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- [00:03]
A
There seems to be much greater value placed on what we do from an origination perspective in the institutional market than in the public market right now.
- [00:11]
B
As Buffett said, in the short run, the market is a voting machine and it's voting against private credit compensation.
- [00:26]
A
Welcome back to the Promote podcast, your insider guide to the money and mania of the CRE market. I'm Hatan Samtani.
- [00:32]
B
And I'm Will Krasny.
- [00:35]
A
Shout out to our sponsors for this episode. LoanBoss, which is a best in class CRE debt management software and Bravo Capital.
- [00:41]
B
Which is one of the market's leading HUD and bridge lenders and one of the best named too.
- [00:45]
A
It is pretty good. This week we discuss Tishman Speyer making another run at the Chrysler Building. With AB out, Robbie's raring to go. We then discuss how the ICE immigration crackdown is putting another big question mark on the already troubled Sunbelt multifamily market. And finally, Apollo sells to Apollo. With Apollo's help, it's going to be a good time. Should we kick it off with the news bulletin?
- [01:08]
B
Absolutely. Straight out of central casting, we get our guy, Kevin Warsh.
- [01:13]
A
Isn't it amazing how quintessential the guy is?
- [01:16]
B
It's just perfect. He looks like a Fed chair. I'm sure when he was like five in his class photos he looked like the Fed chair.
- [01:22]
A
He's also very much to the manner born, isn't he?
- [01:24]
B
Well, to the manner married, which is more important. You can marry more money in a man minute than you can make in a lifetime. He is the son in law to the Lauder family, one of Trump's biggest donors and one of the wealthiest in New York.
- [01:35]
A
Our friends at Pensford threw up a dossier about him. There's a couple of good points. So one, Kevin Warsh hates QE quantitative easing, which is basically when the Fed buys government bonds on the open market to kind of juice the money supply. He's not a fan of the practice at all.
- [01:48]
B
He's also an inflation hawk and I gotta say, my man JP really went in here. This was great. Where when unemployment was 9% and inflation was 1, he's like, I'm really worried about inflation.
- [02:01]
A
A single issue voter kind of guy. He also thinks the Fed's main game is setting rates. He doesn't want the Fed to be.
- [02:07]
B
Distracted by anything else and not renovating buildings for $4 billion or what have you.
- [02:12]
A
He's going to be the MVP of the markets is how I think about him for the next however long he lasts.
- [02:17]
B
When I was growing up in D.C. i went to a commander's game, that old RFK Stadium. And I remember walking out and the crowd started chanting, lower interest rate. And I remember being like, dad, what's going on? And he's like, oh, that's Alan Greenspan. He's chairman of the Fed.
- [02:32]
A
The chairman of the Fed has always been a big kind of figure in business and pop culture. Right.
- [02:36]
B
You had Paul Volcker basically ushering in the recession when he broke inflation.
- [02:42]
A
What do you think the Krasny rule would be? If you had to have a rule named after you, what do you think it would be?
- [02:46]
B
Everyone's broker than you think.
- [02:50]
A
All right, next one. Brookfield seems to have misplaced some value in an Oz fund.
- [02:55]
B
This was great. So the fund, which was called Brookfield Opportunity 71 IV7, I think.
- [03:04]
A
Is it just the number of funds they've raised to date or something?
- [03:07]
B
Who knows? Had an internal rate of return of negative 18.3 through the third quarter of last year, which, again, we're not here to shame bad returns. That happens.
- [03:16]
A
Things happen. Right.
- [03:17]
B
But when your investors aren't sure what the fund owns, how long it's owned it, where the losses are coming from, then it's something that we want to dig into a little bit.
- [03:25]
A
But isn't that classic Brookfield? One hand pays the other, and then the other hand's tied behind someone else's back.
- [03:30]
B
Brookfield walked so Apollo and Athene could run.
- [03:34]
A
We're going to get into that in a bit. But I think the big question for me is who's better at Oz investing? Brookfield or the Mooch remains to be seen.
- [03:42]
B
But my favorite part of this is that the investor goes, everything here should have done okay except for the mall that we bought in Connecticut.
- [03:49]
A
Oh, boy. All right, next one with the Willis Tower kind of in the market now because Blackstone's trying to sell it after a decade of a mah run at the tower. Donald Brun's getting in the game here.
- [03:59]
B
So Donald Bren. Every time you think, wow, this guy owns all of Irvine. You know, richest guy in the US in real estate. No, he actually also owns the MetLife building. He owns three massive million plus square foot towers in the Loop. Actually, I don't know Chicago that well. Like, is North Wacker in the Loop?
- [04:16]
A
Yes.
- [04:18]
B
So he is trying to sell one northwacker, which is actually performing well. It's pretty well leased. The debt yield is north of a 10 on the existing financing. So presumably this should be a pretty good outcome. And I think it's going to be a bellwether for the Chicago office market because a lot of the trades we've seen there have been distressed, vacant, having issues. This one's performing well.
- [04:36]
A
We've seen Beacon lose their shirts on a bunch of things. Even the landlords who've held onto their buildings are cash and refi. Painful recaps, all that stuff happening.
- [04:44]
B
And so this one should trade pretty tight. Great building, great address, performing well with plenty of equity baked in. So we shall see.
- [04:51]
A
One thing we do know for a fact is he would not be spending any of the proceeds on defending his son from investor lawsuits.
- [04:58]
B
We do not have a personal or professional relationship with this individual.
- [05:04]
A
Still the coldest statement I have ever heard. All right, last one. The Carlyle deal that just happened in New York is super interesting. Just to recap, Carlyle sold a portfolio of about 1.3 million square feet, Manhattan, Brooklyn, Queens and a little in Staten island for a billion dollars, which is $790 a foot for self storage.
- [05:24]
B
That's a pretty good office price from the peak.
- [05:28]
A
It's exactly what I was thinking. The buyer here is Storage Mart. I think New Yorkers will best know that name from the owners of the Manhattan Mini storage empire.
- [05:36]
B
Yes.
- [05:37]
A
They paid $3 billion for the Manhattan mini storage empire in 2021, and now they're doubling down. It's an astonishing run of acquisitions here.
- [05:45]
B
I know, it's massive. I think GIC is in here. Cascade's in here. It's the who's who of institutional investors and Manhattan Mini Storage, too. I just want to shout out my guys at Edison who top tick absolutely everything.
- [05:59]
A
You know, they sold the HFZ site.
- [06:01]
B
That's exactly where I was going. They sold the land to Zeal Feldman and HFZ for the 11.
- [06:07]
A
Yeah.
- [06:07]
B
At a thousand bucks a foot, they top ticked Manhattan Storage pricing. But maybe not here.
- [06:12]
A
No, they. Well, they kind of did because I think they sold at $970 a foot, and this one sold at an incredibly high price, but 790 a foot.
- [06:20]
B
All right, so they top ticked. Great. And they still own Edison Parking. They have sites all over the place. So those guys, well done.
- [06:26]
A
What we've talked about with Carlisle and a couple of these groups are trying to do, which is institutionalize a heretofore scattered asset class. So in 2020, a key tax abatement called the ICAP ran out for self storage. You could no longer use this for self storage facilities because that abatement supposed to spur job creation and self storage Facilities are basically like one guy if that automated. So they bought these up. They actually amped up the pace of acquisitions after this abatement ran out. And at some point they basically became if you had a self storage portfolio to sell in New York, you were calling Carlisle.
- [07:03]
B
Carlyle puts together these buy boxes. And then again, as we've talked about, there's a whole industry about front running their buy box and putting it together for them to sell.
- [07:11]
A
We've talked a bunch about the walk up empire in Brooklyn that they built and now I've refied for about a half billion dollars through the agency. So pretty, pretty interesting playbook they have overall. So will you violate any debt covenants recently?
- [07:30]
B
So funny you should ask. I have been in technical default recently. I mean, who among us, right? But not since Q4.
- [07:38]
A
Ooh.
- [07:38]
B
And that's not because I paid off the loan. It's because that's when I started using Loan Boss.
- [07:43]
A
I can't believe how old school some of our listeners are. They're still crunching DSCRs in Excel and all that.
- [07:48]
B
Ugh. Total waste of time. Risky business to boot. LoanBoss runs the entire process for me. One click covenant testing. Incredible. Instant cash flow forecasting. Impeccable. And my favorite nerdy delight, the live forward curve. So I hate having to go download the forward curve. And then it's always vertical and you got to alt HVT to have it go horizontal. Make sure the index match works like ridiculous.
- [08:12]
A
They've just got it sorted here for you.
- [08:14]
B
Much better. So thank you, Loan Boss listeners.
- [08:17]
A
Check them out@loanboss.com that's loanboss.com and tell them the promote sent you. Okay, Tishman Speyer coming back into the Chrysler Building. I love this building. It is kind of the embodiment of New York real estate. It has attracted capital from all over the globe. There have been some fascinating twists and turns in this art deco icon's history. And now Tishman Speyer is making another run at it. So AB Rosen, Abi to Will Krasny here lost the Chrysler building a few months ago. Him and his partner Renee Benko owned it together. Renee's had quite a run.
- [08:54]
B
Before we get to Renee Benko, I just want to briefly talk about Billions. I think season four, an episode's called American Champion. And the guy who's supposed to be Warren Buffett is trying to buy the Chrysler Building because he's like, it's going into the hands of the Japanese and like, we can't have that. And Wags buys The building. Coming out of a meeting in the Chrysler Building. Literally, Warren Buffett's waiting and they're like, wags, great job. You just bought the building. I'm like, that's not how this works. And I stopped watching Billions until I was on Billions.
- [09:22]
A
I don't want to be the kind.
- [09:23]
B
Of person that gets off on that. I really don't. Anyway, Renee Bengo. So Austrian property magnate slash playboy slash playboy slash philanthropist, current felon. So he flew onto the scene, he would buy these landmark properties and he also owned a bunch of operating retail businesses. So not unlike what's happened with Sachs. And actually, I think they bought Galleria Cough off from Sachs. Yes, from Hudson's Bay where he would own these retail companies and then sign way above market leases to pump up the value of the buildings and then siphon off tons and tons of money out of them.
- [10:01]
A
Tried and true playbook.
- [10:02]
B
You know why? Because it works.
- [10:04]
A
You know, at some point, I think he was one of Austria's richest men, lived the Life, became A.B. rosen's backer on a bunch of things. They came in, they teamed up in 2019 to buy the Chrysler for $150 million, which is nothing. It was a. There's a very interesting reason, I think, writ large in New York real estate about why some of the most iconic towers on the skyline can trade for bupkis.
- [10:27]
B
Right. So the Chrysler building is on a ground lease to Cooper Union. Yes, basically the largest asset in Cooper Union's endowment. And the ground lease was set to reset right when AB bought this. So they were paying some, not, I think, a couple million dollars a year of ground, which is, you know, a lot of money. But relative to the income that a building like this generates, not much.
- [10:49]
A
Sure.
- [10:50]
B
But then it increased, I think to north of 20 and is now set to reset north of 40 a year.
- [10:56]
A
And so imagine what that does to your noi. It's basically eviscerates your noi.
- [11:00]
B
The building's worth nothing.
- [11:01]
A
We've seen this issue play out across New York. A lot of the landowning families that own the fee have done this with a lot of the well known landlords and as a result we've seen tons of distress. So the Kareens, the Goldman family, Ashkenazi, and our boys at SL Green.
- [11:15]
B
Yeah, Barneys, yeah.
- [11:17]
A
Dealt with extreme prejudice there though, that, that worked out just fine for SL Green. I was surprised, Will, that you didn't bring up one of the most interesting players that was involved in the history of this building, Jack Kent Cook of The Redskins.
- [11:29]
B
Oh, man.
- [11:35]
A
Do you know how he got it? It's. It's an amazing story, too.
- [11:39]
B
So, yes, this was part of selling the Lakers. So he got divorced. Yes, that's right. And so Jack Kent Cook was talking to Jerry Buss. He had a tax issue, so he needed to take property.
- [11:51]
A
This tower at the time is sitting with Massmutual because they've just done a lender take back seats, Right. So they've taken it from Sol Goldman, one of the heavyweights of New York real estate. They've taken it back from him. And so they're sitting on it. Go on.
- [12:02]
B
So Jack Kent Cook is talking to Jerry Buss to sell the Lakers. He's like, I need real estate for some tax reason. Jerry Buss is like, I own a bunch of crappy apartments in Santa Monica. Like, does that interest you? And he's like, absolutely not. I want the Chrysler Building. And so Jerry Buss is part of this, figures out a way to engineer a swap to get the Chrysler Building to Jack Kent Cook. Jerry got the Kings, the Lakers, the Forum, and then a random piece of land in like Northern California, I think, where his ranch was. And then his apartments went to somebody else, who then sold the Chrysler Building.
- [12:39]
A
To Jack and Cook Bus absolutely got the better end of the trade here.
- [12:43]
B
Oh, my God. This whole thing was done for $67.5 million or something. And of course, the Lakers recently sold at a $10 billion valuation. So excited about Tishman coming back because Tishman was the once and future king here. They bought it in 1997 for 220 million, about 180 a foot, and then did phenomenally well on it.
- [13:06]
A
We don't maybe give them their flowers because Stytown happened and a bunch of other kind of meh outcomes, but I think Tishman Speyer is one of the best in the game at attracting that sort of quote, global capital. Right. Their sovereign playbook is absolutely 11 on 10. They got a W here at a. What kind of valuation was that?
- [13:24]
B
I think as high as 800 million.
- [13:26]
A
Yeah, pretty damn good.
- [13:27]
B
So they sold off all of their exposure, except I think they had a nominal grub stake, 10% or something, because I think they were still managing it for Abu Dhabi and kept a little peace.
- [13:38]
A
Abu Dhabi didn't do very well here. A.B. rosen and Renee Beno come in. What's his company called? Cigna, I believe.
- [13:45]
B
Cigna. Cigna Holding.
- [13:46]
A
I love it when there's no S in the holding that, like, to me that's prestige.
- [13:49]
B
I think that's why? Renee Benko and AB partnered together because they are both holding.
- [13:54]
A
Holding. Is it a European thing? Probably.
- [13:57]
B
It has to be.
- [13:58]
A
So RFR and CIGNA come in at $150 million valuation again, with that massive ground reset looming, they have a little bit of time to figure out a lot of things and they can't. They just can't make it work.
- [14:10]
B
Don't aggregate me, as Brian Windhorse would say on the HOOPP collective, but I heard that the investment committee for this was less than robust. And it essentially came down to AB saying, I'll figure this out. I'm AB Rosen.
- [14:23]
A
Sometimes you need a guy with a yacht just making a call. That's what makes this business so fun.
- [14:27]
B
And to be fair, I think they were pretty far down the road with Cooper Union on agreeing to something because again, Cooper Union doesn't want to take this thing over. They can't manage it and they can't.
- [14:36]
A
Really sell it because of the massive tax liability that they would have. Right. So they can't sell the whole thing outright.
- [14:41]
B
Yeah. So everyone's kind of incentivized to do the same thing. However, the monkey wrench here is that Rene Benko, in the middle of this negotiation, his whole empire collapses and he is now going to jail.
- [14:51]
A
He suddenly becomes front page fodder for the FT for multiple weeks in a row.
- [14:55]
B
It's tough when you end up as the guy, the main character in the ft.
- [14:59]
A
He was absolutely the guy in the FT for a bit. And so A.B. rosen's being asked, all right, dude, what are you going to do? They're looking to figure out a way for Benko to exit his stake and AB to hold on to his share in the building.
- [15:11]
B
The problem is, is that with the ground lease reset, that means none of the cash flow really could be reinvested in the building. So the building is capital starved at reports of mice in the building. Now the elevators work. It's part of RFR's leverage is going to Cooper Union. This thing's a mess. Like, do you want to take it over? Like, you don't. You definitely don't.
- [15:27]
A
Both sides are talking tough. Cooper Union moves to evict ab. Rosen and RFR claim that Cooper Union's mishandling of the Gaza related protests.
- [15:37]
B
Oh, God, right, I forgot about this.
- [15:38]
A
Yeah. Negatively impacted the values of this building. So, like, things are getting really ugly. Cooper Union wins a key decision and that's it. Ab's out. He's done.
- [15:47]
B
He's ejected from the ground lease.
- [15:48]
A
He can no longer collect Rents on the property.
- [15:51]
B
There's some stuff going back and forth though, because the Chrysler building is trademarked, so there's I think, a question of like, who owns that trademark still. So whether it's separate from the building itself.
- [16:03]
A
Interesting. So anyway, this, this comes back on the market. And generally for people who are not familiar with the New York skyscraper listings, they're an event. You get big headlines for them. They typically go to one of maybe three groups in the city. This one kind of happened randomly. It was on the market. The promote found out about it. No one had written about it. Savills is marketing and it's Savills. What's going on here?
- [16:26]
B
Savills is studly. What can you say?
- [16:30]
A
So this is like a weird quiet listing that's been in the market for a few months. And now we find out that Tishman Spire is making another run at it, which to me makes a lot of sense. You come in at an incredibly low basis. You already know the building cold. You hopefully have a decent relationship with the fee owner, which is kind of the linchpin of this whole thing.
- [16:48]
B
Totally. And again, you also have the capital. You're buying this thing low enough to have the capital to fix it. Yeah, that's always the issue with buying these things. It's like, oh, the basis is incredible. But really, what's your adjusted basis once you factor in all the deferred, all the capex. That's the thing we talk about with like the rent stabilized product. Yeah, you're buying it for 80,000 a door, but you got to spend a hundred thousand a door just to make it habitable. And so Tishman coming in at a low basis makes that more palatable.
- [17:13]
A
What's your guess on what this is going to go for? If AB&CO paid 150, what do you think Rob's going to pay?
- [17:18]
B
Sub 100.
- [17:19]
A
Sub 100.
- [17:20]
B
Wow.
- [17:20]
A
Okay. I had it at 125.
- [17:22]
B
Yeah, I mean, it's just a massive reset in the ground lease. So again, it's sort of like mutually assured destruction. Cooper Union cannot run this building. Like that is like they have to sell and there has to be some complex. As you said, they have tax issues. You gotta like figure that out. Which again, Tishman, as sophisticated as they come, can do that, solve their problem. So I think this makes a lot of sense. I had heard that a couple folks were looking at this as a residential conversion, which would be interesting.
- [17:47]
A
The other thing that Tishman can do, as we kind of hinted up top, is they can buy their time. And then they have kind of the know how the wust that'll bring in another Abu Dhabi at some point. Right. They know that whole universe. At some point they can go and spin the story. Like, hey, this remains an icon of the New York skyline. Sure, it had some issues, but, you know, we've cleaned it up since then and you're good to go.
- [18:07]
B
This is the whole de Risking playbook where you take the hair and you do that on balance sheet or with a partner and then you fix it.
- [18:13]
A
Yeah.
- [18:14]
B
Max out the value and bring somebody else in. So they may just rinse and repeat the same thing they did when they bought it in 1997. Foreign.
- [18:32]
A
I'm here with Aaron Krovitz from Bravo Capital. Aaron, let's get right to it. What's the story behind this mythical 100 HUD approval record?
- [18:39]
C
It's pretty straightforward. We have an amazing team. We're a pure play hud. We're focused on bridge to HUD all day. We're both fully HUD licensed and we also offer balance sheet bridge financing where we can finance deals over $100 million, just like we did in Miami, Brooklyn and Jersey City.
- [18:56]
A
And what's the secret sauce? How do you put it all together?
- [18:58]
C
It's our underwriting. We don't rush deals to market and hope they stick. We know what HUD wants before we submit, so there are no surprises. And we have a real balance sheet. So when we go, we go.
- [19:08]
A
You were telling me when we were chatting offline that you closed a HUD Express Lane deal in four days. That's absurdly fast for hud.
- [19:14]
C
Hey, Tim, that's why we get up in the morning at Bravo. We're here to break records. We're here to innovate. And when you have tight documentation, the right underwriting, that means speed approvals and.
- [19:24]
A
Speed means the sponsor can close quick. Thanks, Aaron. Good to have you on.
- [19:27]
C
Thanks.
- [19:27]
A
A10.
- [19:28]
C
And you can find us@bravocapital.com.
- [19:48]
A
We're not really political on the show, but I think this is interesting thing because the broader political conversation is impacting particularly the multifamily landscape. Pretty hard. We're talking about the whole immigration crackdown. Pretty interesting and kind of alarming trend going on with hud.
- [20:02]
B
Immigration crackdowns nationwide have had a pretty meaningful impact on apartment leasing and occupancy. And John Burns, the real estate consultancy who are fantastic. Yeah, really good data, commissioned a survey where it said that 40% of apartment owners reported that immigration policies have hurt leasing and occupancy rates and particularly in markets that you would expect to have a lot of immigrants.
- [20:27]
A
So the Sun Belt, Phoenix, California, et cetera.
- [20:30]
B
Exactly. So some of the results of this survey are pretty startling. In Florida, where about a fifth of the population is foreign born, 2/3 of landlords that were polled in this survey have felt a negative impact from the immigration policy enforcement, according to the report. In Texas, another fifth of owners and developers reported significant negative impact, while another quarter said that they felt a somewhat negative impact.
- [20:53]
A
For the most part, a lot of these landlords, developers, operators are Republican. So this is not a political statement in any way that they're making. This is like, hey, this is having a material impact on my leasing, this is having a material impact on my finances. Because I think landlords are essentially being asked to play the role of quasi immigration agents in a way. And the mechanisms that they need to vet someone's immigration status, etc. They don't necessarily have. So it's putting a big damper on the market. It's also impacting activity. Right. If you're someone with a kind of a teetering immigration status, you're less likely in this environment to make any real estate moves.
- [21:29]
B
Totally. And I think people understand how immigration enforcement has impacted labor, especially on construction. But on the leasing side too, you think of all the downstream impacts. So if you're foreign born, you may opt to move in with friends or family because you don't want to have your name on a document.
- [21:46]
C
Exactly.
- [21:46]
B
And so that really puts a damper on leasing in apartments. It's all above being above break even occupancy. So if on the margin demand goes down, there's huge fixed costs to operate these buildings and that can have a huge downstream impact. And you're seeing in some of these places where you can point on a timeline to where immigration enforcement cranked up to where market occupancies have dropped 400, 500 basis points.
- [22:12]
A
The other part of this is even though the actions will not necessarily impact a large chunk of the tenant population, it's more the vibe of the thing, the expectation that landlords may now have to do XY the contingency that hey, if we don't do this, we might get taken down by the government. I think that changes the investment calculus quite a bit. Right.
- [22:31]
B
There's been enough uncertainty around just verification of incomes. Whole industries have been created to snapped and other products to make sure that folks aren't like editing PDFs showing like job offer letters or pay stubs and all that, trying to Verify things even above that. It's really hard. Landlords don't really have the infrastructure to do this and it's really causing an impact because again, the difference between 125 DSCR and a 0.9 is not that high in terms of occupancy. And this can really knock folks that are already struggling down below those thresholds.
- [23:02]
A
Do you think Syndicator, Sunbelt Syndicators. Are you going to use this as another excuse?
- [23:06]
B
100%.
- [23:13]
A
All right, let's close things with kind of the classic promote story, right? When you're having a bit of a rough go in the public markets. As we've talked about, a lot of these REITs are getting bodied in real time on the stock market, right? Even the best in class ones. What do you do? Well, a lot of people have no choice but to dissolve and kind of ride into the sunset. Others though, like Apollo, have a few more options.
- [23:35]
B
As Don Draper said, if you don't.
- [23:37]
A
Like what is being said, change the conversation. It's very true. So what are we talking about here? Shares of Ari Apollo Commercial Real Estate Finance, their real estate credit reit, have consistently been trading below book value. They've gone and decided to sell their entire loan book, which is about $9 billion, to another Apollo unit called Athene. Athene, the insurance subsidiary, in an amazing.
- [24:03]
B
Self attaboy, Athene agreed to pay a 20% premium to recent trading levels per the FT. And Ari said this validates its book value.
- [24:11]
A
We were right all along because our sister company just did this for us.
- [24:15]
B
Ugh. Fantastic. Talk about self grading your homework.
- [24:18]
A
Athene, we've talked a lot about on this podcast, just basically writing the biggest checks all across CRE at the moment. And the reason, I think our friend Hunter had explained this really well in that incredible essay we'll link to in the show notes. But Will, can you just give a summary of why it's so easy for Athene to do the kind of things it's been doing over the last couple of years?
- [24:37]
B
This is just like a whole pyramid where Athene originates loans and then you can sell off those pieces and get more equity to originate more loans to sell off the pieces to get more equity to originate more loans to sell off the pieces.
- [24:53]
A
So the initial equity is coming from what used to be like a very unsexy, dry part of the money machine, which was life insurance premiums. Right. They were not used in a, let's say in a creative fashion prior to Apollo figuring this whole thing out.
- [25:05]
B
Right. And part of it was everyone's talked about Buffett trying to have permanent capital with insurance, but regulatorily, you could only invest in very specific fixed income. So it's not like any guy can go buy a insurance company and, like, invest in public equities. Like, you have to have certain parameters. And so Apollo figuring out how to do this and basically run their entire private credit book, which is like the DNA of the company through this engine, is really a masterstroke. They create the perpetual motion machine of finance here. And so if one side of the house doesn't like what's being said, they change the conversation and sell it to the other side of the house.
- [25:41]
A
I think it was a great quote from a very senior Apollo exec, Scott Kleinman. He said, the whole game really is built around can you originate enough attractive assets to meet your needs? If you can figure that out, that's the whole game.
- [25:53]
B
It's hard to do it in one specific sleeve because there's certain times where, you know, real estate finance might not be attractive, corporate finance might not be attractive, but if you have enough nodes into all these different industries, at some point, there's always something to do.
- [26:06]
A
That's actually kind of a great hidden insight. There's always something to do, right?
- [26:11]
B
Yeah. Like, if you have enough surface area, you'll get lucky and find it. So that's really what they've done. It's a way to put out a huge amount of capital into a thing that they know. They know these loans. I mean, Athene's already invested in a lot of them. And so it's natural, keeps it in the ecosystem. They keep the management fees, and it just keeps the machine moving.
- [26:28]
A
The other part about this that makes all of this work is that real estate assets, asset backed loans, are often rated investment grade, which satisfies the criteria that insurance companies have to have. That's kind of the clincher here.
- [26:39]
B
Not saying anything about the quality of this loan book, but, like, let's ask the folks at Moody's how well residential mortgage bonds were rated in 2007. If we don't give them the ratings, they'll go to Moody's right down the block.
- [26:51]
A
There's a couple of loans in this book that Ari is selling to Athene that I think we want to get into. Probably the most fascinating capital stack of all time. And I don't say that lightly, but the promoter. We think about this shit a lot. 111 West 57th street, which is the JDS PMG building. Incredible.
- [27:07]
B
You know you have a good cap stack when it takes multiple pages, it's absolutely astonishing.
- [27:13]
A
So Ari was the lender. I believe they own the mezzanine piece on that one.
- [27:16]
B
There's 45 loans on that property. Who knows? It's one of them. It's one of the Fulcrum securities. Let's just call it that.
- [27:21]
A
So, air. I. I'm assuming after the sale is consummated, they'll write off into the sunset.
- [27:27]
B
Well, I'm sure that they'll ride off into the sunset and then start originating new stuff they're selling off the loan book. They'll just go rebuild it, rinse and repeat. As you said, Ari is an origination engine. And there we go.
- [27:37]
A
Stuart Rothstein, who runs that arm, said it flat out. He said, there seems to be much greater value placed on what we do from an origination perspective in the institutional market than in the public market right now. Translation, being private lets us do a lot more exotic, cute things.
- [27:52]
B
And in the public markets, if you're trading at less than books, I can tell you what that at the end of the next quarter, Athene's marking that shit to par. That's a big gain.
- [28:02]
A
Athene's already become, as we said, an alpha dog in the CRE lending book. It topped CMA's ranking of top insurance lenders two years in a row. In 2024, it originated more than $10 billion, which was up 40% year over year. Last year, it did one of the defining transactions in the New York market, which was 590 Madison. It originated that loan for Rechler and Elliott Investment Management. It keeps kind of moving up the prestige and scale stack. And as kind of we're talking about here, Apollo's kind of getting into every little nook and cranny of CRE finance. They bought a cpace lender as well. A topic that I've been wanting to chat about. More on the pod. How would you define cpace?
- [28:40]
B
Basically, extra leverage. That's cheap. Apollo is basically created like in the Titanic, when you could have four different pockets flood before the whole boat goes down. Athene is just another pocket. So Ari's going down and they can just slam the gate, shove it over there, and it'll float to the top.
- [29:07]
A
That's it for the promote podcast this week. If you get no love in the public markets, there's always a private credit cuddle to be had. ICE's immigration crackdown is breaking the flow in the multiple multifamily market. And Tishman speyer is making another run at a tower where everyone probably except for Tishman Speyer, has been humbled. We'll be back next week with more CRE Insider goodness. And remember, write us a review on Apple. Will was hoping to have a fun rendition for this week, but no love.
- [29:33]
B
Really sad. I was really fired up for this podcast. I have a ton of energy and it's all wasted for nothing. So thank you.
- [29:41]
A
For nothing. A shout out again to our sponsors, Lone Boss and Bravo Capital.
- [29:45]
B
You can find them at bravocapital.com and.
- [29:48]
A
Loanboss.Com I will see you next week, my friend.
- [29:51]
B
Thank you, thank you.
- [29:53]
A
Ciao.