Blackstone Cubs, Secondaries Sizzle & Hines of Arabia

Summary

The Promote Podcast
Episode: Blackstone Cubs, Secondaries Sizzle & Hines of Arabia
Date: November 5, 2025
Hosts: Hiten Samtani (“The Bard of CRE”) and Will Krasne

Episode Overview

This episode dives deep into three pivotal stories from the commercial real estate world:

1. The emergence of “Blackstone Cubs”—top alumni striking megadeals and shaping new market dynamics, with a focus on Chad Pike’s big industrial transaction.
2. The surging popularity of real estate secondaries as both institutional liquidity solutions and a clever market workaround.
3. The Middle East's transformation from global capital source to high-stakes development destination, spotlighting American firms’ move to build in the Gulf.

Throughout, Hiten and Will mix technical insights, industry war stories, and trademark banter—delivering a must-listen session for insiders and market observers alike.

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Key Discussion Points & Insights

1. Blackstone Cubs and Chad Pike’s Industrial Megadeal

Timestamps: 02:17–15:27

• Who are the “Blackstone Cubs”?
  Top Blackstone alumni whose moves set the tone for CRE markets.

  • Focus on Chad Pike, former Euro real estate head at Blackstone, now making big plays with his new firm Macraura.
  • “There’s a couple of guys… the market’s been tracking closely… their moves kind of set the tone for the entire market.” (A, 02:17)

• Plymouth Industrial REIT Take-Private:

  • Chad Pike’s Macraura orchestrates ~$2B, 32M sf take-private acquisition—the classic Blackstone move: buy undervalued public REITs.
  • Outmaneuvered 6th Street, who had a large JV and earlier bid lower.
  • “We’re talking like a 50% premium to the share price right before 6th Street’s offer came out.” (A, 03:39)

• Market Context & Asset Class Nuance:

  • Surge in capital; “vibes drive price,” with capital flows and rate shifts fueling big premiums and deal activity.
  • Focus on “shallow bay” industrial—smaller suites, short leases (avg. 3 years), higher active management, more mark-to-market rent potential versus big box, long-lease product.
  • “Whenever there’s more active management, there’s the potential to drive outperformance.” (B, 06:34)

• Financing Shifts:

  • Debt environment for industrial is best in years, partly due to scale and diversification of cashflows.
  • “Generally, scale begets tighter debt.” (B, 06:49)
  • Life insurance and CMBS capital joining the party at higher deal sizes.

• Chad Pike’s Career & Blackstone Backstory:

  • Pike: fly-fishing-loving Blackstone lifer, co-headed real estate with John Gray, then nudged out in classic corporate power play.
  • “Chad Pike… was co-head of real estate. When a young wizard called John Gray was running the Americas, this guy was running Europe. So they were peers for a time.” (A, 08:42)
  • John Gray’s maneuvering to become sole head, Pike’s subsequent lateral “demotion” to Tactical Ops, and early retirement.
  • Takeaway: Blackstone breeds “stone-cold killers”—and alumni have outsized influence when they strike out on their own.

• Blackstone Mafia / PayPal Analogy:

  • Blackstone (like PayPal in tech) spawns waves of high-impact alumni (e.g. Tyler Henritzi’s Town Lane, $1.25B raised without IR/placement agents).
  • “Of course, [Tyler] would be one of these guys. Not just the resume, the deals, the expertise, the jawline in a lab.” (B, 14:25)
  • At scale, Blackstone talent pools and stock comp keep talent in-house longer—but those that leave can easily raise capital.

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2. Middle East Evolution: From Capital Source to Development Destination

Timestamps: 16:27–22:38

• Historical Context:

  • Gulf (Saudi, UAE, Qatar, Bahrain, Kuwait) was traditionally where U.S. and global firms went to raise capital.
  • “It used to be the Gulf is where you’d go to rub noses and raise cash… now they’re going there to build out these skylines for these royal families.” (A, 16:35)

• Shift to Development:

  • American developers now opening offices (e.g., Hines in Riyadh) to partner on massive government-backed urban projects (e.g. NEOM).
  • “One of the most American companies… is opening an office in Riyadh. They had an office in Dubai… but [Saudis] have a massive mandate to build out their cities.” (A, 18:01)
  • Dubai now a wealth magnet post-pandemic: 70% property price increase in 4 years.
  • American and global expertise needed for “building at scale”—massive government mandates require imported know-how.

• Cultural & Mandate Dynamics:

  • Gulf states value speed, flexibility, and creative fee/JV structures—opportunities for savvy U.S. operators.
  • “If in the Middle East you get to start from scratch, you can get pretty creative… Adnan Khashoggi’s entire business model.” (A, 20:01)
  • Government investors more interested in building domestically, pressuring U.S. partners to “join the party” instead of just collecting checks.

• Market Implications:

  • Existing American firms are sending young talent; major builders (Brookfield, Hines) landing major new mandates.
  • Expertise in “mega” urban development remains rare globally—CRE heavyweights are now prized builders, not just capital hunters.

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3. The Real Estate Secondaries Sizzle

Timestamps: 22:55–30:49

• What Are Secondaries?

  • The market for trading stakes in private real estate funds, offering long-locked-in investors a liquidity release valve.
  • “Secondaries more broadly have been a way for folks to get liquidity over time…” (B, 23:33)

• Why Heat Up Now?

  • Private real estate funds are active longer; distributions are slower, fundraising cycles are protracted.
  • “I heard of a large [real estate] fund… that has not made a carry distribution in seven years.” (B, 25:06)
  • Illiquid, opaque market means “face-saving” and shifting mandates drive sellers as much as economics.

• Key Players and Deals:

  • StepStone: $4B fund; Warburg Pincus and Madison: $300M new secondary fund.
  • “They’ve been doing it in corporate private equity as well. There are other firms that are known for doing this.” (B, 24:33)

• Discounts and Opaqueness:

  • Discounts (20–25% below NAV?) are common; sellers offload dog assets alongside gems; price discovery tricky.
  • “A lot of people… haven’t put real marks on things. This has been something that Mike Comparato has been railing about for a long time.” (B, 27:10)

• Face Saving and Institutional Behavior:

  • Organizational changes or mandate shifts (e.g., new CIO, allocator decides “no more NY office”) can trigger block-selling.
  • “A lot of what we see in these broader institutional markets is a function of face saving.” (A, 28:48)

• Smaller Secondaries & Restructurings:

  • Family offices (see: Alexa Raklin at Hob Mountain) targeting sub-$5M deals; many mid-market funds are struggling or in wind-down mode.
  • “There are a lot of mid-market private equity firms that aren’t going to exist, that have raised their last fund both in corporate and in real estate.” (B, 29:52)
  • “It might not be the right environment to exit an individual deal, but it may actually be the right environment to exit the poo poo platter of deals.” (B, 30:31)

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Notable Quotes & Memorable Moments

• “There’s a reason Blackstone offsites never include fly fishing.” (A, 00:20)
• “Chad Pike… was co-head of real estate. When a young wizard called John Gray was running the Americas, this guy was running Europe.” (A, 08:42)
• “Vibes drive price.” (B, 04:30)
• “If you have these shallow bay things, what you can do is you can reset them to market.” (B, 05:33)
• “If you were to draw up somebody in a lab to raise private equity real estate funds… it would be Tyler Henrietti.” (B, 14:25)
• “You notice when I make ethnic jokes, Will gets really uncomfortable. So I do it a lot because I’m ethnic and he’s not.” (A, 16:53)
• “Nothing will ever beat Michael Milken with a giant headdress from five years ago…” (B, 17:15)
• “If in the Middle East you get to start from scratch, you can get pretty creative.” (A, 20:01)
• “Secondaries… the cold pizza of the allocator game.” (B, 01:18)
• “It’s really, you know, barbells all the way down. It might not be the right environment to exit an individual deal, but it may actually be the right environment to exit the poo poo platter of deals.” (B, 30:31)
• “Returns matter for fundraising? No, they do not.” (A, 28:48)

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Important Timestamps & Segment Guide

• 02:17–15:27: Blackstone Cubs & Chad Pike’s Industrial Megadeal
• 16:27–22:38: Middle East: Gulf Shifts from Capital Source to Development Destination
• 22:55–30:49: Secondaries Market Heat, Technical Explainers, and Market Psychology

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Tone & Style

• Trademark blend of technical rigor and playful banter.
• Real-world industry gossip and irreverent observations.
• Nuanced, non-hyped analysis of market mechanics, with plenty for both insiders and the curious layperson.

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This episode is essential for anyone tracking commercial real estate power moves, understanding invisible market levers, or wanting a front-row seat to how the industry's biggest actors are rewriting the rules—in capital, geography, and liquidity alike.

Transcript

[A]

You watch the Blackstone holiday videos of the reels on LinkedIn. John Gray. He comes across as this nerdy, brilliant, likable guy running your trillions as he runs across world capitals.

[B]

But we at the promote have long believed you don't get to that level without the ability to be a stone cold killer when you need to.

[A]

You know, there's a reason black zone off sites never include fly fishing. Welcome back to the Promote podcast, your insider guide to the money and mania of the CRE markets. I'm Hittan Zamdani.

[B]

And I'm Will Krasny.

[A]

We're podding on this gorgeous New York City marathon date.

[B]

Congrats to my friend Nicholas Fulford. Set a PR today. Excellent work.

[A]

Well done, Nick. Does he listen to the pod?

[B]

He does.

[A]

Okay, excellent. So we're potting on this gorgeous New York City marathon day, which is apt. Since we're gonna discuss those who run huge sums of money. That is.

[B]

Ha ha ha. Hi, O.

[A]

Former Blackstone Alpha Cub Chad pike is finalizing an industrial megadeal. This is in a world awash with capital, but it's the same names who are gobbling up increasing shares of it. The Middle east used to be where you go to get your money, but it's quickly becoming where you go to build. And buying leftovers has never been sexier. CRE secondaries are the hottest game in town.

[B]

The cold pizza of the alligator game. It's a great docket yet again. I'm very excited to dig in here.

[A]

As am I. So a couple things. Go check out the Promote Insider. That is our premium subscription tier. We dropped this piece on these Chinese firms that are still active in the US market. And it was super timing because hours later, one of them did their first major condo deal in New York. So we've got some sauce. Hit [e-mail] upgrade.

[B]

I just can't believe JD Capital wanted a more American name. And what they went with was Pond Moon.

[A]

So good. Something got lost in translation for sure. Also, brands to reach CRE's insider community.

[B]

Reach out to partnershipsthepromote.com and it's not just CRE insiders. We're entertaining to folks of all persuasions and all jobs. [e-mail].

[A]

That'S right. All right, well, was it the Chad?

[B]

The Chad was excellent. Starfish. Was it the Chad? No, the Chad was great.

[A]

So there's a couple of guys who. Couple of Blackstone cups that the market's been tracking very closely to see what they get. Up to because their moves kind of set the tone for the entire market. So one of them is our boy Chad pike, who's just struck an industrial megadeal.

[B]

Look, I just apologize in advance. Macarora, I'm going to just butcher.

[A]

So yeah, I thought it was some Maori fishing term given the guy that we're talking about, but I'm not sure.

[B]

I don't know. Just give me some grace on it. I apologize in advance. No disrespect intended. So he has inked a really big take private, which is right out of the Blackstone playbook. They are known for wanting to buy public companies when they're trading below nav. It's a playbook they've done over and over and over again and it's how John Gray sort of got his stripes.

[A]

So we're talking about Hilton lbo, the most recent one with Air Communities Equity Office Properties, qts, all of that. That's their book. Yeah.

[B]

Yep. They've definitely done this and they are the best at it. And. And they just inked a deal to buy Plymouth, which is an industrial REIT. 32 million square feet, two plus billion dollar deal. And what's interesting is that they pipped one of the other groups that's been aom gobbling 6th Street. Yeah. So Marco Salvarado had done a large. Had done a large JV with them for their Chicago assets and they tried to buy the company in August. So just a couple of months ago. And this is at a massive premium to that number.

[A]

We're talking about like a 50% premium to the share price right before 6 Street's offer came out.

[B]

Right. I mean that's like OpenAI valuation numbers.

[A]

Is that just a function of the market just being awash in capital and so, so much capital number go up. It's not like the market conditions could have changed in industrial that dramatically.

[B]

Not really. It's a function I think too of how people's perception of what's going on with rates can really impact forward capital allocation decisions. So I don't have the chart in front of me, but rates are down since August and more importantly, like we've seen two cuts. Except our guy JP did say he didn't wasn't sure we're going to cut in December, but it looks like the market's pricing in more in 26 people are calling the bottom. More and more and Blackstone themselves are calling the bottom. They're saying we're in.

[A]

Yeah, they've been talking about re acceleration. This is the time to get going. All of that.

[B]

Brookfield said the same thing. So it's just again like vibes, drive price.

[A]

We should talk about industrial as an asset class and why it's become a target for so many of these megadeals.

[B]

I think it's important to just say that like industrial is not a monolith.

[A]

Did you see the promotes new shallow bay Chalamet feature?

[B]

I did. You know, and I'm surprised you didn't call me Chalamet Chalamet because I do Chalobay. I like to think I'm a little, you know, bulkier than old Timmy.

[A]

Well, after the food poisoning, I'm not sure.

[B]

But yeah. So when you think industrial, I think when you hear Hamid from prologis talking about it or what Blackstone's buying, you think these sort of hulking million square foot distribution centers, they're right next to highway exits, they're near ports, those types of things. We can reach 37% of the US population in one truck drive, right? Yeah, that's part of it. But what Plymouth is, is smaller suites, shorter leases.

[A]

What is the wall tier? Like three years or something?

[B]

Just over three years. And you may say, well gosh, like I would prefer a 10 year lease to Amazon. Well, there's no upside there. That's baked in.

[A]

You're basically buying cash flows in that.

[B]

And risk is the stability of your cash flows. And so those cash flows are generally pretty stable. Some Whole foods landlords may disagree, but if you have these shallow bay things, what you can do is you can reset them to market. So if you look at the spectrum of real estate asset classes, hotels you can re lease every day, you can jack the price if the market moves.

[A]

And we talked about this with Dreamforce and how that week in SF basically makes your entire nut for the year.

[B]

Apartments once a year office was longer. But in this case what you're able to do is you're able to go get market rent. So if you have a lease that's 10 years long and your rent escalations are 2 and a half percent but the market moves 5% a year, you are way under market but you don't have a method to go get that mark to market increase. With this portfolio where you have shorter wall, you're able to take advantage of the market actually growing rent because you can release a 30 year portfolio every year essentially with 3 year wallet.

[A]

This would be more fair to say like a more actively managed portfolio, more resources for asset management lease.

[B]

This is not the industrial where you know, you sign the Lease set and forget. Yeah, yeah. You don't talk to the tenant for nine years until they renew. This is way more active management. But whenever there's more active management there's the potential to drive outperformance with good active management. Yeah, so that's sort of I think the play here.

[A]

And what do the debt markets look like for this kind of asset?

[B]

Debt markets right now are as good as they've been in the last two, three years period. Full stop for this. Generally scale begets tighter debt. So if you had two assets with three year wallet it's going to be really hard for you to find a good debt quote because they're going to rightfully look and say well if I'm going to give you a five year loan, you got three year wall that does the sort of jive. But if you're able to spread it across 32 million square feet you can rightly say look, we have a very broadly diversified portfolio. We have this diversity of cash flow streams and it's going to grow because it's not locked in. We're able to go get market rent growth. We also think that these assets are infill, they're smaller, it's harder to build, there's not going to be as much supply as there is in the big box area. So we're going to have above trend rent growth. It's a pretty salable story. I've said that exact story myself.

[A]

You certainly have. And there's so many options here. Right. Like you can go the CMBS route. You can also increasingly for these bigger and bigger deals you can also get life insurance money more and more now. Right. We've seen New York Life step up for a bunch of these. Typically life insurance companies used to tap out maybe in the 2,300 million dollars range but now they're going bigger and bigger and bigger and there's always our boys from a theme.

[B]

It's a great number. It's like mid to high 6 cap rates or your mileage may vary on how you calculate that but that's pretty tight.

[A]

Tight, tight, tight.

[B]

Pretty good validation that this space, the small bay industrial space is here to stay. Not just the big box supertankers that Amazon's going to run with a bunch of robots.

[A]

Regular listeners might be thinking oh this is all very interesting but this, it doesn't sound very promote y very technical industrial assets. We're not just talking about it because of the deal, we also like the person behind the deal. So let's talk a little bit about Chad pike and who Chad pike is Chad, cast your line, sir. Yeah, so this is going to be full of crappy fishing puns. I've only fished twice in my life.

[B]

So Chad, he ran European real estate at Blackstone back in the day. So he is pretty much the same age as John Gray.

[A]

I looked at his New York Times wedding announcement. He was 25 and 96. So yeah, he's about mid-50s. He's a Blackstone lifer. He's been there from like his whole career and he was co head of real estate. When a young wizard called John Gray was running the Americas, this guy was running Europe. So they were peers for a time. For a time.

[B]

Old John Sharp elbowed back in the day, noticed that. Well, the U.S. real Estate Group is a lot larger than this European real estate group, yet we have the same title.

[A]

Not only was it a different level of scale, John Gray's like, I'm answering emails all day, all night, I'm working all weekends, I'm working Blackstone hours here. This guy is a fly fishing has the time somehow. And, and one of the broader things I'm always fascinated with these captains of the universe type is time management. I remember I interviewed John Gray back in the day and I was given 15 minute increments like you can do 7:15 to 7:30 or 7:45 to 8. These guys are maniacally. The way they use their time is completely different from the rest of us. They have in fact manipulated time. What I've done now is I have changed and manipul I now get 21 days a week. These guys are working crazy hours. However, Chad pike has the ability somehow to run a company on the side while running a major division at Blackstone. And John Gray didn't take too kindly to that.

[B]

He walked. So David Blitzer could have, Harris Blitzer Sports Entertainment could run. No one seems to look too scans at that. But everything's about seasons in life, right? When you're late 30s, early 40s, a grinding through the corporate up at a company like Blackstone, that's the thing just for some context.

[A]

So Chad pike, avid fly fisherman, great outdoorsman, also found time to start an experiential travel adventure company while at Blackstone.

[B]

Had he been like doing something more economic on the side, I think it probably goes off a little bit better. Like if you bought Arsenal, like it's fine. So anyway, the story is. So Business Insider did this profile of John Gray and again, Business Insider, take it or leave it.

[A]

Massive pinch of salt.

[B]

Yeah, massive pinch of Salt. But from 2021, which talks about how John Gray played a little bit of politics here to get the global head a real estate title. Let's just say these are all allegations, like people have commented.

[A]

Well, James did not dispute the turn of events, but go on.

[B]

He went to Tony James and just said, hey, I don't think this is working. Our relationship is frayed. The crucial point, I think, is that he didn't just say that because that's like, you know, sour grapes.

[A]

Sure.

[B]

He intimated that Chad was ready to step back from the firm.

[A]

Yeah. What he said was like, I think there may be room for an exit here that's graceful.

[B]

Right. Something like that.

[A]

For Chad, not for himself.

[B]

Yeah.

[A]

Yeah.

[B]

And so Tony James goes to London, brings it up, and apparently Chad pike is blindsided and ends up getting shunted off to Tacops.

[A]

Tacops, which is their tactical opportunities group, which is now a bigger deal because now it's involved in qts and a bunch of important bets for Blackstone. But at the time, it was kind of a lateral demotion is the best way to think about it.

[B]

Yeah. And then John Gray took all of real estate, and then now is what? President of the firm.

[A]

John Gray took all of the. Yeah, all of the firm since then. Chad pike retired, quietly, retired from Blackstone in 2020 at the age of barely 50, which was unusual.

[B]

So he won't be receiving a paycheck anymore.

[A]

So it'll just work itself out naturally.

[B]

Right. He founded Mac Aurora a couple years later, and this is sort of the first big bet. So interesting to see him running the Blackstone playbook. It's a asset class and more specifically, a product type within that asset class. That's very much at the moment.

[A]

In general, both you and I are quite obsessed with the PayPal mafia type of storyline. Right. Like, are there companies that can birth other great companies? You think of PayPal and how the alumna basically dominate all of tech right now. I think in real estate, Starwood is one of the great examples.

[B]

Certain horses have great lineage, too, and great boat lines. They may not even have been the best steeplechase horse, are the best thoroughbred themselves, but they have the characteristics like Stormcat. You know, John shepherd made a fortune off of the breeding from that. More so than he ever made off of Stormcat running.

[A]

I think JMB is the other alum. Basically run a lot of real estate right now, too. Right. The Chicago company.

[B]

Right. Yeah. You've got Wall street, you got Barry from Starwood, jmb. Their DNA is everywhere. The funny thing is you can go look at somebody's model and be like, oh, yeah, that guy worked for someone who worked at jmb.

[A]

Yeah. So Blackstone is an unusual one because it's such a massive firm. They minted a handful of billionaires and also several centi millionaires. It's one of those companies that people stay for a very, very long time.

[B]

We talk about, ew, I'm gobbling. Because the problem is that your, your payroll gets so huge. Like these people need to make a lot of money because you go somewhere else or start your own thing, you can get hugely compensated.

[A]

Right.

[B]

And at Blackstone, they have the public stock, so they can just like juice it with that. Yeah. And so. And that gets paid dividends. So if you're making a 4% dividend on, you know, 10 million of Blackstone stock, that's an extra 400k a year. That's taxed half of what ordinary income is. And most of these people live in New York, San Francisco, like London. It makes sense that they'll just pay you to stay because it's so big, they have so much money coming in and the fundraising is only going in one direction.

[A]

You see a lot of these executives who are head of acquisitions or something senior at Blackstone, and they're absolute stone cold GS in their own right. So when they leave, people throw money at them. The other example that comes to mind is Tyler Henritzi, who used to run acquisitions in the Americas, was involved in a lot of the big deals, qts. I think he ran point on as well. He has a company called Town Lane. I believe we have a listener from that company. I think they raised $1.25 billion in nine months. Nine months.

[B]

Incredibly impressive. But I mean, of course, like, if you were to draw up somebody in a lab to raise private equity real estate funds, like, it would be Tyler Henrietti.

[A]

It would be one of these guys.

[B]

Not just the resume, the deals, the expertise, the jawline in a lab. I think also about the nine months. It's not just that they raised it so quickly, it's that they had, what, no real IR team and then no placement agents.

[A]

This was like a friggin. This is. This doesn't bode very well for the middlemen. If these guys can go, just based on the track record, can go and raise that kind of money without much help. It's tough.

[B]

It's really tough. And that's again, we've talked previously how Blackstone has the most baller thing where they do one fund close like 30.

[A]

Billion brex for done.

[B]

It's not dissimilar here. Not using like not having a full in place IR team or replacement agents to raise that much money that fast.

[A]

Is just like the jury's still out on whether if you stayed at Blackstone at a very senior position, like if you're in Nadeem or Kathleen McCarthy or etc. I think over time your comp would probably be higher than you go run one of these things. However, you still have to tow the Gray line. You're part of that machine. Do you want to go and build your own army or do you want to be one of John Gray's guys?

[B]

There are not a lot of firms in any industry, not just alternative asset management where non C suite people own sports team.

[A]

One thing I gotta mention before we go on to our next segment. It's almost too perfect. Did you see the yield Straight thing, the Etch A Sketch?

[B]

Oh God, yeah, I did. But here's what gets me. It's like when Bill Ackman blows up and does it to start a new track record. It's like considered very savvy.

[A]

So what we're talking about, after many of his deals went to absolute zero, crowdfunding firm yieldstreet, which was also sued by investors by the way, has now rebranded. Henceforth Yale street shall be known as Willow Wealth.

[B]

Your wealth will bend in the wind like the agile Willow.

[A]

Yallah. You wanted to talk about the Middle East? Let's do it.

[B]

Yeah, absolutely.

[A]

I might put on my high school shoaifati accent for this segment, so forgive me, it's going to be natural.

[B]

Oh, fantastic. I love it. Let's go. So there's a fascinating shift happening in the Middle East. It used to be the Gulf is where you'd go to rub noses and raise cash for your American investment cap.

[A]

Literally rub noses. I wasn't kidding when I wrote that in. That's how you meet people. Important you do a little nose kiss.

[B]

So that's still true to some extent. Saudi Arabia's future.

[A]

You notice when I make ethnic jokes, will gets really uncomfortable. So I do it a lot because I'm ethnic and he's not. I can get away with it.

[B]

So that's still true to some extent. Saudi Arabia's future investment initiative, that was in the desert, as it's otherwise known, was very lit this year. Nothing will ever beat Michael Milken with a giant headdress from like five years ago, if you remember that.

[A]

Yeah, I remember that. Our boy Ray Dalio has basically Been stationed out in the Gulf for a long time. And he's. The thing is, when you, when you're at that level of name recognition broadly in American business, when you go to the Middle east, you don't start from step one like you're directly in the room with the royal family at their board meetings. That's. That's kind of the way you can leapfrog it. So it makes complete sense that you would go there to raise money. But I think the shift that's so interesting is now they're going there to build out these skylines for these royal families. We should be clear, when we're talking about the Middle east, we're talking specifically about a handful of Gulf countries, Khaliji countries, so the United Arab Emirates, Saudi Arabia, Kuwait, Bahrain and Qatar. That's about it. This is where the money's at.

[B]

Right. This was in the news this week because Heinz, sort of like one of the most American of country.

[A]

Heinz of Arabia, baby.

[B]

Yeah. One of the most American companies is opening an office in Riyadh. They had an office in Dubai. I think they opened it in 2020, but they're opening this one specifically to build projects in the Kingdom.

[A]

So the Dubai one. My assumption is it would be basically a conduit to move money into their broader Heinz operation because Dubai is such a commercial hub in that region. But, yeah, I think the Saudis have a massive mandate to build out their cities. Right. They have this major Project 2030, which realistically is going to be Project 2075 or something. But the whole idea is to diversify the kingdom away from being so dependent on oil, which is why we have megaprojects like Neom and we're going to see much smaller but also still incredibly significant projects in the next decade or so.

[B]

This is basically saying, you know, not give us 500 million in commitments to build a bunch of like, Dallas office. It's. You're going to be building a lot of Riyadh office, and we know how to build. So why don't we just come over here and do it maybe on a fee basis, maybe with some upside.

[A]

I think the JV structures are going to be fascinatingly good for them.

[B]

Yeah, but just think about the quantum of dollars that they want to put out. Like, NEOM is supposed to be hous much, like even. It's all nonsense, obviously, but it's what.

[A]

You want to know how much it's going to be. All right. In its end state, it's going to be estimated to be at $8.8 trillion, which is more than 25x the annual Saudi budget. And just the first phase, which was supposed to be by in 10 years from now, which, you know, God bless, is supposed to be $370 billion. So that's 12 Hudson Yards.

[B]

Think of it this way. If Heinz is like, all right, in that little proforma we're putting together, there's, you know, 3% DEB fee, you know, $12 billion tight.

[A]

When we think about American real estate projects, et cetera, there's a pretty, I mean, people fudge with these bars and push it as far as you can go. And we saw this in Sunbelt Multifamily, for example. But there's a generally accepted boundary for fees and how things are comped and how things are structured. Right. If in the Middle east you get to start from scratch, you can get pretty creative.

[B]

Oh my gosh. Yeah. I mean, wasn't this like Adnan Khashoggi's entire business model?

[A]

The arms dealer?

[B]

Yeah, he was just taking a little piece off the top.

[A]

Little piece, little slice.

[B]

And there's some real people coming here. So. Dennis Hickey, former CEO of the massive Australian construction conglomerate lendlease, now chief development officer.

[A]

Not only that, he was also a contemporary of Shane Warne and a very, very quick pace bowler. A cricket reference, by the way. So for the five people who get.

[B]

It, Shane Warne in the 90s was quite the thing.

[A]

It really was. But yeah, Dennis Hickey used to be chief operating officer at Lend Lease, is now chief development officer at neom. So they're getting pretty serious executives out there. And then you see big companies. So Brookfield is building its first real project in Dubai. It makes sense. Property values in Dubai have surged 70% in the last four years.

[B]

That's a lot of the crypto bros.

[A]

I'm going to push back on that a bit. I think Dubai has historically, yes, been a boom and bust down. I mean, there's been so much of that. But in since the pandemic, it's pretty amazing how much wealth has moved to Dubai, Abu Dhabi and the Middle east in general.

[B]

No, it's true. I mean, they have a Real Housewives franchise now. Like, and I say that, like, not really in jest, like that's actually like.

[A]

No, you say it with, with full admiration. I can see.

[B]

I know they got, they got Caroline Stanberry to go from London.

[A]

The policy of those countries has always been a laissez faire thing. Like, we're not going to ask questions as long as you come here, spend Money and don't fuck with our politics. You're free to have whatever provenance of funds you've had. When you have head of states whose mandates are to just basically transform their skylines in record time, they're not going to risk that kind of reputation on a local builder who's probably built a couple of projects, Right. They're going to do these tie ups, they're going to bring in the hinds of the world, the Brookfields of the world, all these other mega developers are going to have a lot of business in these countries for the next, call it decade, two decades, right?

[B]

You have to bring in the infrastructure because as we talked about last week, building any one of these huge towers is really difficult. And that expertise is. It's not diffused throughout the world. There's only like a number of people who can do this, a number of firms that can do this. And so it makes sense if someone's got a market to spend this much money doing it, that they're going to come to them.

[A]

And also a lot of these companies that used to historically fund or be mega LPs for American bets are now saying, you know, we prefer to spend our money domestically. They're not saying you can't be part of it. They're saying, you just got to come here and join the party.

[B]

Absolutely. And you know, doesn't mean that doesn't preclude them from investing in a bunch of Dallas office developments either.

[A]

I gotta get you a Kandura for Christmas. I think you'll really enjoy the garment. It's very comfortable.

[B]

Hanukkah, Veronica.

[A]

Let's do it.

[B]

I was like a 28 year old at Heinz. I'd be like volunteering to go to Riyadh.

[A]

Send me there.

[B]

That's the. How's Jay, man?

[A]

He's doing good. He's not sleeping very well through the night at the moment. He is waking up very angry. Oh, no. But then in the daytime he's a fucking Casanova smiling at people in the street. He's been pulling hair in the subway, which is adorable and not so adorable at the same time. I'm glad we're talking about this today because every other day we're seeing new record hauls for secondaries funds. And I'm not sure everyone quite gets how it works. I certainly could use a little bit of a primer. So let's break it down. What is going on in the real estate? Secondaries market?

[B]

It's really heating up. And so secondaries more broadly have been a way for folks to get liquidity over time. So essentially, if you invest in a private equity fund, you're locked in for however long it is. And if you don't get distributions, you don't get any liquidity. But those economic stakes of the businesses that the fund holds are worth something. And they're generally kind of hard to diligence because there's a diaspora of different companies. You don't really get primary research if you're trying to due diligence. Like they're not going to open the books to you necessarily. It's an opaque market. So you got to go find the people who have the stakes. And it's hard to price. And how do you value the illiquidity? How do you value where certain assets are? Because you might have some killer ones, some not.

[A]

I don't know if the LPs generally are as clued in to the specifics of each bet as they might want to be.

[B]

Oh, definitely not.

[A]

Yeah, definitely not.

[B]

So you may not even necessarily like know what you own in some cases. So it's really hard to price. But there are firms like Stepstone has been, you know, doing this forever, gobbling up.

[A]

I think they just raised the close to $4 billion real estate secondaries fund.

[B]

And they've been doing it in corporate private equity as well. There are other firms that are like known for doing this. And then in venture it happens quite a bit.

[A]

I think that analogy is a good one. Right. Let's talk about tech companies, the VC model. Companies are staying private longer generally. Your path to liquidity was an ipo, right? For a certain company, if it's doing well, companies are staying private longer and longer. Let's take a stripe, let's take a revolut. And so people who want to get out need to find a way to get out. And that's why the secondaries market has become such a big thing in tech. I wonder why in real estate it's suddenly all the rage. I think part of it is that funds are out in the market longer than they used to be.

[B]

It's taking longer to raise money, it's taking longer to make distributions. I heard of a large real estate fund that you all have heard of that has not made a carry distribution in seven years. And that's not unheard of. Like it happened before. Like if it's just think of it, you missed on one fund and your second fund is early. So if you're LPs, you haven't been getting liquidity and you want out because you have to keep making more commitments, right? Not getting those, you can't reinvest.

[A]

I think Brookfield, Lowell Barron was just talking about this, right? They made a couple of big sales. What was the one we talked with that they sold to Starwood? Is it called Fundamental?

[B]

Yeah, the net lease platform.

[A]

They've sold a couple of properties, returned money to LPs and then used that. Hey, we've returned money. Let's go raise some more, right? There's a momentum game there.

[B]

There definitely is. And so it's created this opportunity to do it in real estate. And so Warburg Pincus, which is one of the more eminent names, corporate private equity has been around forever. And Madison, who have history in the secondaries game, teamed up to raise 300 million bucks to do real estate secondaries.

[A]

Doesn't that seem tiny? I'm sorry, I'm not impressed by 300 million anymore. We've been ruined by this podcast.

[B]

Is it a fund for answer?

[A]

How can we be expected to teach children to learn how to read if they can't even fit inside the building?

[B]

You got to walk before you can run, I guess. And this is sort of a newer asset class and I think also real estate itself. A lot of these bets. If you were buying certain types of properties seven years ago which are still in these funds, the world may look a lot different for a suburban office portfolio.

[A]

There was a good stat from Perry that I thought was very pertinent here. So the average time in market for private real estate fund that closed in 2024 was 22 months. Compare that to just 13 months for.

[B]

18 ERA funds or 9 months of your Tyler Henritzi.

[A]

So what did Dickerman say? He had an interesting quote here.

[B]

We get involved in GP LED recapitalizations and end of fund life situations when they are in our preferred sectors and being undertaken for the right reasons. That is not an AUM grab by the manager. Undertaken for the right reasons as in we are getting this at a discount.

[A]

Buying an LP out. Like, are you paying 20% less, 25% less?

[B]

I'm not sure because I think it's still a pretty opaque market. But there are a lot of people who have not put real marks on things. This has been something that good friend of the pod, Mike Comparato has been railing about for a long time. And he's not the only one. If you don't want to sell an asset, there's a way to get liquidity without having to do that, which is sell the whole pool. And you can sort of hide it in and be like, hey, we sold this whole pool of assets for we. We thought it was 85% of NAV, but we wanted to get liquidity for our LPs as we're about to raise this new fund.

[A]

The other part is, I guess while this fund is running its course, some LPs may have a, hey, we don't want to be involved in New York office anymore. Or we don't want to be involved in Sunbelt Multifamily anymore. It doesn't fit our investment mandate any longer. Right. And that's where these secondaries can come in.

[B]

You get a new regime at one of these allocators, and they're like, we're just out of this.

[A]

I'm thinking of our boys at Ivanhoe Cambridge who are now they've gone from being investor to pure allocator.

[B]

Exactly. You get somebody who's like, we're not doing office anymore. We're not doing certain types of retail anymore. And they're like, well, we have a bunch of it in these funds. We're in the get out. Like, we're just out bunch of the ticket. It's also easier to hide some bad deals.

[A]

How so?

[B]

If you're like, you got to take our suburban office. We lost 60% of our money.

[A]

You throw in a dog with all.

[B]

The deals to get our really good power center that is 96% leased and sales are 1,000 a foot.

[A]

But I'm so glad you said this, because one of the things I think about a lot outside of our fundamental question, which is do returns matter for fundraising? No, they do not. Outside of that question, one of the things I always think about is how much of what we see in these broader institutional markets is a function of face saving.

[B]

A lot.

[A]

I really think it drives more than we think about.

[B]

Yeah. I mean, to say we don't do a certain asset class or a certain geography is sort of very reductive if you're an investment professional. Everything has a price for the most part. Right. What someone is saying, if they're like, oh, we don't do office, it's, I lost money on an office deal, therefore no one can make money on office.

[A]

Yeah, that is true. It's like we've been burned and this is it. We can never look at our investment committee with this kind of deal again. So we're out. So David Rubenstein's family office spin off. It's called Hob Mountain Capital. It's run by Drob's daughter.

[B]

This is the family office squared. It's a span out of Declaration Partners, which family office, which is also a private equity firm.

[A]

Kind of mixed record so far in the market. They took a bath on a couple of prep deals in New York.

[B]

They just raised a bunch of money though, so you know, they've been marketable.

[A]

It brings us back to the original thesis.

[B]

I can tell you their returns would have been better had they done the deals that I pitched them. Just telling you.

[A]

Ouch. So Drop's daughter Alexa Racklin has a new secondaries fund and they're targeting, it's interesting here, they're targeting sub $5 million deals. They're going for these more bite sized deals.

[B]

There's a lot of mid market private equity firms that aren't going to exist that have raised their last fund both in corporate and in real estate. So if you have these guys who are in these funds for a long time and this is a way to get like basically unwind your business.

[A]

Oh that makes that, that makes so much sense. So you're talking about like these people who call themselves real estate private equity companies. Right. And it's two guys in a spreadsheet if that.

[B]

I think it's that. But then it's also more established funds where it's oh yeah, we, you know, we've raised five or six funds. They're each, you know, 100 million bucks and they're moribund.

[A]

Right. There's not.

[B]

Yeah, it's like performance hasn't been great. So what are we going to do?

[A]

And we've talked in general more in institutional multi about how some of these mid level guys, and we're mid level means a couple billion as well are kind of stuck.

[B]

Oh yeah, it's really, you know, barbells all the way down. It might not be the right environment to exit an individual deal, but it may actually be the right environment to exit the poo poo platter of deal.

[A]

That's it for the promote podcast this week. Blackstone Cubs are building out layers of their own and the market seems all too happy to shower them with billions. Real estate secondaries are all the rage and are helping break the market's great stalemate. And the Gulf Middle east has become the hot new playground for the biggest American developers. Not just to raise, but also to build. We'll be back next week with more CRE Insider goodness.

[B]

As always, reach us at partnershipsthepromote.com for advertising and podcasthepromote.com for feedback. And if you haven't written us a review on Apple or Spotify please go do that.

[A]

We need the validation.

[B]

Thank you everyone for listening. It's great to see us going up the rankings. We're going to keep pushing. We are going to be coming for invest like the best. We are coming for all these guys ahead of us. So let's go, let's make it a reality.

[A]

I gotta ask though. If the promote pod ever gets torched, if we up in some colossal way, what do you think we rebrand as.

[B]

Depreciation, recapture pod fatality.

[A]

I'll see you next week, Will. Thank you.

[B]

Thank you.

[A]

Ciao. Tight, tight, tight, yeah.