Bluerock's Liquid Death, Soundstage Flops and OZK Walks the Plank

Summary

---

The Promote Podcast

Bluerock's Liquid Death, Soundstage Flops, and OZK Walks the Plank

Episode Date: December 24, 2025
Hosts: Hiten Samtani (“Bard of CRE”) & Will Krasne

---

Episode Overview

In this insight-packed episode, Hiten and Will tackle three major stories shaping the commercial real estate (CRE) landscape:

• The collapse of Bluerock’s public listing and what it reveals about “mark-to-magic” in non-traded REITs
• The unraveling soundstage investment thesis in Los Angeles, with Hackman Capital and Hudson Pacific Properties feeling the sting
• The ongoing saga of Baltimore Peninsula (formerly Port Covington), including sponsor shakeups, big bank takebacks, and lessons from megaprojects gone awry

As always, the hosts cut through the noise with sharp analysis, insider war stories, and irreverent banter—offering a must-listen guide for CRE insiders and market-watchers.

---

Key Discussion Points & Insights

1. Bluerock’s Liquid Death: The Mark-to-Magic of Non-Traded REITs

[03:38–11:43]

• Bluerock’s Public Faceplant:

  • Bluerock listed its closed-end “Total Income Plus Real Estate Fund” on the public market, which “traded at a 40% discount to NAV within two days. So wiped out years of gains. This is a great example... Volatility laundering has been a huge concern.” (Will, 03:50)
  • The fund allowed only 5% of redemptions per quarter, but “every single quarter since December of 2022, more than 5% of the shareholders have tried to redeem.” (Will, 06:10)

• What is ‘Volatility Laundering’?

  • Public markets require daily mark-to-market; private funds “basically get to make up your own value once a quarter” (Will, 04:14), creating disconnects: “Private REITs in 2022 and 2023 were down 5%, public comps were down 30%—you’re like, gosh, we just own 25% better assets?” (Will, 04:46)

• Liquidity Issues:

  • As more redemptions flow in, managers have to “sell your most liquid things... eventually you’re left with just fucking mints.” (Will, 06:49)
  • The effect: “People buy these things because they pay good dividends. And so if you cut the dividend, then you have to mark NAV down because that’s obviously a bright red flag. So what you do is you lever up... they kept paying these dividends and then the investors voted for this thing to go public... wiped out years of gains.” (Will, 07:06-07:32)

• Major Industry Implications:

  • This challenge isn’t isolated: “A lot of the bigger names in the industry are facing things—Starwood with SREIT, Blackstone’s BREIT—they had a flood of redemption requests...” (Hiten, 07:43)
  • Underlying issue: “It’s really hard for private market assets to provide daily liquidity... The Cap rate is the inverse of the PE multiple... definitionally it doesn’t generate nearly as much cash.” (Will, 08:53, 11:20)

Notable Quote:

“Private market investing really is... an art. We’re artists. You can’t just go put a formula in and say here’s what all the comps are.” (Will, 09:42)

---

2. Soundstage Flops: Hollywood’s Real Estate Hangover

[11:43–19:09]

• The Pandemic-Era Bet:

  • The thesis: “Content is king and that needs space, and we’re gonna invest an incredible amount of money in these soundstages.” (Hiten, 11:45)
  • Hackman Capital Partners, with 60+ stages and major LA presence, and Hudson Pacific/Blackstone went all in.

• What Is a Soundstage?

  • Basic definition for listeners: “A place where a production studio will film content... build it once, don’t have to keep building sets.” (Will, 13:12)

• The Downturn:

  • LA soundstage use whammied by “Hollywood strikes, fires, merger activity... cheaper to film these things elsewhere. Rob Lowe said... cheaper to produce his game show in Ireland than LA.” (Will, 13:55, 14:01)
  • “Production of film and TV programming in 2024 that cost over $40 million... was down 30% from 2024 to 2022.” (Hiten, 14:33)

• Debt and Restructuring:

  • Hackman faced trouble on $1.1bn loan from Goldman after acquiring CBS Studios space for $1.8bn: “Pacman didn’t pay it off when it came due...” (Will, 15:04)
  • “Netflix in exclusive discussions to buy Warner Brothers... whoever buys it... not lease as much space.” (Will, 15:22–15:31)

• HPP’s Woes:

  • “Victor Coleman’s total comp in 2024 is $25 million... HPP lost $364 million.” (Hiten, 16:03–16:22)

• Industry Narrative Inertia:

  • Once invested around a thesis, hard to pivot: “If you are a private fund manager... the decision... was made upstream of you... your job is not to decide yes or no.” (Will, 17:18)
  • New risks not priced in—AI, strikes, contraction, etc.

Notable Quote:

“Deploying capital at scale in real estate really is about... thesis-driven investing. The problem is when that thesis is flawed, you end up in a situation like this.” (Will, 18:35)

“As William Goldman said: Nobody knows anything.” (Hiten, 19:05; Will echoes, 19:09)

---

3. OZK Walks the Plank: Megaprojects and Lender Retribution in Baltimore

[19:27–27:52]

• Shakeups at Baltimore Peninsula:

  • “The Baltimore mega project, artist formerly known as Port Covington, now Baltimore Peninsula, going through another shakeup.” (Hiten, 19:28)
  • “Mag Partners have been asset managing along with McFarlane Partners. Victor McFarland is winding down the firm.” (Will, 19:44)
  • Contract expired, Hines stepping in as new asset manager.

• Development Partnership Turmoil:

  • “Kevin Plank, founder of Under Armour, and Goldman Sachs Urban Infrastructure Partners... an interesting JV.” (Hiten/Will, 20:24–20:27)
  • Plank forced to sell off assets (“probably never made a red cent... selling pretty much everything because Under Armour stock is down 75% over the last five years.” Will, 21:01–21:18)
  • Giving back big land parcels to Bank OZK: “Bank OZK just did a take back seize in Chicago at Lincoln Yards as well...” (Hiten, 21:24)

• Themes and Takeaways:

  • Pattern: “Massive urban redevelopment projects sponsored by local guys with deep pockets... a lot of them are kind of debacles.” (Will, 22:03–22:25)
  • Common mistakes: Try to leave a legacy via huge development, but “development is hard.” (Hiten, 22:41)
  • Need: Not just money and political juice, but “you need the wealthy private guy to stay wealthy... and the underlying value of the land to continue to compound.” (Will, 23:13–23:51)

• Lender Dynamics & Market Caution:

  • “This is an interesting and probably worrying trend for the boys from the Prairie—[OZK has] taken back [Lincoln Yards], they've basically walked away from NY ground up for now.” (Hiten, 24:44–25:10)
  • “Ozk, they were so early post-GFC to come back into construction lending when it appeared really risky... they made so much money.” (Will, 25:39)

• Baltimore’s Uncertain Future:

  • Current state: “You have 1.1 million square feet. Great. Pretty big. Not very well leased, not great connectivity... The rest of that parcel, is it going to get built? Who knows?” (Will, 26:42)
  • The house-of-cards risk for megaprojects: “If you only have little pieces of them activated, it's not enough momentum to... make everything sing.” (Hiten, 27:13–27:30)

Notable Quote:

“It’s Baltimore, gentlemen. The guards will not save you.” (Will, 27:13)

“Let’s see if Hines can come in and resurrect this. But right now it looks like the founder of Under Armour might just lose his shirt.” (Hiten, 27:52)

---

Notable Quotes & Memorable Moments

• On Private Real Estate Valuations:
  “The number is the number. And if you’re in the private markets and you get to make up your own value... you can basically say our value is 100, 100, 100, 100. And then meanwhile the assets, if you were to trade them actually are like 70.” (Will, 04:24)

• The Illiquid Chocolate Box Analogy:
  “Did you ever have those Merci or Quality Street chocolate boxes? You keep taking the good ones, and then eventually you’re left with just fucking mints.” (Hiten, 06:49)

• Soundstage Bubble Burst:
  “This whole thing was, well, content is king and that needs space. And we’re gonna invest an incredible amount of money in these soundstages... It’s been a bit of a journey.” (Hiten, 11:45)

• Victor Coleman’s Pay vs. Performance:
  “Victor Coleman’s total comp in 2024 is $25 million…they lost $364 million.” (Hiten, 16:03–16:22)

• Megaprojects and Legacy:
  “Very wealthy, influential person wants to leave a physical legacy on the place they’re from. They think, well, the best way to do that is do a fricking giant development. But again, as we’ve said before, development is hard.” (Hiten, 22:25)

---

Important Segment Timestamps

• [03:38] – Deep dive: Bluerock’s public blowup, “volatility laundering,” and non-traded REIT ecosystem
• [11:43] – State of LA’s soundstage market, Hackman and Blackstone’s pain, and the soundstage investment bubble
• [14:33] – The ripple effects: Production down, debt headaches, asset write-downs in media real estate
• [19:27] – Baltimore Peninsula: Sponsor shakeups, Bank OZK’s big move, megaproject risks
• [20:24] – Under Armour’s rise and fall as anchor, and sponsor implications
• [27:13] – Megaproject “momentum,” or lack thereof: Why bits and pieces don’t add up

---

Final Thoughts & Tone

Packed with inside-baseball insight, sharp economic analysis, and classic Promote banter, this episode is equal parts cautionary tale and industry pulse-check. From the risks of illiquid “mark-to-magic” to the perils of thesis-driven megaprojects and Hollywood hype cycles, Hiten and Will offer seasoned, sometimes acerbic, always honest guidance:

“Reshaping a city for anyone not named Steve Ross is harder than it looks. And soundstages have gone from investment darlings to boondoggles. But hey, baby, that’s just pictures.” (Hiten, 28:08)

---

For CRE insiders, this episode is a roadmap to the current turbulence—and a reminder: “The game is the game.”

Transcript

[A]

If a tree falls in the forest and no one's around to hear it, does it make a sound?

[B]

It does, but fortunately it doesn't impact the nav calc.

[A]

Welcome back to the Promote podcast, your insider guide to the money and mania of the CRE markets. Hi, I'm Hatan Sumtani.

[B]

And I'm Will Krasny.

[A]

Today we talk illiquid death. The blue rock listing the bokle says so much about the mark to magic that's happening in the non traded reit market. Really bizarre opaque space that we're going to dive into. We then head to Hollywood where showbiz is turning into bad biz for Hackman Capital and others who went all in on soundstages. And finally we head to Charm City to check in on Baltimore. Peninsula Mag is out. Hines is in.

[B]

We used to make shit in this country.

[A]

Indeed. Speaking. Speaking of Rip to James Ranson who gave us the iconic Ziggy Sabaca.

[B]

Just tragic. Phenomenal in everything. How to make it in Generation Kill. I am petting a duck in remembrance. Like I'm the only guy in South Baltimore that ever tried to win the affections of the farm man. Also noticed no one stepped up with my Hanukkah present yet.

[A]

Yeah, what's up with that, guys? Will's your guy.

[B]

Come on, we have a couple nights left, so let's go. Let's go write us some fresh reviews on Apple to bring this to unenlightened ears.

[A]

Also check out the promote Insider for our premium content. Our Hotel Insider went on a heater talking about the sonder leases in our Insider only Wednesday edition.

[B]

It was so good.

[A]

You can check it [e-mail] upgrade listeners. There's a 10% code we've dropped in the show notes.

[B]

Fantastic. Check it out.

[A]

You want to do a little quick newsy nuggets up top.

[B]

Just a couple things that we've talked about before. Want to touch on again? Number one, with a bullet. In my view, Steve Ross gets the largest construction loan in Florida history. For funsies, just like in his pa.

[A]

We'll drop that episode in the show notes as well. We did a whole episode about how Steve Ross is basically remaking West Palm beach in his own image. And he's untethered from any institutional constraints. And it's really, really fun to watch him operate at this level with all the connections and boom. What is it, 772 million here?

[B]

Yeah, unless you think that's like a portfolio loan. It was two deals.

[A]

Incredible guy. Also the height of Chutzpah here from Albert Baylor, the CEO. Wait, wait, wait. The ex CEO of Paramount Group. Did you see the last nugget that he was escorted out of his office?

[B]

I'm not surprised there was an escort involved, but yes.

[A]

So Albert Baylor is his company. The REIT is being sold to rhythm capital for 1.6 billion.

[B]

This is a little known rhythm capital.

[A]

The little known Rhythm Capital. This is about 12 million 13 million square feet of office in New York NSF. And the reason it got so interesting is Albert Baylor had multiple Nepo baby situations happening at the company. The conflicts of interest were so concerning that the SEC got involved. Anyway, Rhythm Capital came in, bought the company. The stock has been in the toilet forever. But now Baylor wants to get paid out. What's he looking for here?

[B]

He's looking for one tenth of a Zaslav, I think, which is for those.

[A]

Uninitiated, $34 million golden parachute. And shareholders said absolutely not, get the fuck out of here.

[B]

Well, the best part is that that's all performative and they're still basically saying go fuck yourself. Even though it doesn't matter, like here's how much we hate you. This performative vote that isn't binding. We're still gonna overwhelmingly vote against you.

[A]

Let's dive right into it, man. This is one of those stories that has broken out of our CRE bubble and I think into mainstream financial discourse. But I think it's still worth really talking about Blue Rock.

[B]

Best of all, kids, I am Liquid BlueRock just listed a closed end fund on the public markets and it traded at a 40% discount to NAV within two days. So wiped out years of gains. This is a great example and part of the reason why it's I think, gone broken out of the little CRE bubble is volatility. Laundering has been a huge concern for those uninitiated.

[A]

You want to just say what that.

[B]

Is what it is. If you're trading in the public markets, you have a daily mark to market, like that's what it's worth. You can say, oh, we're undervalued, we're.

[A]

Overvalued, whatever the number is the number.

[B]

The number is the number. And if you're in the private markets and you get to make up your own value and you get to do it once a quarter instead of every day, you can basically say our value is 100, 100, 100, 100. And then meanwhile the assets, if you were to trade them actually are like 70. And this is in private credit where like Companies will be defaulting and people will be marking the loans at par. Or the loans are trading like $0.92 a month before they blew up. And it happens a lot in real estate, Both for private REITs, which we've seen quite a bit. Where private REITs were in 2022 and 2023 were down 5% and the public comps were down 30. And you're like, gosh, like, we just own 25% better assets.

[A]

This is an argument that's been made by many of the biggest players in the space. So Starwood, Blackstone, Brookfield, famously, with the retail portfolio, the GGP portfolio, they did some kind of shenanigans there. Even though malls all over the country were getting wiped, Brookfield's remarkably resilient retail portfolio kept its value.

[B]

Exactly.

[A]

And they use. They don't even. I mean, they're the final boss of this stuff, right? Because they've got the Canadian accounting system that they can throw in there and all this.

[B]

Oh, God, yeah, whatever. FASB, I think it's called. What's Matthew McConaughey and Wolf of Wall Street's all. So Blue Rock's got these assets. They're saying they're worth X and they go into the public markets. This was called the BlueRock Total Income Plus Real Estate Fund, because the plus sounds pretty pristine. That's what the extra return is, is the plus. So it's effectively a fund of funds. So it invests in other managers funds. But what happened is, starting in 2022, this portfolio from Blue Rock, basically that 5% of the fund could be redeemed in any given quarter. In every single quarter Since December of 22, more than 5% of the shareholders have tried to redeem. And so you think about, if you're a fund, what do you tap first? When you have to sell something, you sell your most liquid things, which makes sense. But then the end result is you end up with an increasingly less liquid business moving forward. Yeah, there's some stat that like 30% of what they owned was, like, completely illiquid. Never traded up from like 5 or 8% or something when they initially started because they kept getting redeemed.

[A]

You know what it reminds me of? Did you ever have those Merci or Quality street chocolate boxes? And you keep taking the good ones, and then eventually you're left with just fucking mints.

[B]

It's like in the Simpsons when Homer goes to the freezer to get the three flavored ice cream and he flips through like a thousand cases and the chocolate's Gone. And all of them. That's exactly what happened. And the other part is people buy these things because they pay good dividends. And so if you cut the dividend, then you have to mark nav down because that's obviously like a bright red flag. So what you do is you lever up so you've got more liquidity, higher debt. So they kept paying these dividends and then the investors voted for this thing to go public. Like, that's the crazy part.

[A]

Sometimes you want to shine a light and you want to see what's out there.

[B]

Sunlight is the best disinfectant. So they vote to go public and wipe out years of gains because the market effectively says, here's where we think your portfolio is valued. Nav is. It's a wozzie, is a woozy.

[A]

This is important because this is something that a lot of the bigger names in the industry are facing. Things specifically of Starwood with Sreit. They had a flood of redemption requests too, I want to say, a year and a half ago. B reit, Blackstone's vehicle, its flagship non traded reit, has been dealing with this for a very long time. There was a flood of redemption requests. I think they have now got the situation under control. But this was like a year of back and forth with the markets. Famously, Nadeem Magji, who's now no longer co head of real estate, but just head of real estate, was on his honeymoon in New Zealand and he had to work on this rescue prep deal with the University of California.

[B]

I remember being a very good piece of paper for the University of California to like backstop the whole apparatus.

[A]

Correct.

[B]

But again, it's this fundamental disconnect between assets that have duration and then daily liquidity in the market. And I think that there's a few big takeaways here. It's really hard for private market assets to provide daily liquidity. Like you can't go sell something tomorrow. In real estate, it takes you, best case 60 days, more likely like four months. And in private credit saying there's a lead time, right? Yeah, there's a lead time. And then there's also friction too, like the sales costs and transaction costs on these things are not immaterial.

[A]

Adam Spies ain't cheap, man.

[B]

Yeah, he's not. And you've got transfer taxes, you've got all of these different things that eat into the nav. So the things worth 40 million bucks, but lop 2% off the top for paying speeds and well, he's not getting out of bed for a $40 million deal, no paying Percadia and transfer tax title, all that stuff, it eats into it. So it's really, really hard. And so you've got this volatility laundering and you may say it's worth X but you get to decide yourself what the values are. And then you get Alvarez and Marshall or Dun and Bride street to just rubber stamp it.

[A]

One of these days we got to do a special episode on just this entire universe of enablers. And I don't mean that necessarily in a bad way, but sometimes in a bad way. The appraisers, the valuation experts, all of them who kind of give you permission to get away with some interesting stuff.

[B]

Private market investing really is. I'm saying this as a private market investor, it's an art. We're artists. You can't just go put a formula in and say here's what all the comps are. Multifamily. North Dallas, maybe it's the same thing but you got different floor plans, you got. There's all these different qualitative factors.

[A]

Everyone believes all their real estate is the most unique real estate there is, right?

[B]

Absolutely. Yeah. Everyone's baby is the cutest, except it's mine.

[A]

Nah, I don't know. You got competition there. A lot of non traded funds have stayed private for the longest time because they feel the public markets don't really give them a fair shake. And I guess there's a good reason to stay private if you're going to end up in situations like this.

[B]

Well, it's expensive to be public in the scale you need to make it worthwhile is, is large. The market can be. Whatever Buffett quote you want to insert here, it's a weighing machine, not a voting machine.

[A]

Swimming tides, blah blah blah.

[B]

Yeah, blah blah blah. Like that's. Yeah, it's fair enough. They're not wrong because if you go to sell a really clean multi deal in a good market right now the cap rate has a 4 in front of it. Whereas look at the implied cap rates for MAA UDR and all the public REITs and they're much higher than that.

[A]

And then the public REIT bosses always cry about how their stuff is just not getting a fair shake. This is the standard refrain for pretty much every public REIT that we care about is the BO are upset about how they're valued.

[B]

What they should do is sell all your properties and liquidate. The other part about having real estate in the public markets like this is that real estate doesn't generate that much cash. Think of it this way, the Cap rate is the inverse of the PE multiple. So definitionally it doesn't generate nearly as much cash. You're buying things at a 5% cap rate versus buying something at like 8 times earnings, which is 12 and a half percent cash yield.

[A]

This is sort of the corollary to your favorite mantra. Every single real estate guy has way.

[B]

Less cash than you think.

[A]

This is a story that has been quite evident for a while. If you look at the activity in Los Angeles where I spent a lot of time, there ain't much of it. You have to kind of think, okay, what is the end point of this? And for our real estate world, the endpoint is soundstages. It was such a massive thesis driven bet right in the pandemic. This whole thing was, well, content is king and that needs space. And we're gonna invest an incredible amount of money in these soundstages. Blackstone came in, PE money flooded in, public reads came after it. It's been a bit of a journey.

[B]

It's been a little bit dicey, I think.

[A]

So what's going on with Hackman?

[B]

So Hackman Capital Partners, one of the largest owners of these asset classes in the US rolled up 60 plus of them, raised a huge amount of money, I think from, among others, the Artist formerly known as Square Mile, which is.

[A]

The Artist formerly known as USAA Real estate as well.

[B]

Yeah. And they have six enormous facilities in la. Yeah, they really struggled because Hollywood has been in a contraction, sort of the opposite of what we thought. With everything going to streaming content is king.

[A]

When I was at the Real Deal, we had a cover story back in, I want to say in 2019, it was called Netflix and Phil, because it was all about this. It was all about this giant space gobbling by Netflix and other streamers. Right. The whole idea was they're all coming in, they're so well capitalized, with so much money to spend on content, you're going to need dedicated spaces for them. What is a soundstage? A very simple, basic thing that we should set up for the audience.

[B]

A place where a production studio will film content. So if you're filming Friends, it's filled in on a soundstage.

[A]

Yeah.

[B]

Any show with a recurring office is basically filmed on a soundstage. And you want to do this because you build it once. You don't have to keep building sets over and over and over again.

[A]

New York has been making a giant push into soundstages.

[B]

Yeah, New York's got a bunch. Tin Cup Studios. Silver Cup. Sorry, Tin cup is the golfer.

[A]

Right.

[B]

Silver Cup Studios. There's a big one in Greenpoint. Our boy Max Chan used to be the landlord.

[A]

Shout out to Max Chan.

[B]

And obviously Los Angeles had a ton of these as well.

[A]

It's been a triple, quadruple whammy, right? It's Hollywood strikes, fires, merger activity.

[B]

It's much cheaper to film these things elsewhere. Like, Rob Lowe said that he was filming some game show. That guy works so much.

[A]

I mean, that guy's good.

[B]

He's gotta be richer than Croesus. And he said it was cheaper to go produce this game show in Ireland than it was to do in la. And everyone was in LA that just talks about how expensive it is to film there.

[A]

Los Angeles doesn't do itself many favors. It has the entire infrastructure. It has the history, it has everything set up for it. But I think it's so cost prohibitive to be here that people are just now looking elsewhere. Quality content is now much more portable than it used to be. It's less of a one of one place. It's still the place, but it's less of a one of one place than it used to be.

[B]

I need to put some numbers to it. I think there's a stat in this article in the Wall Street Journal about Hackman. The production of film and TV programming in 2024 that cost over $40 million per pop, not per episode, but like, per production. Sure was down 30% from 2024 to 2022.

[A]

What ends up happening kind of at the sponsor end is they have to restructure a bunch of their debt. Hackman is having these issues with their Goldman money, I think.

[B]

So they bought all of CBS Studios production space, which a rare win for Sherry Redstone.

[A]

Good sale.

[B]

And they. I think they paid 1.8 billion. Goldman has a $1.1 billion loan. Pacman didn't pay it off when it came due this past year. A bunch of it is in flux because Netflix, I think, is one of the largest tenants in the space. And Netflix is in exclusive discussions to buy Warner Brothers.

[A]

Right.

[B]

Part of the reason why people have coveted Warner Brothers is that they own all their real estate, they own all the lots.

[A]

So they don't need Hackman, they don't need an hpp, et cetera.

[B]

Y. So whoever buys it, whether it's Paramount or whether it's Netflix, they're going to not lease as much space because they're just going to use this Warner infrastructure, which is just going to be devastating. Now I got to turn my back.

[A]

Speaking of hpp, Hudson Pacific Properties are run by a guy called Victor Coleman. They're the ones who partnered with Blackstone. So Blackstone made it, what was it? Secular tailwind bet on HPP with soundstages?

[B]

Well, offices are 2% of our portfolio and soundstages are only 50bps. So Victor, Victor is a well compensated individual, wouldn't you say?

[A]

I would agree with that. So this is an incredible statistic. Victor Coleman's total comp in 2024 is $25 million. Do you want to take a shot at how well HPP did that year to make it commensurate?

[B]

I assume they did excellent. Must have done very well.

[A]

Yeah, they lost $364 million.

[B]

John Malone, the chair of this company.

[A]

So it's just a very, very tricky time for HPP as well. They suspended their dividend for a while, then they went out back to the market to, to raise another $600 million in cash. Cohen and Steers jumped in and took about half of that. And what's interesting is like people aren't stopping now. This is a question for you, which is once you have these narratives in place, once you've raised a bunch of money around them, do you have to be Nero, the mad fiddler of Rome? Because Television City, which is a billion dollar mixed use project, is supposed to have 700,000 square feet of sound stages.

[B]

I want to differentiate because I think the, the imperative for someone like Hackman Capital Partners, which is private versus a publicly traded company, I think they're different. So let's, let's do that. Cut between that. If you are a private fund manager, the decision of whether to invest or not or whether to develop or not was made upstream of you. Yes, your job is not to decide yes we're doing this or no we're not.

[A]

Yours not to question why you're supposed to do and die.

[B]

Yeah, you go do the best deal that you can. You're basically dollar cost averaging into whatever it is you've decided to do come hell or high water. And that's your job. Your job is not to decide oh, it's a bad time. Like if you think it's a bad time, don't fundraise. If you're hpp, obviously the calculus is a little bit different because you have shareholders. You have to do the right thing at a given point, which may not be to develop. So if the go forward irr on a project you're mid development on is gone, you stop. Don't spend the bad money. The thing we haven't talked about is Sora and AI and how is that going to impact content and what's that going to do to the need for soundstages? I don't think we're at a point where you can just say, write an episode of Hacks and just have there be conflict and have Deb and what's her name.

[A]

Hi, I'm Ava.

[B]

Be friends at the end. We're not there. Sit, sit. But it's all gonna be additive, right? Like a lot of post production, it's the marginal thing that causes the damage, right? Because that's where you make all your money.

[A]

Chris Nolan might need the exact amount of space that Chris Nolan needed for interstellar or whatever, right? But the multiple layers below him, the C list, the B list, etc. They're going to have to compromise, they're going to have to work with smaller budgets. And as a result, real estate is definitely going to be a casualty of that.

[B]

So deploying capital at scale in real estate really is about, as you said at the top of this thesis driven investing. You have to figure out something that's acceptable that allows you to pump a ton of capital into it. The problem is when that thesis is flawed, you end up in a situation like this. And I don't think the thesis was necessarily wrong, but it just didn't account for all of the risk down the road. Covid didn't account for generative AI Strikes. Didn't account for strikes. Risk is inherent in everything and you can't ever remove it. It's just transmuted.

[A]

As William Goldman said, nobody knows anything.

[B]

Nobody knows anything.

[A]

The game is the game, Will.

[B]

It's all the game. Yo. The Baltimore mega project, the artist formerly known as Port Covington, now Baltimore Peninsula, going through another shakeup.

[A]

This is a big one. It brings up a bunch of dynamics that we should definitely talk about. Mag partners have been asset managing along with McFarlane partners.

[B]

Yeah, so Victor McFarland and SF. He's winding down the firm.

[A]

Okay, what's he up to?

[B]

It's one of the largest or a very large development firm. They did a lot of PVPs and I guess he had this successor and then basically it was like, this guy's not it. And he's like, I'm just winding the firm down.

[A]

You know what? Friggin kudos to you, Victor. That's the way to fucking do it. Don't be Ali. Go out on top.

[B]

No, totally agree.

[A]

Be Khabib.

[B]

Send me a message like location, location.

[A]

So here what's happening is MAG had been asset managing. Their contract ran out late last year and Heinz is stepping in as kind of the adults in the room. This is a pretty interesting JV group here. It's Kevin Plank, who is the founder of Under Armour and Goldman Sachs.

[B]

Goldman Sachs Urban Infrastructure Partners.

[A]

Oh, that's them. Ah, okay.

[B]

Yeah, so they, they were a huge part of this.

[A]

Can I say that they're not very good at investing or is that too much to say? No, they've had a lot of like really messy Essex Crossing as them as well.

[B]

It's really hard and I think there's some of these themes in this project that are similar to Essex Crossing. So Kevin, who founded Under Armour, the Under Armour stock was through the roof in the early 2010s and he went nuts and was buying everything. Yeah, he had the Sagamore Pendry Hotel in Baltimore.

[A]

He has a Holdco called Sagamore. Right. I think he does a lot of his deals.

[B]

Sagamore is his Holdco. He owns a horse farm which he's trying to sell. He had Sagamore whiskey and the Sagamore Pendry. I have to say one of the most beautiful hotels I've ever been in and probably never made a red cent. Ended up selling that. He's been selling pretty much everything because Under Armour stock is down 75% over.

[A]

The last five years.

[B]

Pretty tough. As part of this transition, they are also giving back a big land parcel to Bank Ozk.

[A]

To Bank Ozk. And this will sound like deja vu because Bank Ozk just did a take back seize in Chicago at Lincoln Yards as well, which we'll get to in a second.

[B]

Another massive urban project in a declining population.

[A]

I gotta say, for Marianne, this would have been a pretty sweet gig. No, like pretty solid fees for a couple years.

[B]

Yeah, solid fees. You've got a narrative here that you can see. You squint a little bit and see how it makes sense. You had a ostensibly deep pocketed sponsor.

[A]

Marianne came in in 2022 and to keep the Hollywood theme going, she replaced another showrunner in Weller. This is going to be at least the third manager coming in here.

[B]

Yeah, it's the third. I think there's been three rebrands during that time. It was Port Covington, they bid on Amazon HQ2, then it was like Cybertown USA and then Baltimore Peninsula. The reason we want to talk about this is that there's this sort of theme of these massive urban redevelopment projects that are sponsored by local guys with deep pockets. And a lot of them are kind of debacles.

[A]

The thing I think about a lot, right, you can kind of see why this takes shape. Very wealthy, influential person wants to leave a physical legacy on the place they're from. They think, well, the best way to do that is do a fricking giant development. But again, as we've said before, development is hard.

[B]

It's really hard. And you might think if you have the money and you have the political juice, like those are two very critical elements. They're not all unique.

[A]

Which plank has he had that right?

[B]

They got a massive tiff here.

[A]

Tax increment financing. Correct.

[B]

Yeah. Which was like hugely controversial that he got.

[A]

I feel like that's table stakes for some of these things. Right. Centennial Yards is getting that. Our boys at one Beverly Hills actually got a special tax district which is like a next level thing. You kind of have to get these city and state tax incentives to make anything like this pencil out. Hudson Yards, obviously, famously is the goat of this.

[B]

And I think there's also two other things you really need. The first is if it's a wealthy private guy doing this, his underlying business can't shit the bed.

[A]

Right. You need the wealthy private guy to stay wealthy, ideally get more wealthy over time.

[B]

And not even just that. I think Under Armour initially was going to take something like half a million square feet of this development.

[A]

Oh, to anchor it, right?

[B]

Yeah, yeah, that just didn't happen. They're a much smaller portion of it now. There's. They've built 1.1 million square feet, a couple apartment towers, there's a bunch of office space which is like half leased, some retail. Yeah, but it was going to be an Under Armour development and the company has just not been able to do that. So that's one. And then two is you need the underlying value of the land to continue to compound during the development.

[A]

And we've talked about this with Starwood and their master plan community. That is the whole linchpin of the whole thing. Right. The land value has to get. Has to appreciate.

[B]

Yeah, exactly. Because if you have so much of this, this gets built out over so many years, like you. You need the land value to keep going up to just like make the math work. And ideally, each development is accretive, contextualized, and helps the stuff that came before it and is additive over time. But if the land value goes nowhere or goes down, you just can't build these things. The whole way you make it work is your land is more valuable so you can borrow more against it over time. And that didn't happen here.

[A]

You can borrow more against it. You can bring in A JV partner at a. At a higher valuation. That's part of it too.

[B]

Yeah, that's. Yeah, that's a very great point. Didn't happen at Lincoln Yards. Didn't happen here. You also need to be super talented. It's hard to outsource these things. There's a reason that Steve Ross can do this out of his PA in West Palm.

[A]

One thing I want to say, the lender here again, bank Ozk there. This is an interesting and probably worrying trend for the boys from the Prairie who could. They took back that Northern Yards portion of the Chicago megaproject Lincoln Yards. They took that back from Sterling Bay, a formerly Cock of the Walk developer in Chicago.

[B]

Oh yeah.

[A]

They've basically walked away from New York ground up for now. According to my sources, they were supposed to do the second phase of the Naftali project, the Williamsburg Wharf project.

[B]

Oh, Williamsburg Wharf. Wow.

[A]

Yeah, they were very much in the mix there. It's not like they pulled out last minute. It wasn't like the Landau thing that we've talked about before. It wasn't anything like that. But they. They basically expressed that they don't want to do this anymore. And so then Naftali turned to his boys from Golden Tree and JP Morgan, which are doing 805th for him. So it's the same lender group that just closed on the half a billion dollar loan for the Williamsburg. The point is that OZK is taking. It's getting a little interesting there as well.

[B]

Right. And Ozk, they were so early post GFC to come back into construction lending when it appeared really risky. No one wanted to touch it. They were one of the first people to come and open the spigot. And they made so much money.

[A]

I think George G.L. gleason was, without exaggeration, the most important man in real estate for maybe five years.

[B]

Yeah, he's certainly on the short list.

[A]

George Gleason and maybe Nick Mastroianni.

[B]

But as we talked about before, so much of real estate is getting permission. And so if you have one crazy guy out there writing these loans, it allows everyone else to turn the spigot back on. And that's really what led to this development boom that led to so much of this past cycle.

[A]

Ozk hasn't quite gone away. They just seem to have focused very, very heavily now on South Florida. That seems to be a market they believe in completely. Yeah. And they're just putting all their billions into that as opposed to a lot of the other core markets that, that generally they would play in also, I.

[B]

Think what their chief investment officer. Chief lending officer. I forget his name.

[A]

Dan Thomas. Yeah, Dan Thomas ran something called a real estate strategies group. Resg. And Resg was. Yeah, Resg made things happen.

[B]

Yeah. So to bring it back to Baltimore, you've got this site where you have 1.1 million square feet. Great. Pretty big. Not very well leased, not great connectivity, not fully occupied. And the rest of that parcel, is it going to get built? Who knows? Ozk took a big write down. Maybe Hinds comes in and does it. But like, at what basis? You end up with something that's just a blight instead of sort of a very transformative project for a city. It's Baltimore, gentlemen. The guards will not save you.

[A]

One point I want to make. Megaprojects are incredibly complicated because if you only have little pieces of them activated, it's not enough momentum to. Do you know where I'm going with this? Like it's.

[B]

Yeah.

[A]

You have one building here, you have one retail strip here. You kind of need a lot more than that to make everything sing.

[B]

You need enough people to live there to service the retail. You need enough office to service the lunch places. You need enough retail to have people want to live there.

[A]

Yeah.

[B]

All of these things have to talk to each other. And all of them are important. And if you have one and not the other or not enough of any of them and the whole house of cards falls in on itself to pull another Baltimore thing out of our hat. Because that filmed there. And Kevin Spacey lives on a boat.

[A]

Let's see how if Heinz can come in and kind of resurrect this. But right now it looks like the founder of Under Armour might just lose his shirt.

[B]

At least he's not gonna have sweat stains on it.

[A]

That's it for the promode podcast this week. If you keep marking the magic, you might end up hexed. Reshaping a city for anyone not named Steve Ross is harder than it looks. And soundstages have gone from investment darlings to boondoggles. But hey, baby, that's just pictures.

[B]

We're still figuring out whether we're back next week.

[A]

Will didn't know this. He's sad about it. I don't think we're potting next week.

[B]

But I might just. You might get a rambling thing from me again. We'll see if I can sneak it past to 10, but wanted to wish you all a Merry Christmas. Happy Hanukkah.

[A]

Merry Christmas. Yeah.

[B]

And in case we don't see you until then, a very Happy New Year. This has been a privilege. We haven't even been doing this for a full year, but want to thank you guys again. We have a lot planned for 2026 and beyond and look forward to giving you guys a lot of great content.

[A]

We started doing this when my son was three weeks old. The missus gave me a hard time, but I just knew that we needed to do this. The CRE community needed something, and it's been such a privilege for us to have the audience that we do incredibly engaged, incredibly knowledgeable. I still remember the guy who gave us the whole show spiel about Waltz. I think about him a lot, but in general, just. It's such a blessing to have an audience that is with you that cares so much, that gives you a lot of feedback and is a little bit also, I mean, from the mailbag episode, a little bit nuts, which we appreciate.

[B]

I appreciate it because I'm also nuts. So it fits.

[A]

Thank you all. Really huge for us to have put this together. And thank you, William.

[B]

Thank you, Haten. This is truly a pleasure.

[A]

Ciao, Sa.