 (More here & here)

• Special servicer moves to foreclose on Nathan Berman’s Fidi rental

• Isaac Chetrit, Sioni land $275M construction loan on Midtown South resi project

• Ralph Lauren, LVMH go toe-to-toe over Soho storefront

• Pod Signup Reminder: Next week is a Gary Barnett special episode 😻 

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