Inside a Supertall Capital Stack

“When God wants to make a poor man happy, he causes him to lose his donkey, then find it again.” - Turkish proverb

Redemption stories are irresistible, and particularly when they involve Manhattan supertalls. For years, 125 Greenwich seemed like it would join the ignominious ranks of DOA skyscrapers – unlike those w/ construction issues (161 Maiden for e.g.), however, its problems were primarily about the capital stack: bitter partnership disputes and problems with lenders had paralyzed the project. Bit by bit, the mess is being cleaned up – this is going to be a LOT to digest, so apologies in advance, but it’s fascinating.

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125 Greenwich (Cont.)

First, OG partner Michael Shvo was sidelined after his tax troubles; then, OG lender United Overseas Bank, which had moved to foreclose on its $195M construction loan, instead turned around and sold it at a discount to BH3 (“What the fuck do these guys think we are, baggage handlers?”); BH3 then sold the debt to Fortress for $230M, making a quick & tidy profit. Instead of foreclosing, Fortress opted in ‘23 to convert its debt into equity and become the lead partner on the project – at some point in that process, OG partners New Valley (Howard Lorber) and Chinese PE shop Cindat were also bought out. Fortress, remaining OG partner Davide Bizzi & Serdar Bilgili (who came in after Shvo was bounced out) convinced Ran Eliasaf’s Northwind Group to give them $313M in financing; Eliasaf, in turn, financed his financing 😶‍🌫️ w/ a $220M note-on-note deal w/ Madison Realty Capital.

Less than 2Y after all those contortions, the sponsors were back in the market for cheaper debt, which they have just landed: $350M from Starwood Property Trust, per CO. The 88-story tower, designed by the late starchitect Rafael Viñoly, is nearly complete, and is slated for 271 condos plus some banger amenities (3 floors at the top). The Traded post on this financing is going to be fun – both Newmark (Jordy Roeschlaub) & Morris’ Betesh’s new shop Arrow brokered the deal. We’re also curious about the status of the EB-5 investors in the capstack – Nick Mastroianni’s US Immigration Fund had raised $194M for the project, and as of ‘23 was still in the mix.

New Pod Alert: Tariff Terror, Naftali’s Record Pricing & Starwood's Land Bets 🎙️ 

“Your costs [of construction materials] are completely a SWAG. You almost don’t even know enough to bid.” 🔮 
“You go sit there and have a beautiful view of the HVAC units on top of Bergdorf.” 💀
“Hype talk that we used to get into in school: You're about to fight someone and you talk a big game and in reality, maybe you push each other a couple of times. That’s what Floyd Mayweather just came up with in Upper Manhattan.” 🥊 

Ep. 6 of The Promote Podcast is now live! We get real on the market-moving stories of the moment: tariff-induced development paralysis; Naftali’s stargazing pricing on his new Fifth Ave. megabet; Mayweather’s bluster; and Starwood’s big land swing. Listen on Spotify here or Apple Podcasts here. If you’re interested in advertising, hit us up here. And show us 💌 via ratings & reviews wherever you get your pods. 🙏 

ICYMI: Our Gary Barnett special episode from last week is a keeper 💎 

Meridian’s Free Agency

How’s this for a Passover Shabbos news drop? A couple hours before a big chunk of the market went dark for a 3-day holiday respite, Meridian Capital Group announced some big news: it has been cleared for business by Fannie, ending a year-plus period in the penalty box w/ the agency that had, in conjunction w/ a similar ban by Freddie, thrown the firm into disarray. Meridian CEO & chairman Brian Brooks, brought in by the firm’s PE ownership to right the ship after the bans, touted Meridian’s buttressing of its risk-management mechanisms – new U/W processes, large-loan credit committee, etc. – as a key reason for the clearance, saying that they were now “best-in-class among commercial mortgage brokerages.”

Since we haven’t seen any comms from Fannie on the matter yet, we’re still in the dark on the fine print of the clearance – and on commodity-ish products like agency loans, the fine print will be decisive. If it’s even a tiny bit more of a pain in the 🍑 to broker loans through Meridian as opposed to through another brokerage or keep the process in-house, lenders may balk. Remember that when Meridian was cleared by Freddie, the clearance came w/ heavy strings: loan repurchase clauses on defaults for any reason within 12 mos.; repurchase requirements even after that period should fraud be discovered – full breakdown here. We will note that Freddie’s former anti-fraud czar Lindsey Bass recently hopped over to Fannie – safe to assume that she’d have weighed in on the conditions of Meridian’s clearance. Moreover, the company-wide clearance doesn’t mean absolution for all dealmakers: The Promote reported earlier this month that Abe Hirsch, a key point man for Meridian founder Ralph Herzka, was added to Fannie’s blacklist.

Still, this is a big milestone for Meridian, and a clear sign that Brooks is earning his keep. It comes on the heels of a lucrative deal to sell agency lender NewPoint to Benefit Street Partners (our tick-tock of that $425M deal here). The Q becomes: Once that deal closes, will Meridian’s v wealthy principals choose to fight on w/ a greatly diminished army, or canter off into the sunset?

Koreans Take Over RFR Tower

It’s done: Korean debt funds managed by Daol Asset Management have officially taken over RFR’s 285 Madison, The Promote has learned: The funds, which had provided RFR $200M+ in mezz on the 26-story Grand Central-area office tower, moved to initiate a UCC foreclosure at the top of this year, and took control at the auction yesterday. RFR sent the following statement: “After a decade of ownership and great stewardship of 285 Madison Avenue, RFR elected not to bid on the property given its write-down of the property value driven by today’s capital markets environment.”

We had highlighted this as a notable development because it signified a rare instance in which Korean lenders, known for rolling over, seemed determined to fight all the way: when asked by RFR to extend the mezz in late ‘22, the lender insisted on a PiK loan that RFR principals Aby Rosen & Michael Fuchs would have to personally guarantee, and upon RFR’s default, successfully moved to enforce that PG. Opting to go the UCC route allowed the Koreans to beat CMBS bondholders to the punch – they too, had been gunning to foreclose after RFR defaulted on the sr. debt.

Close RFR watchers will know that despite this loss, and that of the Chrysler Building earlier this year, RFR has had a lot to celebrate these past few months: It pulled off a $1.2B refi of the Seagram Building, recapped 475 Fifth, and fetched a fat $400M+ for the W South Beach.

Full Court Press – Media Strategy Rundown 🏀 

The Promote pays close attention to the game inside the game, and media strategy is a key part of it. Couple this week that caught our eye

• Zillow is at war w/ resi brokerages over the use of pocket listings. CoStar boss Andy Florance saw the drama as an opportune time to plug CoStar-owned Zillow rival Homes.com, saying that it follows the “Your Listing, Your Lead” principle 🍿 Post went hella viral

• Masses & classes: Madison Realty Capital upsized its loan for Rabsky’s giant Downtown Brooklyn resi project to $555M. First, it teed the story up in the trades to drop the day when the market came back from Passover – you can tell it’s a plant rather than a scoop by the statement in the press release-y CO article. Madison followed that up a few hours later w/ a slick LinkedIn video announcement (set to dramatic 🎼 , Zegen on camera) that was prepped well in advance. This two-pronged approach gave them both the street cred of the news story and the personal touch of social.

Quickies

• Is this just a pricing vibe fart? Alexico apparently got a vague $1B offer for the Mark Hotel – but that would be a fantastical $6.7M/ 🗝️ 🤣

• Big one here - more on it Friday: Newbond is buying 2 mega-hotels (Hilton SF Union Sq, Parc 55) in SF, nearly 3K 🗝️ in total 

• New POTUS EO: Federal agencies no longer have to cluster in CBDs 🦅

• FHFA’s Pulte hits NY AG Tish James w/ federal criminal referral alleging mortgage fraud 

• SLG, Silverstein & Soloviev worry that NY’s slow casino reviews could DQ their bids ♠️ ♣️ ❤️ ♦️ 

• Leader of new LA housing agency to bounce after resume questioned

• Blackstone Mortgage REIT 👎️ graded over asset quality, office exposure 

• 7abibi hope: Brookfield has billions riding on Middle East PE revival

• Dimon: Trump trade war could challenge US credibility 

• Partnership w/ Wellington & Vanguard gives Blackstone access to the great unwashed 🧼 

Unquotable Quotes