Limit-Up Hotel Kamikazes & AI's Brokerage Rout

Summary

The Promote Podcast

Episode: Limit-Up Hotel Kamikazes & AI's Brokerage Rout

Host: Hiten Samtani (A), Will Krasne (B)
Date: February 18, 2026

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Overview

This episode dives deep into some of the most consequential—and entertaining—recent events shaping commercial real estate (CRE):

• The epic rise and fraught fall of Anbang Insurance (and the saga of the Waldorf Astoria)
• Big waves in brokerage valuations and AI tremors
• A historic slumlord prosecution in Washington, D.C.
  Alongside, the hosts riff on Japanese M&A trends, REIT survival playbooks, trophy hotels, and the shadier sides of syndication, blending insider expertise and sly wit.

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Key Discussion Points and Insights

Punch List: This Week’s Top CRE Headlines (01:01–10:32)

Japanese Corporate M&A Heating Up (01:08–02:42)

• Sumitomo Forestry acquires Tripoint:
  • Continues trend of Japanese megafirms buying US homebuilders, driven by domestic demographic decline (“Japanese giants facing a declining population back home are targeting the US for greener pastures” – A, 01:53).
  • Illustrates wholesale-to-retail arbitrage: buy public, sell private.
  • Examples: Sekisui House buying MDC, Daiwa House investing in Alliance Residential.
• REITs face tough choices:
  • “If you’re a REIT ... you can rail every earnings call ... sell to a bigger company, or liquidate” – A, 02:45.

Mega Asset Managers Getting Bigger (03:24–04:46)

• Nuveen’s acquisition of Schroders’ real estate division:
  • Forms a $175B real estate manager.
  • “One plus one is equal to five for the future”—a CEO quote lampooned as a red flag (A, 04:15; B, 04:25).
  • Pressure to hit “$2 trillion club” status; scale now mandatory in active asset management.

Adam Neumann’s New School & Real Estate Antics (05:15–06:37)

• Adam Neumann (of WeWork fame) launches “Soulful (SOLFL): Student Of Life For Life.”
• Buys, then demolishes a church to build a private school without community buy-in.
  • “He’s more of a beg for forgiveness type” – B, 05:50.

Kimco Dumps “Lard” Holdings (06:37–08:06)

• Shopping $500M of underperforming retail assets, cleverly marketed as “lower growth, multi-tenant centers and non-income producing land.”
  • “They’re dumping their unwanted stepchildren” – A, 07:28.

Fannie Mae License Fee Shake-Up (08:06–10:32)

• Fannie Mae to charge up to $25M in transfer fees on agency licenses, impacting liquidity and favoring big lenders only.
  • “You’re putting a dent in the liquidity of the market” – A, 09:44.
  • “The licenses can be worth a lot more to one lender vs. another ... you have to have a certain scale” – B, 10:08.

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Main Story: Anbang, "Limit-Up Kamikazes," and the Waldorf Astoria (12:04–24:09)

The Legend of Wu Xiaohui & Anbang
(12:04–16:01)

• Wu Xiaohui—the “Limit Up Kamikaze”:
  • Comes from Ningbo in China’s Wenzhou region, a place famed for wildcat financial risk-takers.
    • “Limit up kamikazes. … Fast and loose, doing the thing. Wildcatters is, I think, what we would say here in the U.S.” – A & B, 12:29–12:45
• Meteoric Rise:
  • Wu starts with car sales and $500 RMB capital, becomes a massive insurance conglomerate through leverage, big risks, and a politically advantageous marriage.
• US Buying Spree:
  • Anbang acquires the Waldorf Astoria for $1.95B (“$1.4 million a key pre-renovation” – A, 16:20), plus Strategic Hotels and others.
  • Wu likened to “the Chinese Warren Buffett.”
• Fabled Quote:
  • Wu on US market entrance:
    • “If you choose to stay in rural villages, you can only meet common village girls. Yet if you come to Paris, you’ll have the chance to lay your eyes on the Mona Lisa.” – Wu Xiaohui (read by hosts, 15:51–16:01).

The Downfall: Overreach & Crackdown
(18:58–20:07)

• Government cracks down on “grey rhino” companies—large, over-levered, opaque conglomerates like Anbang and HNA.
• Wu is hit with corruption and embezzlement charges; Anbang’s portfolio is seized and transferred to state-backed re-insurer Dajia.

The Waldorf Today (20:07–23:13)

• Dajia spends 8 years, ~$4B on renovations (“A in output, D in process” – A, 20:31).
• Units command surprisingly low prices relative to basis, suggesting huge write-downs.
• Portfolio (including other strategic hotels) now being shopped—questions swirl on who could buy and operate such massive, ultra-luxury hotels.
  • “You can lose a billion dollars and not notice just on the carpeting.” – B, 20:50

US Trophy Hotel Market Context

• Ultra-luxury hotels see robust demand but thin exit options—big funds have “brain drained” out of the sector post-COVID, leaving far fewer buyers able to step up for billion-dollar acquisitions.

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Notorious D.C. Landlord Gets the RICO Treatment (25:16–29:11)

DC Attorney General Sues Sam Razdriyan Family (25:16–28:40)

• First-ever RICO (Racketeer Influenced and Corrupt Organizations Act) suit against a real estate owner in DC.
  • “Is that normally for Sopranos Mafioso kind of stuff?” (A, 25:20)
  • “Oh yeah, you’d think. But no.” (B, 25:23)
• Allegations:
  • Massive fraud in rent-controlled buildings, subjecting tenants to dangerous conditions, fake doors, and straw buyers to side-step lending bans.
  • “They would paint doors onto concrete walls ... make buildings look like they had more units” (B, 26:57).
• Takes a critical look at how outlier cases drive policy shifts, especially protecting tenants.
  • “If landlords were to take just a few steps to call out extreme cases like this…the laws wouldn’t be as skewed towards tenants” – A, 28:40.

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Brokerage Bloodbath: AI Hysteria in Public Markets (29:34–34:00)

Office Brokerages Take a Stock Hit (29:34–31:10)

• CBRE, JLL, Cushman—all suffer 20%+ stock drops in two days, triggered by new AI tool launches (Anthropic’s “Claude”) and market fears of job losses.
  • “AI’s killed all the brokerages. Done. End of segment.” – B, 29:44
  • “CBRE is down 20% ... in two days.” – A, 30:12.

What Actually Drives Broker Revenue?
(30:20–32:40)

• Sales and leasing are sexy, but “facilities management” forms 70%+ of CBRE’s business.
  • “The engine of their revenue is facilities management. The really boring unglam stuff.” – A, 30:43.
• Brokerage profits depend on a handful of top producers; business is more transient and less sticky than institutional asset management.

Will AI Replace Brokers?

• Sorting the myth from the reality: AI may automate OM prep and follow-ups, but real estate still runs on relationships and tactile assets.
  • “At the end of the day, real estate alpha ... you can’t press a button. ... We’re subject to the vicissitudes of the market because we’re human beings.” – B, 31:56.

Luxury Office Markets Still Resilient

• Despite blood in public equities, AI companies drive demand in SF office; financial firms scoop up New York space. Sentiment doesn’t match fundamentals.

Host Banter/Reflections

• AI is an existential threat—at least to stock valuations this week—but “property management’s not going anywhere.”
  • (A and B throughout segment, especially 32:40–34:00)

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Memorable Quotes & Moments

| Timestamp | Quote | Speaker | Context | |---|---|---|---| | 01:53 | “Japanese giants facing a declining population back home are targeting the US for kind of greener pastures, buying up a bunch of companies.” | A (Hiten) | On Japanese CRE M&A in the US | | 12:29 | “Limit up kamikazes. … Fast and loose, doing the thing. Wildcatters is, I think, what we would say here in the U.S.” | A & B | The spirit of Ningbo financiers | | 15:51 | “If you choose to stay in rural villages, you can only meet common village girls. Yet if you come to Paris, you’ll have the chance to lay your eyes on the Mona Lisa.” | Wu Xiaohui (read by hosts) | Why Anbang overpaid for US trophy assets | | 16:20 | “$1.95 billion for the Waldorf Astoria. That is ... $1.4 million a key pre-renovation.” | A | The eye-watering sum for the hotel | | 20:50 | “You could lose a billion dollars and not notice just on the carpeting.” | B | The immense expense of renovating the Waldorf | | 26:57 | “They would paint doors onto concrete walls ... make buildings look like they had more units.” | B | On slumlord fraud in D.C. | | 28:40 | “If landlords were to take just a few steps to call out extreme cases like this … the laws wouldn’t be as skewed towards tenants as they are.” | A | Why bad actors drive regulatory overreach | | 29:44 | “AI’s killed all the brokerages. Done. End of segment.” | B | On the public market’s panic over AI | | 30:43 | “The engine of their revenue is facilities management. The really boring unglam stuff.” | A | Breakdown of brokerage business models | | 31:56 | “At the end of the day, real estate alpha ... you can’t press a button. ... We’re subject to the vicissitudes of the market because we’re human beings.” | B | Why real estate can’t be fully automated |

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Notable Segments & Timestamps

| Segment | Timestamps | Brief Notes | |---|---|---| | Japanese M&A, REIT strategies | 01:08–04:46 | Sumitomo/Tripoint, Sekisui, Nuveen-Schroders; asset management consolidation | | Adam Neumann’s Soulful School | 05:15–06:37 | WeWork lore, school replaces church | | Kimco & Fannie Mae | 06:37–10:32 | Kimco dumps, Fannie license fee | | Anbang & Waldorf Astoria deep-dive | 12:04–24:09 | Wu Xiaohui’s rise/fall, ultra-luxury hotels’ challenges | | DC Landlord RICO suit | 25:16–29:11 | Systemic fraud, policy impact | | Brokerage stocks/AI market panic | 29:34–34:00 | Facilities mgmt. vs. sales, AI fears, public/private market gap |

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Closing

The episode wraps with reflections on the difference between sentiment and reality in real estate (“the world’s moving so fast, who knows what could happen in real estate?” – B, 34:38), a teaser for next week, and gratitude to the sponsors.

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The Promote Podcast sets itself apart by balancing war stories and humor with real insider knowledge—indispensable for anyone navigating the swirl of institutional CRE, high-leverage deals, and emerging AI anxieties. Even the most outrageous anecdotes come with lessons for investors, operators, and market watchers alike.

Transcript

[A]

When Anbang bought the Waldorf Astoria, it appeared as if they could look smacks it and ascend to the land of high returns.

[B]

But alas, they got frame mogged by the market.

[A]

Unfortunately, you're not my type so I'm hoping enough of you guys get that. Welcome back to the Promote podcast, your insider guide to the money and mania of the CRM markets.

[B]

Hi, I'm Hitsan Samtani and I'm clavicular.

[A]

Will Krasny, a shout out to our sponsors, Loan Boss, a best in class CRE debt management software and Bravo Capital.

[B]

A leading HUD and bridge lender.

[A]

This week on the pod, the Waldorf Astoria is on the market, but it might be a day late and several billion dollars short. And AI is killing the brokered star. Or at least that's what the public equity market believes. And we might have just found the new worst landlord in the country.

[B]

Oh man, that guy's pretty bad.

[A]

It's pretty rough. Not great, Bob.

[B]

Let's get started with the punch list. Our signature rundown of the newsiest news in cre.

[A]

More corporate M and A. This time it's Sumitomo Forestry. Not to be confused with Sumitomo Proper. They were taking down Tripoint.

[B]

This is something we talked about ad nauseum about corporate M and A buying wholesale in the public markets and selling retail in the private markets.

[A]

So big topic of discussion just last week for us.

[B]

So, so Sumitomo. I'm gonna get this wrong every single time I say it, so just bear with me. Sumitomo, Sumitomo Forestry, specifically Sumitomo Forestry has taken out Tripoint, the publicly traded home builder and they have been buying a lot of home builders in the US over the past three, four, five years. So Dan Ryan Homes, which is now drb, they have a handful of others. They're now trying to sell 30,000 homes a year in the United States, which is a pretty big number.

[A]

This is the confluence of two trends. One is the Japanese giants facing a declining population back home are targeting the US for kind of greener pastures, buying up a bunch of companies. We had Sekisui House bought MDC holdings for close to 5 billion in a take private early 24. Daiwa House put in a big, big chunk of money into Alliance Residential.

[B]

Sumitomo has. They bought Crescent Communities, which was at the time the 20th largest multifamily developer in the country. They had southern impression homes. They bought in 2023 and that's a build to rent developer. So this is a pretty big trend. Tripoint's a pretty big company. Four and a half billion is no joke.

[A]

Sumitomo Forestry is about a 6.6 billion market cap and they're taking down something not too dissimilar in size.

[B]

You know what they say, there's no such thing as a merger of equals.

[A]

That's right. As I was saying, it's kind of a confluence of the Japanese coming here and the whole broad Aum gobbling trend that we've talked about. It's a shitty time to be a reit. So if you're a reit, you have basically a couple options or three options. You can rail every earnings call about how you're not being fairly valued. Right. You can go and sell to a bigger company or you can liquidate your properties and dissolve, which is what we're seeing with AIMCO and others.

[B]

Yeah. And again, these things are all math. When you're trading above nav, you issue stock and buy things. And if you're trading below navigation, those are really your options. You have to be a management team with a lot of credibility to not have someone come after you and try to liquidate.

[A]

Speaking of management teams, I love this line in the announcement that they had Sumitomo Forestry has a proven track record of respecting continuity and the autonomy of local leadership. Basically like heads aren't going to roll is the promise they're making here. Then speaking of more Aum gobbling Naveen, which I love this by the way, when the FT did the story about Naveen atrotors, it was a profile of the little known Naveen. Yeah.

[B]

It's like what is Nuveen and why is it buying Schroder's? If you didn't know where the FT was headquartered, that headline will kind of.

[A]

Tell you this is creating a $175 billion real estate manager. Is that right?

[B]

Yeah.

[A]

Schroeder's is like a blue blood name in the uk. It was founded during the Napoleonic wars apparently. So good.

[B]

Brown Brothers Harriman with Bangers and Nash. If we don't respect the past, we'll find it harder to build our future.

[A]

So why are they doing this? There's a great quote from the Nuveen CEO. Sets my Spidey senses off. But one plus one is equal to five for the future is what Naveen CEO Huffman said about this deal.

[B]

When you're talking about red flags, it's the biggest red flag.

[A]

I love this other thing they said, which is nowadays in active management you need to be in the $2 trillion club to make it all Worthwhile. That's a pretty staggering. We talked last week about Conor Tesky being the now steward of Brookfield's goal to go from 1 trillion to 2 trillion. And this just seems to be the big number now that everyone's throwing about.

[B]

It's kind of mind boggling the scale you need there. And what's interesting is you think about 2 trillion. I mean, I don't know what Vanguard has, but you can look at the fee load on those and they're obviously very, very low for their ETF and passive products. But here Nuveen has a big private markets business and Schroeder's has like global distributions. But I guess their idea is we'll just plug in the Schroeder's name with the Nuveen private market fees and juice them up. Sail away, sail away, sail away.

[A]

Next one. All you wrote here is Adam Newman punching people in the face.

[B]

Anytime Adam Newman, a story comes up, we are contractually obligated.

[A]

It's part of the promotes bylaws. Build something that you love. Build something with intention and the money will follow.

[B]

This story is just fantastic. What was his wife's thing used to.

[A]

Be called we grow.

[B]

Yes. And Obviously with the WeWork implosion, the.

[A]

We brand kind of became toxic.

[B]

Yes. Yeah, it became bad. So what's it called now?

[A]

It is now called Soulful. S O L F L. Student of life for life. Fantastic.

[B]

And so he's knocking down a church to build this school. And I think someone at a community meeting says it feels like we're getting punched in the face. Adam is not known as a guy who really asks for permission. He's more of a beg for forgiveness type of person. So he bought the property five years ago and initially, I think, wanted to turn it into mixed use. So office, retail, some restaurant. And Soulful was trying to renovate the church into a school.

[A]

I can't hear that name without laughing. I'm sorry.

[B]

They were trying to renovate it because they thought, okay, this will be a good space for it. We can plug it in here and you know, Adam is no stranger to non arm's length real estate transactions.

[A]

This is correct.

[B]

But apparently it was more cost effective to demolish and rebuild the church, so he just demolished it. Didn't really ask for permission.

[A]

It's quite perfect. All right, next one. This one is probably my favorite of the lot. Kymco is looking to sell about half a billion dollars of assets. They've had an overall very stellar year. I think they've had record occupancy in their portfolio. But now they're looking to cut the fat. And the amazing thing is here they're essentially describing it as lard.

[B]

Oh, it's so good. I always wonder about this, is that when someone buys something and they have to divest, I think the one that comes to mind is when Disney bought Fox and they had to sell off the RSNs and it's like, well, everyone knows that they have to sell. So like, what's your leverage as the seller? And Kimco, I think got rid of all of their own leverage because they said, we are crushing it. We're doing amazing, the best. And he goes, but we're going to sell off some low growth garbage and a bunch of detritus. So if anyone wants to take it off our hands, Godspeed.

[A]

A listener should be aware of what Will said is accurate, which is basically, they're dumping their unwanted stepchildren. Right. But the way they frame it in an earnings call would be as follows. Lower growth, multi tenant centers and non income producing land and entitlements.

[B]

Right. When you're pruning the portfolio, you want to convey to the market that, hey.

[A]

The stuff we're keeping, but there's upside, there's something to be done here.

[B]

We're going to be more pure, play higher growth, all that. Because the market's going to say, well, if you have stuff that's really good, why are you selling it?

[A]

Yep.

[B]

So you have to say it's also, it's bad, but not that bad. So you really got a very narrow window to slide it in there.

[A]

All right, last one. This is fascinating to me because we talked the licensing wars, right? An agency license is one of the most coveted assets you can have. Fanny licenses in particular have been quite liquid. There've been a bunch of trades at some pretty high numbers. And guess what? When third parties are trading licenses among each other, Fannie's not really wetting its beak. So now it's looking to change that.

[B]

Fannie's saying, nice transaction you got there. It'd be a shame if something happened to it. Unfortunately, this is part and parcel with the administration doing this across all types of assets.

[A]

We saw this with the intel, like the mega transaction right there.

[B]

Was that Intel US Steel Government overreach rearing its ugly head once again. I'm sure, I'm sure that all of.

[A]

These small governments will stand up and make a big stink about this. Absolutely.

[B]

Yeah. Everyone on Twitter who loses their goddamn mind anytime the word wealth tax comes up. I'm sure they'll have a lot to say about this.

[A]

Oh, yeah, they'll be totally up in arms.

[B]

The most intellectually honest.

[A]

This is a pretty staggering fee they're looking to levy. So they're talking about charging up to $25 million for trade. And these licenses, depending on what comes along with them, the MSRs, et cetera, can go for anywhere between 100 and 130 million. And the amazing thing here will, is that they're trying to apply it to an in progress deal. We talked a little while ago about fifth, third, buying the HomeStreet's mechanics license for about $130 million. And so if you levied a $25 million surcharge on that, that's 19%. That's pretty staggering.

[B]

It's like you used booking.com to erase this transaction.

[A]

I was thinking Ticketmaster, but you're exactly right. You're putting a dent in the liquidity of the market because you're putting this massive question mark on any future transaction. Right? Arbitrary license fee, Any point being enforced? Coming out of nowhere. The licenses are going for a lot of money. It's a very coveted asset. But I think something like this could box out a lot of smaller buyers so that just the bigger lenders again, can profit off of this thing.

[B]

A very smart guy wrote in this newsletter that I read all the time, called the promote, saying that the licenses can be worth a lot more to one lender versus another. And that's exactly the case here. And if you're adding this fee on, again, to your point, like, you have to have a certain scale to be able to sop up that additional cost. And you have to have a lot of other businesses that are going to benefit from getting this license. You can't just buy it for shits and giggles.

[A]

All right, that's it for the punch list. When we come back, we'll be talking about the Mona Lisa and Village Girls. So will you violate any debt covenants recently?

[B]

So funny you should ask. I have been in technical default recently. I mean, who among us? But not since Q4.

[A]

Ooh.

[B]

And that's not because I paid off the loan. It's because that's when I started using Loan Boss.

[A]

I can't believe how old school some of our listeners are. They're still crunching DSCRs in Excel and all that.

[B]

Ugh, total waste of time. Risky business to boot. Loan Boss runs the entire process for me. One click Covenant Testing. Incredible. Instant cash flow forecasting. Impeccable. And my favorite nerdy delight, the live Forward Curve. So I hate having to go download the forward curve. And then it's always vertical. And you got to alt HVT to have go horizontal. Make sure the index match works like ridiculous.

[A]

They've just got it sorted here for you.

[B]

Much better. So thank you, Lone Boss listeners.

[A]

Check them out@lone boss.com, that's lone boss.com and tell them the promote sent you. What does the story not have? Where do we start? Should we start with a quote? Should we start with the boy who could. Should we start with Deng Xiaoping? Where do you want to start?

[B]

We need to go back. Back to the beginning and start in provincial China.

[A]

Provincial China. This is a port city.

[B]

Ningbo.

[A]

Ningbo. Ningbo in Wenzhou, which is where our protagonist Wu Xiao he cut his teeth, is famous for its financial speculators. And I think this is the greatest term that I've seen in business in a long time.

[B]

Limit up kamikazes.

[A]

Limit up kamikazes? What the hell is that? Basically.

[B]

Oh, my God.

[A]

Fast and loose, doing the thing. Wildcatters is, I think, what we would say here in the U.S. but man, limit up kamikazes is so much cooler.

[B]

It's basically every character in Landman. It's perfect. I love it so much. And really, limit up kamikaze is what this guy did.

[A]

Precisely.

[B]

Yeah.

[A]

I think when you grow up in a place, you do imbibe some of the place's vibes, right?

[B]

Like 100%.

[A]

I'm from Dubai. I'm a little swaggery and bombastic sometimes. It's kind of in my nature. Mr. Wu here, Wu Xiao, he was someone who dreamt really big and wasn't afraid to take outsize risk, use a lot of leverage, and build his company into a behemoth. So Wu Zhao, he is obviously the founder of Anbang Insurance. It started off as a pretty modest, what, car dealer.

[B]

Yeah. With like $500 of initial startup capital.

[A]

500. Renminbi.

[B]

Renminbi.

[A]

RenminBI.

[B]

Sorry.

[A]

And so this guy just kept growing and growing and growing. Eventually started an insurance company that became a conglomerate. And then just at some point, he was one of the biggest companies in China. Astonishing trajectory of growth here.

[B]

He also did the most important thing to becoming a great investor or business person, which is marrying well.

[A]

Yes, exactly.

[B]

You can marry more money in a minute than you can make in a lifetime.

[A]

And in this case, it wasn't just money. It was political juice. So Wu Xiaohi married the granddaughter of Deng Xiaoping, former Supreme Leader of China, one of the Most influential men in the history of that country.

[B]

You would think that puts you on a very good trajectory, which it did for quite.

[A]

Until the guy got divorced. I mean, come on, man, figure it out. Because 2015 is when he split up from his missus. That was the beginning of the end, so to speak.

[B]

You gotta be like a penguin if you're doing a marriage like this. You meet for life.

[A]

Exactly. So Bug Insurance, one of the biggest companies in China. We've talked extensively in the newsletter about this big wave of Chinese capital that came flooding into the US prime market. I want to say in the mid.

[B]

2010S, this was a paradigm shift for all these trophy assets.

[A]

They bought everything, like billions of dollars of assets. Top, top dollar.

[B]

They would buy the best of the best prime office buildings. Not just like full service hotels, but like the best full service hotels.

[A]

They're part of this wave. HNA Group, one of the other big ones, Dalian Wanda, better known for its jump into the movie and entertainment business. I believe they bought Legendary.

[B]

Yep, they bought Legendary from Thomas Toll.

[A]

But these were some of the biggest companies in the space. Anbang was definitely one of them.

[B]

So they bought the Waldorf Astoria here. And then they also bought Strategic Hotels, which was a public company that they took private, which owned some of the best hotels across the west coast. Though they left out my favorite hotel.

[A]

Have you been to the Hotel del Coronado? Of course, the reason that it was taken out of the trade was Cifi's, which is the committee that vets foreign investments in the US said, no, you can't have this one. It's too close to naval base.

[B]

James Reese, the guy that Chris Pratt plays in the TV show, he lived on Coronado island because he was at the Devgru right here.

[A]

Wu, at this point he's being likened to Warren Buffett, the Chinese Warren Buffett. And he goes and speaks to a crop of Harvard students and he says, in my opinion, one of the greatest analogies ever made in modern business. You want to read it?

[B]

If you choose to stay in rural villages, you can only meet common village girls.

[A]

Yet if you come to Paris, you'll have the chance to lay your eyes on the Mona Lisa.

[B]

Just perfect. If that's not a limit up kamikaze, nothing is way to be. I don't know what is.

[A]

He's explaining his rationale to come into the US real estate market in such a big way and pay these kind of prices. We take a few shots at Blackstone here and there. One thing that Blackstone is supreme at is identifying the patsy.

[B]

Absolutely.

[A]

$1.95 billion for the Waldorf Astoria. That is. God, 1.4 million a key pre renovation.

[B]

Unbelievable. Just a staggering price.

[A]

I love the way that this was framed at the time because I remember when this deal was happening, there was this patent of invincibility around the Chinese. Like, hey, this is very different from the Japanese because they're not levering up, et cetera. The difference was they were levering up back home and then buying in cash. So it was kind of hidden leverage in a way. And when this deal happened, I remember there was this whole thing about, oh, it was a chairman to chairman transaction. As in John Gray and Schwarzman were basically quarterbacking it for Blackstone with Woo directly.

[B]

That almost makes it worse, right? If John Gray is trying to sell you something, do you really want to buy it?

[A]

And that wasn't all that John Gray sold to them. Strategic that you mentioned up top was a Blackstone joint.

[B]

When you're on a heater, you know, you got to press it, respect the street. And that's exactly what they did. It's like, hey, you like this really overpriced full service money pit that we've got in New York? Would you like some overpriced full service money pits elsewhere?

[A]

It's like an $8 billion sell off to one by Blackstone.

[B]

That's a fund returner in and of itself.

[A]

All right, let's talk about a specific number here. 666.

[B]

So when Charlie Kushner was for a half minute thinking about doing a full cap stack to redevelop 666 into $7 billion vertical mall.

[A]

Yeah, we should say at this time any numbers were being thrown out. This is a building that was purchased at $1.8 billion, which was a record, record, record overpriced price at the time. And suddenly in the middle of it being hella distressed, they're talking about a $7 billion figure.

[B]

And that's after they sold the retail, which was the most valuable part of the building.

[A]

Exactly. You can only bring up such figures when there is foreign money floating in the air and the prospect of presidential power. Again, this is Trump won. These things were still scandalous back then, but this was front page headlines that the Kushners had met with an bang and the cutleries to talk about investing in this tower. We did a whole episode on it. We'll put it in the show notes.

[B]

Right. And the Qataris ended up doing it and Brookfield has now stabilized it. So they also made A run at a public company that they lost out on, which was Starwood Hotels. So it was a $14 billion transaction. Marriott ended up buying it and combining it, much to the chagrin of all the Starwood points holders. But the fact that they were making runs at companies this size was staggering, given how much they'd paid for these other assets. They were going to spend $22 billion on the US hotel industry.

[A]

It's astonishing. We didn't know enough about the origin of some of this money. Right. Turns out that the Chinese government shared a similar concern.

[B]

Yeah.

[A]

So in the late 2000 and tens, they started issuing warnings about what are known as Gray Rhinos, which are big companies that grew incredibly quickly with a lot of leverage and a lot of murky financial structures. H and A was one of these companies. They formerly owned 245 Park Avenue, which SL Green took over in a magnificent deal for them. And Anbang was the other big gray Rhino that was singled out.

[B]

We talked about how you don't want to be the main character in the ft. You definitely don't want to be the main character for the Chinese government.

[A]

Yeah. And unfortunately for Wu, this did not go so well. So he was accused by the government of embezzlement and fraud and all kinds of bad things. And in China, when you're in that situation, it's basically, we don't got to.

[B]

Worry about Mr. Wu no more.

[A]

Oh, poorly.

[B]

Won't see him no more.

[A]

One thing we should say, though, about that is that Anbang sort of ceased to exist at some point.

[B]

Oh, yeah.

[A]

And all its properties, all its properties were packaged and hand it off to a holding company that was regulated by the state government called dagia.

[B]

The best part of Dagia taking it over is that the WSJ article about this just says, a Chinese reinsurance company, it's like, boy, if only you knew.

[A]

If only you knew. And you're lucky you have the promote for that. Dahjia had this tough task of renovating the Waldorf and figuring out how to deal with the rest of this portfolio. So it did. The Waldorf, I want to give it A maybe A in output, but D in process.

[B]

I mean, F minus in process. They spent eight years and what, $4 billion renovating it?

[A]

Gotta ask you, though, as a developer, how do you break down that cost? Do you say per key? Per condo unit? Per fucking square foot? Like, what do you do with a $4 billion figure? How do you spend it?

[B]

I don't know if you've been in the Waldorf like you could lose a billion dollars and like not notice just on the carpeting.

[A]

Massive.

[B]

It's so big and the rooms need anytime you like get in the walls. You don't know what's going on with a building that old. And I'll tell you though, they did a phenomenal job at the public space. The bar in the lobby is beautiful. The rooms were always challenging. The condo conversions, hotel to condos are always tricky. The Plaza, as much as we applaud Mickey Naftali for what he did there, there was a bunch of lawsuits about the product. And I think these condos are not selling.

[A]

I told you about a guy that I know who bought a pad at the Waldorf and what his per foot price was, it was cartoonishly low.

[B]

So they're in it for something like 6 billion. And that's for the condos and the hotels who are not totally apples to apples, but they're asking about a billion.

[A]

They're also shopping the Strategic Hotels and Resorts. Now we will mention this company and this portfolio of prime prime assets. Hotel Del Coronado was taken out of this mix. We're still talking what, 15?

[B]

Just pulling up the list because it's some just phenomenal assets.

[A]

Super swanky stuff. Yeah.

[B]

The Four Seasons DC, the Intercontinental Mag Mile, the Intercontinental Miami, the JW Merritt, Essex House, the Westin St Francis, the Ritz Carlton, Half Moon Bay, which is awesome.

[A]

Oh, that's gotta be nice.

[B]

Yeah, The Ritz Carlton, Laguna Niguel, the Regent Santa Monica. So these are just prime, prime, prime hotels.

[A]

They could host the IMN conference kind of hotels.

[B]

Yes, exactly.

[A]

The other thing is you can't run an asset like this bare bones. Right. There's only a maximal way to run this thing like a Waldorf or anything else.

[B]

If you're charging these premium prices, you have to provide a premium when stuff starts looking tired, like the guests will let you know. You read the great book about the Plaza by Julie Sadow.

[A]

Shout out to Julie. She's my ex boss's wife.

[B]

Like one person ever made money on the Plaza and it's really hard to make money on these unless you find the sucker.

[A]

This broader trend, there's a wave as you mentioned of high end hotels hitting the market right now. Because there's quite a big gap between kind of the everything else and the tippy top luxury in the US hotel sector, which is doing astonishingly well.

[B]

Consumers have really been impacted by the economy, but the top is doing great. We've seen since COVID the experiential market has boomed. And experiences especially high end where people are price insensitive has done well. But again you have to staff it and you have to provide the product that is sufficient for these folks to show up.

[A]

Did you see that the red Central park went for $1.2 million a key? Gencom, what are they looking for here? They're looking for a billion dollars. For what? 375 keys?

[B]

Yeah, two and a half mil a key. Hotels have really seen a brain drain. It's something I think we've talked about a bit too, where hospitality was one of the acceptable institutional asset classes. And if you look at traditional hotel buyers, start with Capital Group, Blackstone, ksl, they've really shifted away from it. So who are the buyers if not for companies like Anbang H and A who can write a billion dollar ticket and then probably have to spend, I don't know, half a billion more to get this thing like where it needs to be. So be really interesting to see because these are some of the most trophy assets but you oftentimes you'd be better off maybe owning some tertiary market self storage.

[A]

All right, I'm here with Aaron Krovitz from Bravo Capital. Aaron, let's get right to it. What's the story behind this mythical 100% HUD approval record?

[C]

It's pretty straightforward. We have an amazing team. We're a pure play hud. We're focused on bridge to HUD all day. We're both fully HUD licensed and we also offer balance sheet bridge financing where we could finance deals over $100 million just like we did in Miami, Brooklyn and Jersey City.

[A]

And what's the secret sauce? How do you put it all together?

[C]

It's our underwriting. We don't rush deals to market and hope they stick. We know what HUD wants before we submit, so there are no surprises. And we have a real balance sheet. So when we go, we go.

[A]

You were telling me when we were chatting offline that you closed a HUD Express lane deal in four days. That's absurdly fast for HUD.

[B]

Hey 10.

[C]

That's why we get up in the morning at Bravo. We're here to break records, we're here to innovate. And when you have tight documentation, the right underwriting, that means speedy approvals and.

[A]

Speed means the sponsor can close quick. Thanks Aaron. Good to have you on.

[B]

Thanks.

[C]

Attend and you can find [e-mail].

[B]

All right, so the D.C. attorney General filed a RICO case against.

[A]

Is that normally for Sopranos Mafioso kind of stuff?

[B]

Oh, yeah, you'd think. But no. It's against slumlord Sam Razjuian.

[A]

Yes. And his mother and his brother. This is notable because the DCAG said this is the first time that a RICO statute has been used against a real estate owner.

[B]

It allows them to get, I think, more penalties for the same crime.

[A]

You get treble damages. But also importantly, you don't have to just go after one property, one llc, et cetera. You can kind of go after the web or the Nexus, so to speak.

[B]

Yeah, absolutely. And so I guess according to the complaint, the Rajulian family, they've controlled more than 70 rent controlled buildings with over 600 units, primarily in Wards 7 and 8, which are primarily black. They're rent control buildings for a reason. And the family who I love that the article in the D.C. city Paper says who own neighboring multimillion dollar townhouses in Potomac. Which to be fair, a multimillion dollar townhouse in Potomac could be like 1300 square feet. They allegedly defrauded lenders in the city while subjecting low income tenants to dangerous and deplorable housing conditions.

[A]

The kind of allegations we're hearing in this lawsuit about tenants specifically are unfortunately pretty run of the mill, right? Neglecting buildings to the point of dangerous conditions, lying about repairs, all that stuff. Though there are a couple of things you pointed out.

[B]

Again, like there's shades of gray here and then there's clearly like awful evil things. Like they were doing a lot of the latter. Allegedly they treated people horribly. And again, allegedly. And again, providing housing's a huge responsibility and like people need to take that seriously. These guys did. Not allegedly, but some of the stuff is kind of funny. They would paint doors onto concrete walls.

[A]

Oh, God.

[B]

And put like number tags on them to make buildings look like they had more units when they were doing lender inspections. So they added like 10 units to some property, which are just like walls that didn't go anywhere. They would lever up to promise repairs and just pocket the money.

[A]

They would tell lenders that, hey, we're going to rent exclusively to voucher tenants. I think you're exempt from rent control when you do that. And then this part, I think was our mutual favorite, which was once the Razdriyan name was tarnished solid. They found straw buyers to go buy these things and get the loans on their behalf.

[B]

The fact that they're going after using Ricoh to go after these guys, because again, first time DC AG is doing that and the first time I've seen.

[A]

It, how tenant friendly is DC kind.

[B]

Of in the broader spectrum, very tenant friendly. Like, there's topa, which is a Tenant Opportunity to Purchase act, which.

[A]

Oh, that's like the COPPA thing that was just killed in New York. Same kind of thing.

[B]

Yeah. Like that's been a thing in D.C. where tenants can organize and purchase rental buildings. It doesn't often happen, but it's hugely costly to go through a purchase process. It can take a year because the tenants basically have a right of first refusal to buy their buildings.

[A]

We're obviously making light of a couple things here, but as we've talked a lot about and regular listeners will know, when you're running an apartment building, you really have tenants, lives at stake. It really matters. We understand how hard it can be to be a landlord because forget about getting a horrible tenant out, it just doesn't happen. There are so many laws that are very much in favor of tenants, but the reason they fucking get there is because of scumbag situations like this.

[B]

100%. As a landlord myself, we have to call out this behavior and make sure that this isn't accepted. Because I understand where people are coming from when. If you're a tenant in this building, I would be completely militarized against landlords.

[A]

If landlords were to take just a few steps to call out extreme cases like this, my hunch is that the laws wouldn't be as skewed towards tenants as they are. You think of Harry Macklow with the illegal midnight demolition in the 1980s, Rafi Toledano with the craziness happening in the East Village. Cases like that are the ones that kind of reach escape velocity, create that kind of media frenzy, which then puts political pressure on lawmakers, which then creates these laws. Right. It's all a function of this kind of shit.

[B]

It absolutely is. If you're sitting here saying, oh, rationally, like most landlords are, yeah, sure, but like, it doesn't matter. Like, you have to understand that the optics of dealing with people's homes and not providing safe places for them, that overrides everything else.

[A]

You know how brokerages have been talking of a big game in AI being a force multiplier and all that?

[B]

Yeah. Actually, I'm using Sirhant simple to record this podcast.

[A]

So what's going on here?

[B]

AI's killed all the brokerages. Done. End of segment. So the big brokerages last week were down enormously.

[A]

Bloodbath.

[B]

Yeah. So cbre, jll Cushman. They all got hit really hard, as did the office REITs. And I think it's in people Are saying that it was because of new anthropic products through Claude that got rolled out and everyone just sort of figured, oh, we're never going to need office workers ever again. And that's what got priced in.

[A]

CBRA is down 20% I think at some point.

[B]

20% in two days.

[A]

This is rough because Bobsled had a lot of things to be quite proud about on this earnings call. I think they had record revenues. A bunch of things were happening.

[B]

It was an earnings blowout. I think the big takeaway though is how skewed in all of our imaginations the importance of brokerages. Sales, leasing. That's sexy stuff.

[A]

We've talked a lot about that hierarchy. It's investment sales, then office leasing. That's in our minds. That's what drives this business. But it's absolutely not that.

[B]

Yeah, what drives it. Like for CBRE, the engine of their.

[A]

Revenue is facilities management. Yes, 70% of the business is facilities management. The really boring unglam stuff. I have this anecdote, I forget who told me, but someone who's well connected. They're at the CBRE conference and Bob Silentik was there and like, ah, Bob, are you gonna go? He's like, nah, I don't even care about these guys. Referring to me, my salespeople. Such a staggering driver of the business is just the boring blocking and tackling of keeping a property in shape.

[B]

Look at Colliers. Jay Hennick in First Services. That's what he built like the juggernaut that he built. That's exactly what this company does. And the advisory services are sexy. They're almost like a loss leader in a lot of cases.

[A]

That's how I think about them too. I feel like brokers make really good money. Brokerages in that sense are not as great a business as you would think.

[B]

The human capital can walk out the door. And you've seen what Walker and Dunlop has done. Just if you can pay these guys, you can go get them. There's not really a lot of switching cost for these folks. And so what they're saying is that why do you need a broker? If Claude can put together the OM for you, they can put together the email list for you, they can put together all of the follow ups for you. But again that doesn't really drive a lot of these businesses. It's really about the emotions and it's a relationship.

[A]

It's a carousel.

[B]

It's a carousel. It's a place that we ache to go again. I'm not sitting here and saying that the Brokerage business is completely indefensible from AI or immune to AI. It's not a lot of these workflows. A lot of people can get replaced. But at the end of the day, real estate alpha, it's the asset class by itself. You can't press a button. You can create a feeding frenzy for certain assets. We're subject to the vicissitudes of the market because we're human beings. So I think it is somewhat overstated. I think there is bloat. I think these things can be run more efficiently. You don't need 14 people on an email chain to do tours. But it seems like a little bit of an overreaction. Particularly because as you said, a lot of these businesses, property management's not going anywhere.

[A]

It's a sentiment, emotion thing as opposed to anything logical. Logical. At the same time, SF's office market is having a rip roaring time right now. Anthropic that we just talked about just signed up for that 300 Howard Divco and Blackstone. Exactly. Divco West.

[B]

Divco West. Yes.

[A]

Those AI companies have been such a big driver of SF's office resurgence in New York. The financial sector is buying up or leasing up everything they can. Look at JP Morgan with 270 park and the return to office mania in big finance is huge. So I don't quite get this one.

[B]

Me either. But again, that's why I'm not smart enough to do public market investing. I'm sure the pod gods Baliasny and Millennium can set us straight on why this is actually correct.

[A]

What do you think about this? The argument which is I like real estate because it's tangible, it's something I can touch. It's falling hard here on that.

[B]

Devastating. For every entry level real estate job interview. When they ask why real estate, It'd be one thing if the brokerage business was a melting ice cube like cable or one of these other industries where there's a real question about the terminal value. But they're all doing really well.

[A]

They're all cranking, they're making money. Most of them are profitable.

[B]

They're profitable and revenue is up.

[A]

I was looking at the Green street rankings just before this. Every metric is up and deal volume is up 30, 40, 50% in some cases.

[B]

Imagine how much the stocks would have been down if they weren't crushing it.

[A]

Sadly, I don't think it would have mattered at all. That's it for the promote podcast this week. A man wanted to chase the Mona Lisa and ended up doing the scream. AI has gone from a brokerage talking point to an existential threat. That's to the stock, at least. And the landlord is getting the full mob boss treatment in our nation's capital. We'll be back next week with more CRE Insider goodness.

[B]

Thanks again to our sponsors, Loan Boss and Bravo Capital.

[A]

You can find them at loanboss.com and bravocapital.com the world's moving so fast, Will.

[B]

Who knows what could happen in the world of real estate? Perhaps Claude will infiltrate and record this podcast for us.

[A]

We can only hope. All right, dude, thank you so much. I'll see you next week.

[B]

Thank you.

[A]

Ciao.