Exotic Alts (w/ SomeraRoad's Ian Ross) & Taconic's Lab Leak

Summary

The Promote Podcast: "Exotic Alts (w/ SomeraRoad's Ian Ross) & Taconic's Lab Leak"

Date: December 17, 2025
Hosts: Hiten Samtani ("Bard of CRE"), Will Krasne
Guest: Ian Ross, Founder of SomeraRoad

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Episode Overview

In this episode, Hiten and Will take listeners into the evolving landscape of “exotic alternative” asset classes in CRE (Commercial Real Estate)—from car washes to aviation hangars and marinas—shedding light on why these previously niche real estate verticals are suddenly seeing heavy institutional interest. They delve into the impact of recent U.S. tax legislation, dissect how depreciation incentives are warping transaction dynamics, and explore the behind-the-scenes ground game needed to execute large-scale plays in fragmented markets.

The show’s second act spotlights Taconic’s ill-fated $2B bet on NYC’s life sciences real estate, unpacking how a pandemic-era ‘sure thing’ can unravel in spectacular and instructive fashion.

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Key Discussion Points & Insights

1. The Rise of "Exotic Alts" in CRE

[00:38–06:05]

• Definition: Once seen as “rinky dink,” asset classes like car washes, aviation hangars, marinas, and gas stations are now targeted by institutional capital.
• Catalyst: Recent tax law changes (referred to as the “big beautiful bill”) have reignited 100% bonus depreciation for certain property types—meaning investors can write off the majority of an asset’s value in the first year.
• Investor Strategy: High-net-worth individuals (HNWI) and those with big equity event gains (e.g., from AI stocks) are seeking these investments to sharply reduce federal tax bills.

Notable Quotes:

• Will Krasne [02:02]:
  “As Stephan might say, New York’s hottest club is tax shelters. ... It really poured gas—Constantine—on the fire for a couple of these asset classes that have 100% bonus depreciation you’re able to pull forward in year one.”

• Hiten Samtani [03:03]:
  “How do you roll up your mega gains from Nvidia or what have you and put it into these, like, rinky dink things?”

Transaction Impact Example:

[04:20–05:12]

• A $5M car wash in Miami sold at $1,600 per square foot—a “staggering number.” With bonus depreciation:
  • $1M allocated to land.
  • $4M is 100% depreciable in year one.
  • Result: A top-bracket investor could see 7-figure federal tax savings—hence prices climbing 25% in 6 months after the bill passed.

Notable Quote:

• Hiten Samtani [04:50]:
  “What the fuck? Wow.”

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2. Spotlight Interview: Ian Ross on Private Aviation Real Estate

[08:17–19:33]

Who is Ian Ross?

• Founder of SomeraRoad; background in distressed debt acquisition (Triangle Assets, post-GFC), now prominent developer with major ongoing Nashville projects.
• Today’s focus: SomeraRoad’s aviation infrastructure ground game (“Mile High Club”).

Why Hangars?

• Hangars are leased on ground leases at airports. With new rules, 100% of the value is depreciable because there’s “no carve out for land.”
• The “ramp” (concrete area) is considered a land improvement—also fully depreciable in year one.

Notable Quotes:

• Ian Ross [09:14]:
  “What’s unique about private jet hangars… is they sit on ground leases ... when you have a ground lease, there’s no carve out for land. So 100% of the asset is depreciable …”

• Ian Ross [11:54]:
  “You don’t park your Ferrari in your driveway. Well, you don’t park your Global on the ramp. ... It’s your most prized possession.”

Market Dynamics & Demand

• Massive demand: 10-year waitlists for hangar space are common in populous markets.

• Inelasticity: Rents can be raised without much pushback, due to the ultra-high-net-worth clientele and limited supply (airports aren’t making new land).

• Ian Ross [12:33]:
  “The real estate that caters towards this demand—it’s like beachfront property. You can’t build more of it.”

Acquisition & Roll-Ups

• Market fragmentation: No Newmark or Eastdil equivalent for hangars; acquisitions are ground-up and often from mom-and-pop owners.
• SomeraRoad: $300M in assets, $600M in pipeline.
• Politics: Public airports, FAA regulation (max 50-year ground leases, commonly 40), and local government interests make these deals complex and sometimes risky at lease termination.

Who are the institutional end-buyers?

• Major roll-up activity: KKR, Apollo, Blackstone, KSL, Cascade, etc., often via infrastructure funds and public vehicles (Sky Harbour SPAC mentioned).

• Will Krasne [17:46]:
  “There was an asset that had $400 million of year one depreciation … it was the deepest bid sheet I’ve seen in five years. … Every single billionaire family office looking to offset AI gains.”

Fun Anecdotes

• Ian Ross [19:19]:
  “Owning 37 private jet hangars on the Las Vegas strip brings out a full cast of characters from casino owners to high rollers.”

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3. Taconic's Life Sciences Misadventure ("Lab Leak")

[19:49–31:49]

The Bet

• Following the pandemic, Taconic invested $2B+ on repurposing NYC office assets as life sciences labs via Elevate Research Properties—convinced life sciences was a “can’t miss.”
• Lots of public-sector tailwinds (Cornell Tech, city funds) and historic successes in Boston/San Diego.

What Went Wrong?

• Buildout for labs is costly and specialized; tenant demand in NYC proved illusive.

• Alexandra Real Estate Equities (market leader in the space) saw its stock drop 74% over five years.

• NYC had only ~433,000 SF of leasing volume at peak enthusiasm (“That’s like one law firm moving.”), yet vacancy now is 27% on ~3 million SF inventory.

• Will Krasne [21:33]:
  “There’s been zero leasing activity in their portfolio ... that just didn’t work out. Tons of capital came into the space.”

Dissecting the Deals

• Taconic raised institutional capital for multiple conversions (Hudson Research Center, West End Labs, Iron Horse).

• Equity partners (Silverstein, LaSalle) and lenders (Square Mile Capital) are now facing major write-downs.

• Hiten Samtani [26:13]:
  “They might be building for Moderna, but what you really need is space that’s cheap and flexible and built to suit for startup to plug and play, basically.”

• Will Krasne [29:05], quoting a departing exec (Perkins & Will):
  “I’m returning with a sharper understanding of the economic, technical and regulatory challenges that our clients are navigating. … If you can learn on someone else’s dime, that’s great.”

Behind the Curtain

• Many NYC “innovations” are driven by shifting priorities within family real estate firms (e.g., Silverstein’s new leaders wanting to expand the company’s scope).

• OPM (“other people’s money”): Taconic demonstrated sophisticated narrative-building, raising for ventures that see much of the risk externalized via JV and LP partners.

• Will Krasne [31:04]:
  “A lot of these old office landlords … took out five times the building’s value in cash over the last 20 years. Like, don’t cry for them.”

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Notable Quotes & Memorable Moments

• On the Tax-Led Asset Surge:
  Will Krasne [02:02]:
  “New York’s hottest club is tax shelters. … this place has everything.”

• On Car Washes as Institutional Investments:
  Hiten Samtani [04:50]:
  “What the fuck? Wow.”

• On Hangar Value:
  Ian Ross [12:33]:
  “The real estate that caters towards this demand—it’s like beachfront property. You can’t build more of it.”

• On NYC Lab Space Reality:
  Hiten Samtani [24:20]:
  “That’s like wild Gottschall moving. … New York is still very much a fire town.”

• On OPM and Developer Returns:
  Will Krasne [31:04]:
  “Don’t cry for them. … these kinds of returns matter. We’re talking about the difference between a 7 and a 0 is pretty big.”

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Segment Timestamps

• 00:38–06:05: The exploding market for exotic CRE alts (car washes, marinas, hangars), bonus depreciation mechanics, and tax-driven buying frenzy.
• 08:17–19:33: Interview with Ian Ross—how and why SomeraRoad dove deep into private aviation real estate.
• 19:49–31:49: Detailed post-mortem on Taconic’s failed $2B life sciences push in New York, lessons in asset class fads, institutional capital flows, and operator “skin in the game.”
• Key quotes and takeaways: Scattered throughout, see bolded boxes above for highlight moments.

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Takeaways for CRE Insiders

• Government incentives (bonus depreciation, etc.) drive tidal shifts in CRE capital flows toward asset classes that were, until recently, considered “niche” or “mom and pop.”
• Fragmented markets (like hangars and marinas) require relentless ground-game development—there’s no Eastdil/CBRE for these deals.
• Even with “can’t lose” narratives (NYC life sciences, post-COVID), CRE innovation is risky, and late-cycle institutional plays can end in public write-downs.
• The ultimate winners in the institutional gold rush are often those adept at using OPM, crafting compelling narratives, and exiting positions ahead of hard times.

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To learn more about the hosts or sign up for The Promote newsletter, visit thepromote.com.

Transcript

[Hitan Sumtani]

What is it that Dorothy Boyd said in Jerry Maguire? She's sitting in coach, gazing wistfully at cruise up in first class.

[Will Krasny]

First class is what's wrong, honey. Used to be a better meal, now it's a better life. That was the 90s, though, and we've currently reached the point where the plane itself is the better life.

[Hitan Sumtani]

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

[Will Krasny]

And I'm Will Krasny.

[Hitan Sumtani]

Today we're talking exotic alts, the cute, far flung corners of CRE that are starting to catch some serious institutional heat. So think car washes, aviation hangars and the like.

[Will Krasny]

Just remember, your biggest business partner is the government. And it ain't what you make, it's what you keep.

[Hitan Sumtani]

Indeed, we also look at Teconic's failed experiment, pun perhaps intended in New York's life science market. $2 billion deployed and not very much to show for it.

[Will Krasny]

Before we begin, here's what I want for Hanukkah. Go to Apple, Spotify, or your podcast vendor of choice. Register, review. Tell people why you're obsessed with this podcast. It helps my ego and I'm supposed to say that it also helps more people find the podcast, but really it's that first part.

[Hitan Sumtani]

There's one dude, bravissimo to acquisitioni, who set some kind of new unhinged record in the Promote psycho universe. He listened to eight episodes of us in a single date, give or take 150 minutes of the promote podcast.

[Will Krasny]

No accident that his development deals will likely hit the Promote outstanding stuff. Also, go check out the Promote Insider, our premium tier for paid subscribers at just $30 a month. I'm working on a piece for it right now.

[Hitan Sumtani]

You can find [e-mail] upgrade. All right, well, let's get get exotic. What is happening in this space of formerly kind of random assets? Car washes, airplane hangars, marinas. It's all starting to get a lot of institutional interest.

[Will Krasny]

As Stephan might say, New York's hottest club is tax shelters. Needless to say, this place has everything. The big beautiful bill earlier this year made a bunch of changes that made real estate writ large a more attractive asset class on an after tax basis. But it really poured gas Constantine on the fire for a couple of these asset classes that have 100% bonus depreciation that you're able to pull forward in year one. And essentially what we mean is more of the 39 year depreciable life like Everyone kind of knows this, but certain asset classes and certain property types have the ability to have more of the property depreciated in year one, offering more year one tax savings. And so what we have seen the last 90 days really, is a flood of transaction volume into these types of assets. Because folks who may have made a bunch of money on AI or if you're a David Geffen and you didn't, insider trade the Warner Brothers deal, and you have a lot of gains to offset, you can invest into one of these asset classes.

[Hitan Sumtani]

And how do you roll up your mega gains from Nvidia or what have you and put it into these, like, rinky dink things.

[Will Krasny]

Rinky dink things. These are private equity backed leases on just phenomenal real estate. No. What is it?

[Hitan Sumtani]

What does it look like? Do you have a network of Armenian brokers that you're going through for this stuff?

[Will Krasny]

No, there's honestly a whole cottage industry for it. Not necessarily for some of the more esoteric asset classes, which we'll get into later, but for car washes, gas stations, things like that.

[Hitan Sumtani]

Marinas too.

[Will Krasny]

Marinas a little bit. There are brokers who really specialize in this stuff. There's a whole network of knowing who has 1031 capital, who's got gains, and who is looking for a shield. A lot of those folks are looking to buy stuff towards the end of the year. Because if you have that uncomfortable conversation with your accountant in October. Yeah, still got some time.

[Hitan Sumtani]

I would imagine that as a result of all this institutional investor interest, price of the brick gotta go up, no?

[Will Krasny]

Yeah. And I mean, if you have taxable investors, this is a huge thing that you can offer them. The broker network, you call it Matthews. And you're like, what is your inventory of gas stations? Like, I want a hard corner.

[Ian Ross]

You know, I'm just a gangster, I suppose.

[Will Krasny]

And I want my corners. One of these tenants. This cap rate, like, you can sort of get the poo poo platter of it. Let's put some numbers around it.

[Hitan Sumtani]

Yeah, let's do it.

[Will Krasny]

This is all kind of like in the ether. So there's a great article on Globe street of all places.

[Hitan Sumtani]

All right, I'm in.

[Will Krasny]

They talked about a car wash on Biscayne Boulevard in Miami. It was 3,300 square feet, plus or minus. And essentially, though, is that if you can do the deal with debt, so call it 65, like high 60s leverage with 100% bonus. So for a $5 million car wash, which roughly, this is where this trade, which by the Way staggering number per foot.

[Hitan Sumtani]

For what are we talking per foot?

[Will Krasny]

We're talking like 1600 bucks a foot.

[Hitan Sumtani]

What the fuck? Wow.

[Will Krasny]

Okay, so for a $5 million car wash with a $1 million land allocation, you can get 4 million of depreciation in year one. Okay, so call it like 3 million of debt, 2 million of equity, you're able to offset more than what you put in in year one. And so if you're in the top tax bracket, you can see seven figures of federal tax savings. Wow.

[Hitan Sumtani]

So I would imagine prices have crept up at least double digit figures.

[Will Krasny]

Well, this broker says that they've climbed 25% in six months since the bill got passed.

[Hitan Sumtani]

I was talking last week to you about how industrial brokers are probably feeling pretty good right now after the culture being dominated by office brokers. Imagine the day where it's the car wash guy from Colliers is like the top producer in his office.

[Will Krasny]

No, seriously, it definitely could be. And real estate, one of the things about it is that this is a downstream impact of legislation. And real estate can be saved or.

[Hitan Sumtani]

Ruined by 1986 tax act, for example.

[Will Krasny]

Right. So one stroke of the tax pen can have meaningful differences in this. And like even in multifamily, for instance, that garden apartments have more depreciable property for year one than mid rise or high rise on the margins, it impacts flows into those asset classes as well.

[Hitan Sumtani]

So, you know, while we have resisted bringing on too many guests on the promote podcast, we kind of didn't want to turn this pod into a book tour circuit, which is what a lot of CRE interview pods tend to become.

[Will Krasny]

Everyone's got to do what they got to do. But yeah, I'm not really trying to help Brad Jacobs sell books.

[Hitan Sumtani]

It's just not our style.

[Will Krasny]

So we've tried to do them differently. We have folks on who are in the thick of the juiciest topics in CRE and try to get them to nerd out on what they're up to. And there's been so much demand for interviews done in that promote style that we are giving the people what they want.

[Hitan Sumtani]

Indeed, and I'm excited about it. Which brings us to today's guest, Ian Ross from Samara Road. So Ian's an interesting guy. He made his bones at a family office in the wake of the gfc. I think it was called Triangle Assets. He was buying up distressed CMBS paper for pennies on the dollar there. And then he started his own shop in 2016, basically employing the same playbook. And they've since branched out into development as well. They're doing a resi project in your old neck of the woods hotel. Bossard is going to be a resi project, so that's going to be fun.

[Will Krasny]

It's going to be pretty spectacular. Say, be a unit, please.

[Hitan Sumtani]

And he's also got a major thing going on in Nashville. We're doing a 30 story hotel condo, which is going to be the Pendry.

[Will Krasny]

Yep.

[Hitan Sumtani]

But we're not talking about any of that today. We wanted to talk to him specifically about the Mile High Club. We're going to talk only about aviation infrastructure, which is a quirky corner of CRE with explosive demand and very, very, very favorable treatment from Uncle Sam.

[Will Krasny]

Bonus appreciation is a hell of a drug.

[Hitan Sumtani]

It really is. I enjoy this chat a lot. What jumped out to you?

[Will Krasny]

Honestly, the velocity of execution in this portfolio.

[Hitan Sumtani]

Is this an aircraft pun?

[Will Krasny]

A little bit, yeah. But doing something this fragmented at scale takes brute force. And it's very impressive how they've been able to put this together.

[Hitan Sumtani]

I would imagine they've set up a ground game. God, it's turning into a lot of airplane punts, but I'd imagine they set up a ground game at least a few years ago. And now with Triple B coming into play, it's all manifesting quite well.

[Will Krasny]

They've taken advantage of Bernoulli's principle.

[Hitan Sumtani]

I also got to say, whoever's pressing his shirts deserves a raise. They were very crisp. All right, let's cut to our conversation with Ian Ross from Samara Road. Ian, welcome to the promote podcast.

[Ian Ross]

Hey, great to be with you guys. Appreciate you having me on.

[Will Krasny]

We're excited.

[Hitan Sumtani]

Yeah, we really are. So I would imagine the big beautiful bill is the catalyst for a lot of the things you're doing.

[Will Krasny]

It's a great bill. It's a popular bill.

[Hitan Sumtani]

Talk us through when this strategy really formed and what is it exactly?

[Ian Ross]

We've been working on private aviation and aviation infrastructure for a number of years. But the big beautiful bill and the 100% bonus depreciation which was brought back certainly made our business even more compelling.

[Hitan Sumtani]

What specifically changed and what kind of changed in the underwriting or the pitch?

[Ian Ross]

This year, Trump brought back 100% bonus depreciation for assets that had an element of accelerated depreciation. What's unique about private jet hangars or aviation real estate is that they sit on ground leases, traditional real estate investment. You carve out the ground value, the land value from what can be depreciated.

[Hitan Sumtani]

That's give or take, 20% or so. Right, you said.

[Will Krasny]

Yeah.

[Ian Ross]

The rule of thumb, the general paradigm is to take about 20% passes muster with the IRS. You know, 10 times out of 10, if you carve out 20% when you have a ground lease, there's no carve out for land. So 100% of the asset is depreciable or qualifies for some element of depreciation.

[Will Krasny]

So let's quantify that if you're a taxable investor. Apples to apples. At the end of the day, it's not what you make, it's what you can keep. So on an after tax basis, how much juice would an investment like this in a car wash private aviation investment make relative to a fixed income investment?

[Ian Ross]

Are we talking about depreciation or yields on the investment?

[Will Krasny]

No, post tax, post depreciation shield. Apples to apples yield on like a high yield bond or I'd rather just.

[Ian Ross]

Stick to depreciation than go into like the return profile of the investment class. If that's okay with you guys.

[Will Krasny]

Like it's 100% bonus. Like how, what does that mean? Just in terms of savings? Like you can write off X amount.

[Ian Ross]

Yeah, sure. So what's unique about this is that there's no allocation for land value. 100% of the asset is depreciable because there is no land carve out. What's further interesting about aviation real estate is the ramp. So the ramp is all of the concrete that surrounds these buildings or these hangars or the FBOs. And the ramp fits under something unique called a land improvement. When you look at the big beautiful bill, when you look at accelerated depreciation, land improvements qualify for bonus depreciation and are 100% depreciable in year one. And when we look at our aviation assets, I'd say about 50% of them are structures. The other 50% of it is land area, but improved land. And that portion is 100% depreciable year one, qualifying for that bonus depreciation. The remaining assets are traditional commercial real estate, 39 year depreciation assets. Obviously with some cost segregation that can be accelerated a little bit to earlier years. But now when you step back, 100% of the asset depreciable, about half of that 100% depreciable in year one as a land improvement and the remainder following a more traditional and cost segregated depreciation schedule.

[Hitan Sumtani]

Okay, and in terms of demand for this asset, has there been sort of an explosion of demand at all? When you and I chatted a little earlier, you were talking about how it's quite an inelastic asset class. You can sort of up rents without too much sweat. I was talking to someone in the aircraft finance space and he said the wait list for some of these things is 10 years to get in on these hangars. So you can imagine there's some wiggle room there.

[Ian Ross]

Absolutely. The supply and demand fundamentals in private jet hangers is phenomenal. When I think about private jets, I always say you don't park your Ferrari in your driveway. Well, you don't park your Global on the ramp. You protect that asset and in most markets it's more expensive than your home. Way more expensive than your home. It's your most prized possession. In a hot weather climate, you don't want your avionics getting fried from 110 degree Vegas heat. In a cold weather climate, you don't want rain, sleet, snow messing with your paint. Just messing with the overall aircraft. You want to preserve its resale value for such an expensive asset. So it's very important to keep a jet hangered.

[Hitan Sumtani]

Okay.

[Ian Ross]

You're dealing with a customer that's got a high willingness to pay extraordinarily price inelastic. The real estate that caters towards this demand. It's like beachfront property. You can't build more of it. We're not building new airports across America in population dense areas.

[Hitan Sumtani]

Two things on that. One, the initial demand coming from the private jet owner themselves. Has there been some change in their environment?

[Will Krasny]

Well, private jets themselves now are highly depreciable assets as well.

[Ian Ross]

Totally.

[Will Krasny]

So there's probably been more demand just on the buying jet side.

[Ian Ross]

Private aviation as a category is growing immensely. Something about like 80% of all new private jet deliveries end up in America. Jets are getting bigger, their tail heights are getting higher, planes are staying in service longer. Private aviation is becoming more attainable to a larger set of the population with the advent of things like jet shares and charters and fractionals and frankly with the decline in quality of commercial aviation.

[Hitan Sumtani]

Don't you follow that dude, the private jet guy on Instagram?

[Will Krasny]

Yeah, the flight tracker guy. It's really annoying when famous people block that guy.

[Ian Ross]

Kim Kardashian took a lot of heat years ago. It's actually Jermaine to this conversation. She was repositioning her plane, I believe I wanna say it was from Burbank to Camarillo. And your private jet guy on Instagram was tracking her and commenting on the environmentally unfriendly use of a jet to ferry it around empty just to pick her up more conveniently. I'll Tell you why that probably is. It's. It's probably cuz she had an arrangement at, let's just say Camarillo for a hangar for a better fuel program. She needed to hang her jet. So she hangered in, let's say Camarillo and repositioned it to pick her up when she needed it.

[Hitan Sumtani]

If you worry about something, it's not going to change the outcome. Tell us about the acquisition strategy here. You kind of likened it to beachfront property. What does this look like? What's the universe of brokers or people who kind of hustle this stuff? Who are the Roy Marches and Adam Spees, et cetera, of this world? And what does that look like?

[Ian Ross]

Short answer is it doesn't exist. It's a highly fragmented space of mom pa ownership. We've amassed a portfolio of about 300 million plus in assets. We have a pipeline of another 600 million ahead of us, but it's very challenging to source.

[Hitan Sumtani]

So there's no unified Newmark type of shop here that sources deals or has like a good pipeline of deal flow?

[Ian Ross]

There's not.

[Will Krasny]

And a lot of them are in areas which are. And I know there's been famously a big issue with flight plans in I think East Hampton, around that fbo definitely. Where millionaires don't want the sentimillionaires and the billionaires planes coming through their over their houses.

[Ian Ross]

You'd be amazed. We do work in 50 markets across the U.S. there's a lot of wealth all over America. And actually when you get to these secondary and tertiary markets, the demand for private aviation from that wealthy class actually starts to grow. When you have worse airlift in a market like Omaha, the wealthy class or the corporate jet user wants that ability to get anywhere at any time and can't rely on commercial aviation or commercial airlift to get there.

[Hitan Sumtani]

Perfect segue to something I wanted to ask. So I spoke with a dude in Chattanooga who works in this space and he had a question which was because he's seen this happen a bit, he said, how do you underwrite the potential that a local government might take back the asset at the end of the ground lease and they get to take it back with the improvements that you've made, correct? As I understand it.

[Ian Ross]

Yeah.

[Hitan Sumtani]

How do you underwrite that?

[Ian Ross]

The FAA regulates ground leases on airport jurisdictions to be 50 years at max. Most of the jurisdictions we work with cap that about 40 years. It's just something that you have to get comfortable with. And leasehold interests are prolific across real estate and it's A it's just an element of our underwriting.

[Will Krasny]

I'm not going to tell you that.

[Hitan Sumtani]

Political juice is an element here, I take it. Without getting specific, I would imagine there's.

[Ian Ross]

A ton of politics and over drinks that would tell you a lot more about some of the nuances. But one thing I want to note on our aviation business, it's not just about buying existing hangars in favorable supply and demand paradigms. It's about developing new supply where we can sort of about half of our business is actively seeking new sites to build hangars where there is available land and where there is unmet demand for jet hangers.

[Will Krasny]

So on the investor side of this, and not specific to aviation, but also I think some of these other asset classes which have similar depreciable characteristics. The genesis for this podcast was one of my friends at one of the big pot shops was talking to Eastill's management team and he said, what's the deepest bid sheet you've seen recently? Like, what are the assets? And he's like, there was an asset that had $400 million of year one depreciat. He goes, it was the deepest bid sheet I've seen in five years. It was every single billionaire family office looking to offset AI gains. You see that with like car washes too. Assets that have like the same thing.

[Ian Ross]

Car washes, gas stations, oil changes, shops.

[Hitan Sumtani]

Like yours, not necessarily yours, but shops like yours are looking for that roll up played to one of the massive PE shops. At the end of the day, is there. I know Signature is owned by KKR here. Like who? Who is the end buyer for something like this? We talk a lot on the show about AUM gobbling and when this gets big enough to gobble, who's kind of in the market for it?

[Will Krasny]

Well, isn't it Sky Harbor? Like they went public by SPAC a couple years ago.

[Ian Ross]

Yeah. Sky harbor is a public SPAC that focuses on the development of new hangars. Private equity capital infrastructure capital has been actively gobbling up and rolling up FBOs. Whether it's KKR, KSL, Apollo, Cascade, Blackstone, there's a variety of players that are very keen on aviation as an investment asset class. Folks are always trying to do something different and unique to separate themselves from their peers. When you look at the advent of life sciences, data centers, RV parks, marinas, these are all asset classes that a decade ago weren't considered institutional asset classes and all evolved with institutional capital finding places to seep into across our real estate ecosystem.

[Hitan Sumtani]

Will, you've been obsessed with marinas for a little bit.

[Will Krasny]

Because at one of my first jobs, we were looking at a master plan in Tennessee that had the only place you could buy gas within, like three locks on the Tennessee River. That was by far the most valuable asset in the development because it was just like basically a license to print money. My question is going to be about financing these things in terms of financing a leasehold, like on the real estate side.

[Ian Ross]

I want to pass on that one. Respectfully, Will, I will tell you everything over drinks. I'm just not going to tell the world on your podcast.

[Hitan Sumtani]

Okay, fair enough. One final question, then a little more fun one. In the course of developing out this business, any interesting anecdotes, any kind of portal into that world of private aviation that you want to share with the audience?

[Ian Ross]

Let's just say owning 37 private jet hangars on the Las Vegas strip brings out a full cast of characters from casino owners to high rollers. A lot of interesting people that have been a joy to work with.

[Hitan Sumtani]

Ian Russ from Samara Road, thanks so much for being with the promote.

[Will Krasny]

Thanks for coming on.

[Ian Ross]

Thank you guys. Appreciate the time.

[Hitan Sumtani]

We have to talk about this life sciences debacle happening in New York City. Really interesting story from BizNow. Just dropped this past week. Taconic made a pretty massive bet, $2 billion worth on the space right in the wake of the pandemic. And you know, there's been some lab leaks there.

[Will Krasny]

It's like the worst performing lab deal since Wuhan. So we talk a lot about asset classes that have become institutionalized and how, you know, this doesn't always just start as like one of the major food groups. Stuff gets added in, stuff gets taken out.

[Hitan Sumtani]

Data centers now is kind of the perfect example. And I think there's some cracks in that we have to get into in successive episodes. Look at the kind of the quantum of capital being deployed in those spaces. Right, right. And life sciences was definitely the bell of the ball right as the pandemic arrived.

[Will Krasny]

There's a publicly traded company called Alexander Real Estate equities founded by Marcus. Joel Marcus, that's right.

[Hitan Sumtani]

Are you sure it's Alexander? Alexandria.

[Will Krasny]

Alexandria. Sorry.

[Hitan Sumtani]

Yes, yes. Okay.

[Will Krasny]

One of my good friends works there. Like I should know that. So Alexandria Real Estate equities was founded in the 90s, I believe, focused on lab space in the big hubs. So San Diego, Boston, Cambridge, and as people would say, just outside Boston. It was one of the real estate darlings. They were early. It takes very specific build out. It's not random. Office build out. It's very specialized for what these people need.

[Hitan Sumtani]

You typically can repurpose office buildings to do this, but the buildout is quite expensive.

[Will Krasny]

That's what I was referring to. There's often like temperature controls. You need stuff has to be either super hot to kill bacteria or too cold to preserve bacteria or like who knows. And built this massive company. The stock had done tremendously well and it's just fallen off a cliff. Alexandria Real Estate equities, their stock is down 74% over the last five years.

[Hitan Sumtani]

It's quite brutal.

[Will Krasny]

There's been zero leasing activity in their portfolio. And really New York, when this bet was made was to be a one of the hubs, like a San Diego, like a Boston. And that just didn't work out. Tons of capital came into the space.

[Hitan Sumtani]

And in New York we were sort of building out the broader infrastructure for New York City to be that a competitive market in that space. Right. We had Cornell Tech. There was a lot of incentives for biotech companies to set up shop in the state as well.

[Will Krasny]

Blasio had created a whole fund to help try to bring these here because these are great jobs, are very high paying. Like it's a lot of economic activity. There's a lot of incentives to do it. And it just didn't work.

[Hitan Sumtani]

It just didn't work. You talk about Alexandria, which is a public company and the triumphs and disasters are there for us to see in the stock. But there are private players who took a pretty big swing at this. And Taconic, which is the company founded by Paul Pariser and Charlie Bend, it was probably one of the biggest names in the space. Major developer. They've had tremendous success back in the day in meatpacking. They famously sold 1 1/8th to Google for 1.8 billion, which was a record I think at the time.

[Will Krasny]

That's a lot more than they paid for it.

[Hitan Sumtani]

It's very true. And they also had a lot of success with Samsung. They sold a bunch of buildings in meatpacking. So take it back to the pandemic 2022. We're kind of through the worst of it, but there's a very big question mark on kind of the. The idea of office as a viable asset class in New York City at this time. So a lot of people are running away from office and people who own office or have money to deploy are thinking of repurposing it, thinking of making other bets. So deconick decides to go all in on life sciences. They start a division called Elevate Research Properties, they raise a bunch of money for it and they go shopping.

[Will Krasny]

It's one of these things where you look at the stats and you think it's really compelling. Where there was more absorption in I think what, 2020 or 2021 than there had been over the past decade in New York and vacancy was 3%. But what you forget is these are competitive markets and things change in their dynamic. And so one, there's a wave of supply as everyone sort of read the same thing and started building.

[Hitan Sumtani]

To your point, it's like if something happens in New York, capital can, can move quite quickly because word gets around a lot easier.

[Will Krasny]

Well, and it's not even something where there was a lot, you might say, oh, it's supply constrained because there isn't a lot of it. But how much? To your point, how much office was sucking wind looking for, you know, a new life. And so you had all of these buildings which theoretically could be repurposed. Not all of them could. And it took someone with deep pockets and expertise to do it.

[Hitan Sumtani]

One thing for the record, we should say is like the number that kind of got people excited, the leasing volume in the space was 433,000 square feet. That's not very much.

[Will Krasny]

That's like wild Gottschall moving.

[Hitan Sumtani]

Exactly. That's my point. Right. New York is still very much at fire Town. But anyway, so Taconic comes in. What I think Taconic is very, very good at is raising money, building a very compelling narrative around an asset class or a space, et cetera. They've done this time and time again. They're one of the best at it. So they go and raise this life science venture.

[Will Krasny]

What's so interesting is the premier property they had, the Hudson Research center, they'd own that since 2012.

[Hitan Sumtani]

They had.

[Will Krasny]

And they sort of saw this as an opportunity, like we can rebrand it, we can bring in fresh capital. Correct. And that's really what they did. They brought in Silverstein. To your point about JVs, at a pretty big valuation and immediately were able to get a construction loan.

[Hitan Sumtani]

I have a theory on this.

[Will Krasny]

Go for it.

[Hitan Sumtani]

So 2017 is when this deal happened with Silverstein. They bought an 80% stake at a $180 million valuation. What is happening at Silverstein Properties at this time? Tal Kerritt, the son in law, is kind of gaining power and starting a bunch of things and he wants Silverstein Properties to be more than just an office landlord, more than just a rental landlord. He's thinking more creative.

[Will Krasny]

Are you saying he's thinking elevated.

[Hitan Sumtani]

My pet theory is that a lot of these personnel decisions in these family firms end up manifesting in these sort of unorthodox bets.

[Will Krasny]

The narrative though is that this was unorthodox in that it wasn't traditional office, but it's very orthodox in that you have a name brand firm with sort of a thesis that makes sense on the surface. But again, like you dig in, the tenant demand too isn't necessarily about raw square footage. I have no idea about life science at all. But it sounds like more of the demand is for smaller pre built spaces for these startups that are funded and they're like, we don't want to spend a year building out of space. We want to show up with our toothbrush and beakers. Yeah. And start experimenting.

[Hitan Sumtani]

They might be building for Moderna, but what you really need is space that's cheap and flexible and built to suit for startup to plug and play, basically.

[Will Krasny]

Right. And that was not what they built.

[Hitan Sumtani]

So they were able to get Silverstein on board. They also got Square Mile Capital, the artist now known as Zephineus, to come in and give them a $200 million loan on this asset.

[Will Krasny]

Right. Construction loan. And how's that building doing now? What is Silverstein? How are they feeling about the equity.

[Hitan Sumtani]

According to Tel Aviv Stock Exchange filings? Because Silverstein's raised bond money.

[Will Krasny]

I'm glad it's back.

[Hitan Sumtani]

So according to bond filings there, Silverstein has basically written off the entire equity stake in that property. However they did sell. I mean there is like a bit of. They had sold something else to this fund. There was one called West End Labs. It's actually in the Disney ABC campus. And Taconic and Nuveen had bought it from Silverstein for 230 million in 2019. So I think net, net, maybe Silverstein turned. But fine.

[Will Krasny]

It's like what Mort Zuckerman said when he sold Wired and US News and all that stuff. Yeah, he sold one for like $200 million and one for like six. And he's like, ah, average out.

[Hitan Sumtani]

But West End Labs is interesting as well. In 2021, so Taconic and Nuveen bought it from Silverstein for $230 million in 2019. A couple years later, they got $400 million in construction debt on this building and they wanted to turn it into wet and dry labs, engineering zones, event space, conference center, et cetera. And they brought in LaSalle as their equity partner. LaSalle put in close to a little bit north of $200 million.

[Will Krasny]

I bet that is not feeling great right now either.

[Hitan Sumtani]

They've had a lot of trouble with these. So Hudson Research center, essentially equity wiped. West End Labs has had a lot of trouble. And then there's one more.

[Will Krasny]

Iron Horse.

[Hitan Sumtani]

What happened with Iron Horse?

[Will Krasny]

Iron Horse. So first of all, it was where Lou Gehrig was born, hence the Iron Horse. As somebody grew up rooting for Cal Ripken Jr. When he broke Lou Gehrig's streak, it was kind of bullshit because Lou Gehrig actually like would play one inning of a bunch of games and to keep the streak going.

[Hitan Sumtani]

It's like Real Madrid when they used to win the Champions League back in the day. They only had to show up for the final and they would win the final. They didn't have to go through the entire process.

[Will Krasny]

This building, they bought it and repurposed it again into this type of life science space. And they haven't even converted. They haven't finished doing it yet.

[Hitan Sumtani]

Looks like construction has stalled. Biz now visited the site. Nada. No activity.

[Will Krasny]

What happened to the folks that they hired a bunch of people to come in and run this division? Right.

[Hitan Sumtani]

This is outstanding. They hired this guy from the architecture firm Perkins and Will to basically be their in house design guru. But there wasn't enough for him to do. It was just like there was no activity. So he went back to Perkins and Will this past summer and he's now leading their life science and tech practice. You should read what he said because it's pretty, it's amazing. Corporate doublespeak here.

[Will Krasny]

I'm returning with a sharper understanding of the economic, technical and regulatory challenges that our clients are navigating.

[Hitan Sumtani]

Just this outstanding stuff.

[Will Krasny]

But if you can learn on someone else's dime, that's great.

[Hitan Sumtani]

Broadly zooming out, it's been a tough go for life sciences in New York City. There's been so much construction we talked about. Inventory is now at nearly 3 million square feet and availability is at 27%. That's, that's tough.

[Will Krasny]

And these guys own like 35% of the inventory.

[Hitan Sumtani]

And New York City hasn't really given up on this ambition to be a life science hub. They're pushing for 10 million square feet of new lab space by the end of this decade. The EDC guy said something really interesting. He said, we think in decades, we don't think in quarters or something like that.

[Will Krasny]

When you think about it, makes sense because you've got meds, EDs and government here and it should be a space like that. But again, yeah, a lot of These rely on ecosystems. It's not as if you can just like plug. You can't drop Silicon Valley anywhere.

[Hitan Sumtani]

People have tried. Right.

[Will Krasny]

Miami really tried. Does not work. And a lot of it is just the clusters that you have and people bouncing back and forth across each other and all that. And that's just not New York yet.

[Hitan Sumtani]

That is why SF's rebound has been so violent in a way. Right. Like, when SF came back, that infrastructure was already there. So all these startups were there, the investors were there. It was much easier for it to just shoot back up when the AI thing happened.

[Will Krasny]

Yeah. And that shouldn't be a surprise. Like, this happens every 10 years, you know, where it's dead, it's never coming back. And okay, like, did Stanford go somewhere? Right.

[Ian Ross]

Exactly.

[Will Krasny]

Did Sandhill Road go somewhere? Is Atherton shitty now? No.

[Hitan Sumtani]

One of the things I thought about really with Taconica, obviously this bet hasn't gone well, but how much skin in the game do they have? As I said, they're pretty good at opm, they're pretty good at selling a narrative. They were able to bring in equity partners for the majority of it.

[Will Krasny]

Hudson Research center is sort of a perfect example. They bought it for 120 million and seven years later recapped it at 180.

[Hitan Sumtani]

So they made their nut already in that first transaction.

[Will Krasny]

It's a lot of like these old office landlords who are giving back buildings and you're thinking, oh my gosh, poor them. Like, they took out five times the building's value in cash over the last 20 years. Like, don't cry for them. Same kind of thing here. Yeah, but it really impacts you, though. We talk about how returns don't matter. Like these kinds of returns matter. We're talking about the difference between a 7 and a half, 15 doesn't matter. The difference between a 7 and a 0 is like pretty big.

[Hitan Sumtani]

That's it for the promote podcast this week. If you've got a warehouse near Idlewild where you used to stash bodies in the pre JFK days, you might want to prep a bid sheet.

[Will Krasny]

I love reading books about New York in like the 60s. And they keep saying, like, I'm flying out at Idlewild.

[Hitan Sumtani]

It's the coolest thing.

[Will Krasny]

The Underworld series by the guy who wrote Black Dahlia. James.

[Hitan Sumtani]

I haven't read books in a long time.

[Will Krasny]

American. I haven't read books in a long time.

[Hitan Sumtani]

Not since my son was born. Really.

[Will Krasny]

Incredible. Well, let me just say, very, very sad news out of Bond.

[Ian Ross]

Horrible, horrible, horrible.

[Will Krasny]

And our good friend Eli Lever lost a good pal of his. May his memory be a blessing. We'll be back next week with more CRE Insider goodness. And remember, my Hanukkah present request is a review for this podcast on Apple.

[Hitan Sumtani]

Or Spotify and mine because why not is you visiting thepromote.com upgrade and giving the promote insider world. I'll see you next week. Will. Thank you and happy Hanukkah.

[Will Krasny]

Thank you. My son is enjoying his gelt.

[Hitan Sumtani]

Ciao.