The Name’s Bond…Newbond

This is the kind of deal that makes or breaks careers. Newbond is snapping up two distressed mega-hotels in SF, giving the investor control of nearly 3K 🗝️ (8-9% of SF’s total hotel stock!) in a city’s that’s (🤞) starting to get its vibe back. The hotels, the Hilton SF Union Square and Parc 55 SF, were collectively appraised at $1.56B in ‘16, but that was a lifetime ago – per a servicer report cited by REA their valuation has dropped over $1B since then. Since the deal is hella structured, we don’t yet know how much $ Newbond is coughing up. We also don’t yet know who their equity partner is – one frequent backer has been Apollo, which bankrolled Newbond’s deals for the Renaissance hotel in Times Square and the Sheraton Tampa Riverwalk. Newbond has also partnered w/ asset manager Rithm Capital, through its subsidiary GreenBarn.

Neil Luthra & Vann Avedisian formed Newbond in ‘21, after a decade-plus at Highgate Holdings, the hospitality investor run by the Brothers Khimji (the Khimjis are part of the business-savvy Ismaili community headed by the Aga Khan, but that’s a 🐇 hole for another time).

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Newbond (Cont.)

On the SF deals, Newbond has agreed to kick in fresh equity to fill in cashflow holes and complete required renos. The loan on the properties will be modded & extended.

REIT Park Hotels had landed a $725M CMBS SASB loan on the properties in ‘16. In ‘23, CEO Thomas Baltimore dropped this gently worded bombshell: “After much thought and consideration, we believe it is in the best interest for Park’s stockholders to materially reduce our current exposure to the San Francisco market.” That was his way of saying that Park would no longer make good on their loan payments on the hotels. The following year, a court-appointed receiver tapped Eastdil to market the properties on behalf of bondholders.

Newbond plays in both equity and debt – it partnered w/ Madison Realty Capital to buy the NPL for New York’s Public Hotel in ‘22, and the 2 JV’d on a hospitality lending platform, Madison Newbond. And Newbond was recently the runner-up in a play for the Kimpton Hotel Eventi - it thought it had clinched the deal, per hotel insiders, but lost it in the 11th hour to Blackstone. And this month, it landed the asset-management contract for the distressed ( 😭 Natixis) Edition hotel in Times Square, a former Maefield joint (if you’re not familiar w/ Maefield’s tragicomic forays into big-money real estate, start here).

Carlito Gets His Way  

After a 5Y showdown against asset-management bigwigs, Carl Icahn folded his Big Short trade on US malls last summer, collapsing $3B-ish of derivative trades – we did a short film on the whole saga at the time that you might enjoy. But one skirmish from that broader war lives on: Icahn had gone after special servicer Rialto in ‘22, alleging that Jeff Krasnoff’s firm intentionally slow-rolled the sale of a Nevada shopping center and juked appraisals to withhold profits from bondholders like him.

Now, a judge has ruled that Icahn has been able to show that real harm was done to him in the affair, per Bloomberg, and ruled that his suit against Rialto can continue. The fate of the suit will be closely watched by the small but mighty community of special servicers, who’ve long enjoyed relative carte blanche on the decisions they take on troubled loans – the one that always jumps out to us the $164M holdback by Midland on the Veritas SF multifamily mega-portfolio. Sponsors will be watching closely, too – special servicers have menaced them in recent months, and some have fought back, accusing the servicers of fee juicing. 🧃

“Special servicers often operate on the assumption they’re not going to get sued, and legal and practical impediments have discouraged investors from acting as a natural check against bad behavior,” Icahn’s lawyer told Bloomberg, adding that the ruling “creates a template” for bondholders to come after them. Rialto, for its part, dismissed the rulings as “procedural motions” and said it was ready for court. 🍿 

NYC Rent-Stab Market: Gotta Pay the Piper

Some 🌶️ testimony in front of NYC’s Rent Guidelines Board yesterday: Robert Riggs, a director at the CPC, the nonprofit lender/investor that partnered w/ Related on its purchase of a slice of the Signature Bank rent-regulated loan book, broke down operating costs on the CPC portfolio. IF a unit’s rent was below $1,200-$1,250, he said, that unit was in the red. “If the rent is lower than that, the unit's not covering its operating costs,” Riggs said, speaking of his portfolio, which is all affordable/rent-regulated housing.

“Your increases and our increases over the last 3Y years were 21%,” Riggs told the board. “If I drop this 21% and run the numbers, it comes out to $1K a month, not $1,250. So as those expenses go up, this is how it relates to rents, and as it puts pressure on NOI, we expect to see deferred maintenance, tax liens, mortgage defaults, and bank foreclosures. We as a lender are starting to see all 4 of those things, and I expect that trend to continue.” Audio of full presentation here – it’s obviously just one particular lens into the economics of NYC RS multi, but an interesting one. Landlord lobbyist Jay Martin estimates that 150K RS units in the city have rents below that $1,250 threshold.

Quickies

• 🎥 Meridian’s Fannie freedom cry – the devil’s in the fine print

• Done deal: Amazon taking 330K sf at PBC’s 10 Bryant Park – news of lease had been reported but now there’s confirmation via the Israeli bond market (See also: TASE me I’m dreaming)

• No prison time for Texas investor and AG Paxton buddy Nate Paul 🤠 

• Here are America’s top 50 multifamily landlords

• Gural/Berman/Rockwood seeking $800M debt package for giant office-resi project at 25 Water

• The NYC owners that got the fattest tax discounts 💇‍♀️ 

• 👂️ If you had $800M, would you buy one Manhattan condo site – or 11 Texas master-planned communities?

• I’ve always maintained that Canada is a great place to do real estate development fraud

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