Reston Peace, Senioritis & A Capstack Crisis

Summary

The Promote Podcast

Episode: Reston Peace, Senioritis & A Capstack Crisis

Date: November 12, 2025
Host: Hiten Samtani
Co-host: Will Krasne

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Episode Overview

In this week’s episode, Hiten Samtani and Will Krasne deliver an insider’s perspective on the latest drama and dealmaking in the Commercial Real Estate (CRE) world. The conversation navigates through three headline stories: Blackstone’s senior housing misadventures and fire sales, a high-stakes Brooklyn condo saga, and Boston Properties’ (“BXP”) strategic asset sales to fuel Manhattan’s supertall ambitions. The discussion is packed with lively banter, industry war stories, sharp analysis, and colorful behind-the-scenes context.

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Key Discussion Points & Insights

1. NYC Mayoral Shake-Up and CRE (00:03–01:16)

• CRE’s Reaction to The New Mayor:
  Discussion opens with industry response—heavy on the drama and “predictably unpredictable.” Notable incident: CRE exec Scott Panzer’s inflammatory social media post comparing the winner, Mamdani, to Hitler, which led to his firing and further industry handwringing.
  Quote:

  “He basically compared Mamdani to Hitler and then was fired and then people got mad at JLL for letting him go…no upside.” – Hiten Samtani (00:24)

• Market Worries:
  Hosts underline broad industry fears about a “democratic socialist” running America's key “capitalist city.” Still, they urge pragmatism over hysteria.

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2. Senior Housing: Blackstone's Big Misses & Sonida/CNL Merger (02:13–12:28)

Blackstone’s Fire Sale (02:31–08:42)

• Failed Playbook:
  Blackstone’s usual “buy it, fix it, sell it” formula didn’t pan out; instead, their $1.8B bet floundered in a tough “buy it, it’s more broken, sell it at a loss” outcome.
• Operational Complexity:
  The sector is uniquely challenging, operationally intensive, and requires specialized expertise past traditional real estate know-how.
  Quote:

  “You’re buying an apartment inside of a hotel, inside of a restaurant, inside of a medical clinic.” – Matt McConkey of Turnbridge Peak, relayed by Will (05:54)

• Covid Fallout:
  Pandemic tanked occupancy and sent staffing costs spiraling. Even as demographics are said to guarantee a “silver tsunami” of demand, market cycles and operational hurdles keep the business risky.
• Strategy Pivot:
  After replacing operator Brookdale with regional specialist partners, Blackstone ultimately cuts losses, selling assets at steep discounts—creating prime opportunities for others.
• Market Impact:
  Blackstone’s macro decision to exit becomes a “micro opportunity” for well-positioned buyers (e.g., Isaac Toledano’s 75% off Miami deal).

Sonida & CNL: Consolidation and Complex Structuring (08:45–11:45)

• Big Merger:
  Conversant Capital-backed Sonida is merging with CNL Healthcare Properties to create a $3B player in senior housing.
• Key Players:
  Mike Simonovsky (Conversant) is steering the deal, wielding industry experience from various large residential and industrial REITs.
• Creative Deal Structure:
  The merger uses an “asymmetric collar” to manage risk/reward—downside capped at -15%/upside at +30% relative to a reference price, giving more certainty to CNL shareholders.
  Quote:

  “Structure is alpha. It’s not just CIM who says that.” – Will (09:34)

• Charting Control:
  Sonida takes the reins regardless of where the price lands.

Senior Housing's Repeated Turmoil

• Cyclical Challenges:
  Despite occasional booms, sector is riddled with bankruptcies, restructurings, and private takeovers in distress.
  Quote:

  “You can operate them well and still get annihilated if you time the cycle wrong.” – Will (11:30)

• Leverage Trouble:
  Recurring problem with heavy floating-rate debt loads (e.g., Blackstone’s experience).

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3. Brooklyn’s Biggest Bet: 205 Montague & The Quest for Financing (13:33–23:42)

The Project’s Background

• Site Primer:
  205 Montague is a prime Brooklyn Heights parcel, assembled by the Carey family in 2010, long expected to host something spectacular.
• Developer:
  Jonathan Landau, ex-Fortis Property Group, steps in aiming for a record 47-story condo tower on a stitched-together ~500,000 sq. ft. site.
• Market Context:
  Brooklyn Heights is “toniest neighborhood,” with huge demand, celebrity cachet (Matt Damon, Paul Rudd, Amy Schumer).

Financing Headaches & Cap Stack Drama

• Origination:
  Original construction loan from now-defunct Signature Bank, eventually acquired by Rialto, who took a much harder tack with borrowers post-takeover.
• Borrower Pushback:
  Joe Carey accuses Rialto of a “sinister veto pocket scheme” to stall project extensions (18:15).
• Capital Stack Rollercoaster:
  • Bank OZK (famous NYC construction lender) originally offers $245M senior loan, then backs out last minute (19:47).
  • Northwind Group (Ran Eliasaf) steps in with ~$100M land/predev financing: “Not the cheapest, but he might be the quickest.” – Hiten (20:33)
  • King Street (RXR’s Gemini deal partner) brings $90M of mezzanine, with Atlas Capital adding $60M of preferred equity (21:04).
• Expensive Paper:
  Rates: Mez at 12–15%, Pref at 18%.
  Quote:

  “That is so much mez. Oh my God.” – Will (21:04)

• Equity:
  Carey family rolls in their land equity (~$30M).
• Outcome:
  Project still not fully funded—“filling these holes in the cap stack” is a universal developer struggle, regardless of size (23:04).
• Viability:
  Will: “It’s sort of binary—like you get this thing done or not... But then One Clinton, like, lost a bunch of money directly up the street” (22:49).

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4. Boston Properties (“BXP”): Reston Peace, Strategic Legacy Sales (24:09–31:12)

Reston Town Center: A Massive 40-Year CRE Bet

• Project Background:
  BXP’s Reston Town Center, brainchild of Mort Zuckerman, is a multi-decade planned community outside D.C. with over 5M sq. ft. built and another 4M sq. ft. in the pipeline.
• Recent Sale:
  BXP recently sold two apartment buildings (“Signature,” 500 units each), fetching a regional record—teasing $240M at ~$470K per unit. Bought by Sterling (NYC) & Simpson Housing (Denver).

Why Sell? Reinvesting in Manhattan Super Talls

• Strategic Shift:
  BXP refocusing capital on Manhattan high-rise mega-projects like 343 Madison; sales in Reston provide “dry powder.”
• REIT Dynamics:
  The hosts explain that as BXP’s shares trade below NAV, selling mature assets (instead of issuing new equity) to fund development is the smartest, least dilutive path for a REIT.
  Quote:

  “The whole REIT game is really about are you trading above NAV or below nav… If you’re below nav, you don’t want to ever issue stock. So sell stuff down, buy back your own stock or do your own projects.” – Will (28:42)

• Active Pipeline:
  By 2027, BXP aims to sell ~$2B in legacy assets to bankroll development.

Market Observations

• Pricing Power:
  Control of neighborhood supply lets BXP set price records in regional sales.
• Buyers:
  Simpson—a little-known giant—shows how much of the apartment market is controlled by “quiet” institutions.

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Notable Quotes & Memorable Moments

• “Is that a breaking a hip joke, or what?” —Hiten (02:53), during banter about senior housing.
• “You’re buying an apartment inside of a hotel, inside of a restaurant, inside of a medical clinic.” —Matt McConkey (05:54)
• “Honestly, it’s like great-looking fundraising: hey, we’re not perfect. We made a mistake, but we didn’t try to fight it.” —Will (07:52), on Blackstone’s asset sale.
• “Structure is alpha.” —Will (09:34)
• “That is so much mez. Oh my God.” —Will (21:04), on Brooklyn Heights’ complicated financing.
• “No one would be in this business if they weren’t sick in the head. And the good thing about real estate is there’s always someone who wants to do it.” —Will (23:25)
• “It’s a great time to be doing renderings, but we’ll see if he can actually get it built.” —Will (23:49)
• “If you control basically all the inventory in that area, you are the price setter, right.” —Hiten (27:44)
• “The whole REIT game is really about are you trading above NAV or below nav.” —Will (28:42)

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Segment Timestamps

• NYC Mayor & CRE Fallout: 00:03–01:16
• Senior Housing: Blackstone’s Exit & Sonida/CNL Merger 02:13–12:28
• Brooklyn Heights 205 Montague: Ground-Up Drama & Cap Stack Crisis 13:33–23:42
• Reston Town Center Sale & Boston Properties Strategy 24:09–31:12

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Episode Takeaways

• Senior Housing remains full of both peril and promise: operational complexity and market cycles make for tough outcomes—even for CRE juggernauts like Blackstone.
• Complex Deal Structures and creative financing are essential (and often make-or-break) for the industry’s boldest projects; both cautionary tale and inspiration for deal junkies.
• Prized Legacy Assets are being spun off—even at top valuations—to fund tomorrow’s skyline-shaping megaprojects.
• Market Cycles & Political Winds weigh heavily on CRE’s biggest players, from local politics to macro capital flows.

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For more CRE war stories, inside baseball, and deal drama (with snark and authority), subscribe to The Promote Podcast and newsletter at thepromote.com.

Transcript

[A]

We obviously need to say something about the New York city mayoral election. CRE's reaction so far has been predictably unpredictable.

[B]

I think my favorite was Barry saying that Starwood Capital Group was going to leave New York City again, even after.

[A]

They already left during COVID That's at least entertaining. The kind of the gnarliest one was JLL rainmaker Scott Panzer.

[B]

Oh boy.

[A]

I mean, he basically compared Mamdani to Hitler and then was fired and then people got mad at JLL for letting him go. So Sierra Pretty special, Stu.

[B]

As John Malone said in his recently released memoir, when someone else got fired for comparing someone to Hitler. No upside. Not even that it's bad, just no upside.

[A]

It's rough. Listen, there's more to unpack during the transition. We're probably going to talk about this in the next coming weeks. My take it isn't great for America's most important capitalist city to be run by a democratic socialist. I think that's pretty clear. But maybe cool it on the rest of the stuff doesn't seem productive.

[B]

No, I agree. And again, it's the options were Beret guy or the guy who signed the rent law that ruined everyone's business. So it's not as if that he was running against John, our capitalist.

[A]

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

[B]

And I'm Will Krasny.

[A]

We're chatting in the Democratic Socialist Republic of New York and this week we're going to talk about a couple of really interesting things. We're talking about two big events in the senior housing space Blackstone's fire sale and the Sonita CNL merger. It's a pretty gnarly business to operate senior housing, but there's lots of room for creative structuring. Next we look at behind the scenes wrangling at one of Brooklyn's buzziest projects, Jonathan Landau. He's attempting to build Brooklyn Heights tallest.

[B]

Condo after building most pirate condo.

[A]

That's right. And finally, BXP is cashing in on legacy assets to fund its development pipeline. Supertalls ain't cheap, baby.

[B]

They are not. You know what else isn't cheap are ad rates brands. Hit us [e-mail] for advertising. If you want to get in front of this growing audience of CRE rainmakers, trend makers, hit makers, building makers and allocators and allocators.

[A]

And to read about data center, SASB structures, Chinese capital and other exclusive nuggets, check out The Promote Insider. You can find it at thepromote.com upgrade Founding memberships close up pretty soon. All right, let's go. Let's talk senior housing. Two big deals we need to discuss. Let's start Blackstone.

[B]

Buy it, fix it, sell it. Didn't really work. It was more buy it, It's a lot more broken, sell it at a loss.

[A]

I think you're talking about the general Blackstone playbook. Come in really hot, scoop up a bunch of massive assets in a space, do some creative financing behind the scenes, operate the hell out of it, and then sell it at a generous markup.

[B]

Right, but as Howie Day said, even the best fall down sometimes.

[A]

Is that a breaking a hip joke or what?

[B]

No, it's from. Well, kind of, but it's from Howie Day's collide. Great soft rock hit of the early 2010s. So senior housing has been a boom and bust cycle over the last two or three cycles of real estate because it was super oversupplied then was a victim of its own success. Vacancy rates went through the roof. And the other thing is these are really hard to operate.

[A]

You need to be very specialized for this. Older people have a lot of needs and things get pretty messy pretty fast.

[B]

To give you an example, I did a deal with a senior housing operator where we sold something to him. He was building a tower to try to get younger people into his program. And what he said is, if I can lower the age of entry by one year across our portfolio. The actuarial math is just astounding on the back end because it's like pet insurance. You pay for stuff that you don't use until the dog gets to the end of the road, and then you pay tons. It's the same thing here. If you can get people in early, make a lot of money off them, and then when they need all the care, that's where all these expenses come in. Like it's really about trying to get as much that profit up front.

[A]

What do these look like? Is this like the last scene in the Irishman? That closing door shot? Do me a favor, don't shut the.

[B]

Door all the way. I don't like that.

[A]

Just leave it open a little bit, okay? Is that what we're talking about here?

[B]

There's skilled nursing facilities, there's assisted living facilities, active adult on the complete other side, which is basically just apartments, but single story. You got memory care, acute care, and then various levels of, like in home care and at the lower level, so independent living, aisle light, like that stuff runs pretty much like apartments. You have to have more programming, more community events, stuff like that. And then memory care. You have locked floors and that's a lot more involved. But the bigger thing I would just say is that Blackstone had a thesis and they tried to invest demographically. So everyone's talking silver tsunami. You know, all the boomers are aging.

[A]

Into this secular tailwinds, all of that good stuff.

[B]

Right, right. And then they just ran into Covid and so these occupancies went down. They were really hard to staff.

[A]

Yeah.

[B]

And costs went through the roof.

[A]

I would imagine much more scrutin of operations, et cetera, in situations like that. Right. And I think Blackstone took some hard ratings on some of their assets as well.

[B]

They definitely did. And I think again, part of it though is just coming back to staffing. We talked about why I love extended state hotels. Because you can run it with like three FTEs. And this is like you could run the snack shack with three FTEs.

[A]

So it's operationally very intensive. Then typically Blackstone and most other operators would hire specialist operators to run these kind of complexes. Right.

[B]

So I think you have to.

[A]

Blackstone had a partnership with Brookdale, Right?

[B]

Exactly. One of the largest senior living operators in the country. But it's the same as it's really hotels as well. It's not like people are vertically integrated, multifamily. Like, okay, fine, like you can self manage industrial, but like you're not seeing a lot of groups out there self manage seniors along with other stuff. You have to be like a specialist. He had a great quote in here from Matt McConkey of Turnbridge Peak. What a firm name. And also like great alliteration on his name too. You're buying an apartment inside of a hot hotel, inside of a restaurant, inside of a medical clinic.

[A]

That's a lot of layers of operations. He added.

[B]

That pretty much says it all.

[A]

So Blackstone brought in Brookdale and then they replaced them and their new playbook was like, let's try a bunch of regional operators of these things. It might work out better.

[B]

Generally, I think that's a good thing because these huge behemoths, like if you're on the apartment side, Greystar, if you're on the hotel side, Cambridge. Sorry, sorry. You know who you are listening to this. At the end of the day, your business plan's as good as your worst on site person, no matter what your asset class is. So if you have a regional group, like you're more likely. The argument is to get the best person on site on that squad. And the question is, how good are they relative to the median person at Greystar or Brookdale? So I get the thesis and frankly, like, it's what I do on my own work also because Bob Faith wouldn't pick up my calls.

[A]

That's fair. So Blackstone came in in their typical swashbuckling fashion. I want to say, 16, 17. They made a couple of big deals. They paid, I think, a billion for one portfolio. And then they were off to the races. Right.

[B]

Sooner or later, starting about real money.

[A]

Yeah. So $1.8 billion was their bet, in sum. And then in the end of 22, they realized, yeah, this one, we got to take the L on this one. So they started selling these properties piecemeal. I think this is a point that we, we wanted to make, which is a macro decision by one of these giants can be a great micro opportunity for the right company. So now Blackstone's selling this off piecemeal to a bunch of people. Isaac Toledano out of Miami. His BH group just picked up one in Aventura for a 75% haircut. So you can get some really good prices. When a giant says we're out. Right. Then they don't really care about the individual. 10 million here, 10 million there.

[B]

Yeah. They care about certainty of execution and speed. You can provide both those things. They're like, we're not going to fight for the extra 10 million to the guy who has to go raise it all and might have a bunch of contingencies and ask for super long diligence and, like, can you get the financing?

[A]

Yeah, we just want to be able to tell our investors we're out. That's the main thing here.

[B]

Hey, we made a mistake. We're done. And again, it speaks to. I think we talk about Aum gobbling all the time. Like, if you're another group that you're not sure if you can raise the next fund, you're not throwing in the towel. You're fighting as hard as you can to keep this mark at a certain level, as fake as possible. Whereas Blackstone's. Honestly, it's like great looking fundraising. Like, hey, we're not perfect. We made a mistake, but we didn't try to fight it. We didn't waste resources, we didn't waste time. We got out of it. Everything else in the fund is good.

[A]

The initial headline was of this one trade that we just talked about, the Aventura one. I saw that deal. The media man inside me said, Wait, this is weird. I wouldn't see this one off. Transaction by Blackstone. That doesn't make any sense. A couple days later the Wall Street Journal had that big dive into all of this.

[B]

Yeah.

[A]

Honestly, I would not be surprised if someone at Blackstone fed them the story. Oh, just like let's take the hit in one go. Let's just take it on the chin and move on.

[B]

You only want to do one round of layoffs, Right.

[A]

I want to talk a little bit about a new deal in the works that's quite interesting. Some interesting players in there. We're talking about Sonita, which is backed by Mike Simonowski from Conversant Capital. Simonowski and Sonita are merging with CNL to build one of the largest senior.

[B]

Housing players in the U.S. mike Simonovsky, former partner and senator, founded Conversant Capital five, six years ago. They back Quinn Residences which is one of the largest BTR companies in Southeast. They've backed and structured industrial reit which was formerly Griffin that got taken private by Centerbridge.

[A]

He's also a partner in that hotel deal that we're both obsessed with. Yes, he is the SF, the 3000 keys or whatever downtown. The two Hiltons.

[B]

Yes.

[A]

Simonovsky is the money there. There was a lot of reports that Wyckoff was in the deal. Wyckoff is not in the deal. Our boy Luther from New Bond and Simonowski, they're the partners on this one. I believe it's set to close pretty soon, so we're going to try to talk about it in more detail.

[B]

That's another one where there's a lot of very clever struct embedded in there as well. Because remember, structure is alpha. It's not just CIM who says that. And then a couple of years ago they made a. I think it was a pipe into Sunita Senior Living. Yeah. Which was a publicly traded owner operator, investor in senior living communities, completely restructured the balance sheet and then now they're buying CNL Healthcare which is a public non traded reit.

[A]

Right.

[B]

And they own a bunch of high quality senior housing communities. They're valuing C and L, about 1.8 billion. And Sunita expects to have like a $3 billion enterprise value after this.

[A]

It's a pity that we're both wearing T shirts. We can't do the asymmetric collar. But I think we should talk about, we should talk about what an asymmetric collar is. As I understand it, there's a different cap on downside and upside and this.

[B]

Is like pretty complicated. I'm just A dumb bricks and sticks guy. There's a reference price. The collar is 15% below the reference price and 30% above the reference price.

[A]

CHP shareholders are favored in this asymmetric collar because a, they have limited downside exposure. So only 15% below the reference price get to participate in 30% upside before the caller kicks in and retain more value if Sunita stock performs well before closing.

[B]

But I think Sunita ends up owning more of the company, depending on where they go, because if they kite the stock, they're going to own, I think at the low end, 39.5, and at the high end, 50%. Okay. Sunita is controlling the ship here. To be clear, Mike's going to chair the board. They have control of the board, and the Sunita CEO is going to stay in control.

[A]

We should point out that even though there's a lot of opportunity, a lot of money has been made over the years. It's also, for some of the reasons we mentioned, been a space of a lot of turmoil. There's been tons of bankruptcies, restructurings. A lot of public companies were taken private in distressed conditions. There's a lot of financial engineering type of action in the space.

[B]

Again, we talked about how hard it is to operate these things. You can operate them well and still get annihilated if you time the cycle wrong, if there's too much supply, if, God forbid, something like Covid happens if rates go up.

[A]

I mean, this is what happened to Blackstone as well, right? The floating rate reaper got them.

[B]

Yeah.

[A]

They loaded up with debt and then they took a hit.

[B]

Yeah. And you just gave yourself not a lot of margin for safety. In a business where you have humongous fixed costs, this is something where the structure is very clever. On the Sunita side, they're going to control the boat here. They're getting bigger at a time when prices are low. So that's always fortuitous. Do you want to buy when there's blood in the streets? Right. That's what the Rothschild said. And Blackstone just opened a vein. As a disclosure, Mike Samanovsky and I are partners in an unrelated proptech investment. We want to tell you about the Promote Insider, our premium subscription tier. Lots of spice there.

[A]

He who controls the spice controls the universe. Seriously, we just published a story looking at the dangers of data center sasbies. Bondholders have no idea who the ultimate tenants are. It's pretty crazy and it's the kind of wonky insider stuff you degenerates love.

[B]

I was just thinking about it at the Gym this morning. It's like the guy in Happy Gilmore who's like, circle all good things, block bad energy good. Like that's exactly what this is. It's Oracle spending money, Oracle getting money back. We untangle those things for you guys.

[A]

And we untangle them with experts who really know what they're talking about.

[B]

You had published a great excerpt from one of the Promote insiders in the newsletter today. Really good breakdown of how this stuff works.

[A]

Thank you. So you can check it [e-mail] upgrade. Founding memberships are up for grabs for another couple weeks. So get on it.

[B]

At $20 a month, you're in a good spot. Also, you get a free two week trial. So on a risk adjusted return basis, that puts data centers to shame. And I gotta say, I heard, I saw Bain Capitals avoiding data centers. It's the first bullshit thing I've heard about data centers in a long time.

[A]

This one's in our sweet spot. It's pretty good. There's a quarter billion dollar hole in the Brooklyn skyline and Jonathan Landau has to go fill it real fast. Let's talk about it.

[B]

Oh man, this one's great. I walked by it today. I lived three blocks from here for five years, so love it.

[A]

Montague Street's nice.

[B]

It is though, this is sort of right on the edge because that Cadman Plaza, you know, the other condo deal that got done on Cadmun Plaza did not do so well.

[A]

Let's summarize what's going on.

[B]

So the dirt's owned by the Syrian royalty, one of the founding families, the Carys. I guess my question first of all is that if this is such a good idea, why aren't they doing it?

[A]

Funny you say that. They are not. Not doing it, huh? Okay, listeners might be a little confused here. So 205 Montague street this is a site that the Carey family, Joe Carey's Midtown equities, bought in 2010 for 30 odd million. Once they bought it, there was speculation that something serious is going to show up here, right? Brooklyn Heights, toniest neighborhood in the borough. Just a great, great neighborhood to live.

[B]

In and notoriously, very, very difficult to build.

[A]

So they have this site, if they stitch it together with the neighboring site that they also own. We're talking about a tower north of 500,000 square feet. So there'd been not much action on the side for a long time. And then installed Jonathan Landau with his aging rock star, Maine and made something happen. This is in 2024. Landau is a pretty well known commodity in New York real estate. He used to run Fortis Property Group, which was the Kestenbaum family's vehicle. Mixed record there, I would say, but they've done some major projects.

[B]

Well, what I would say is that he bought great stuff like the river park development in Cobble Hill. So not too far from the sites is phenomenal real estate. I think the execution, your mileage may vary. They gave a couple sites back, But River Park 5, River park, which they built, turned out really well and I think sold really well.

[A]

Yeah, Olympia and Dumbo did incredibly well.

[B]

I think again, financially unsure because they had a very high octane land loan. They had a high octane construction loan.

[A]

The condo sales went very well. Let's just put it that way.

[B]

Condo sales went really well. In the movie Highest to lowest. Spike Lee's new movie, like Denzel lives in the penthouse of the Olympia Building. And it's like a character in the movie. Wake up, y'. All, the king's here. Got got.

[A]

Oh, wow.

[B]

Yeah.

[A]

So Jonathan Landau, former transactional attorney at DLA Piper, stumbles into the principal side through Fortis, meets the Kessenbaums, runs their company for more than a decade and then in 2022 decides, all right, I'm going to fly my own flag. Starts project in Miami, a boutique condo there, boutique office there. But the real Prize was this 2024 deal that he did with the Carys where he bought into Montague street and then he planned to build a 47 story tower condo tower in Brooklyn Heights. That's pretty massive.

[B]

It's really massive. The only comparable site is I think one Clinton, which Hudson did.

[A]

David Kramer's Hudson.

[B]

Yeah, David Kramer's Hudson did. David Kramer also lives in Brooklyn Heights, right around the corner.

[A]

He does, yeah.

[B]

And they had the library that they had to build for the Brooklyn Public Library, which I think sort of made the returns diluted because they spent a ton of money doing that and you don't get any revenue from it. So having a prime site in Brooklyn Heights and especially Brooklyn Heights is like in the Zeitgeist right now. Amy Schumer moved there. Paul Rudd lives there. He gives out candy on Halloween. Matt Damon was at the Standish. John Krasinski lives below Matt Damon at the Standish.

[A]

Yes.

[B]

So there's a lot of celebrities in Brooklyn Heights.

[A]

Where did the Glossier founder buy something with the. A few months ago we walked by it.

[B]

Yeah. Emily Weiss and Will Gabric, my high school classmate, bought it for some crazy number, like north of 2, like low twos. A foot for a townhouse that they spent a bunch of money renovating. So pricing's really pushing there. It's as high as almost anywhere on the park.

[A]

Mid 2ks a foot? Something like that.

[B]

Yeah. And resale trades at one Prospect park west. Or like, close to three. Yeah. So this is the time to be building in Brooklyn Heights, and Lando's trying to build the biggest and the baddest. If he can get there.

[A]

If he can get there. So this project has seen its fair share of drama. Let's back up a little bit. The loan on this that Carrie got was from Signature Bank. All right, Signature Bank. Rip.

[B]

Stepping into a warm bath until Rialto throws ice cubes in it.

[A]

Yeah. And again, we've talked a lot on this podcast and in the newsletter in the promote about how Signature bank was your best friend. Warm and fuzzy feelings for their borrowers. However, when they melted down, FDIC took over. Rialto came in, bought a chunk of their book. Rialto kind of ratcheted up the heat pretty hard on a lot of the borrowers, and they're working through a lot of that now. A lot of mom and pop sponsors kind of rolled over because they didn't know what to do with this Rialto coming at them. But Rialt also came for Joe Carey, and now Joe Carey is not the kind of man to roll over, so he fought back on this one. He alleged that Rialto carried out, quote, a sinister veto pocket scheme in which they deliberately slow rolled his extension request. It was in the contract that they would get an extension on this loan, according to Kerry. And Rialto kind of just sat around and didn't let anything happen.

[B]

It's like Rialto is the husband who the wife's trying to say, hey, I'd like a divorce. And he just, like, covers his ears.

[A]

And goes, that's exactly right. This, by the. A pattern with Rialto that's come up in multiple lawsuits. He comes at them with this sinister pocket veto scheme. He fights back, the parties settle, and then Landau, once again has breathing room. Because obviously, if Rialto foreclosed, there was never going to be a condo here. Right.

[B]

I mean, so the site had quite a life before we even got to this point. And so, you know, this is, again, a $450 million capsack. This is not for the faint of heart.

[A]

Probably like 500 million or so.

[B]

Yeah, yeah, something close to that.

[A]

I got some fresh numbers.

[B]

Oh, you do? Okay. I only have the old numbers.

[A]

So anyway, with the Rialto thing out of the way, Landau is kind of free to go find his financing. And so he lines up one of our marquee names in construction lending. He lines up Bank Ozk.

[B]

It's the new warm bath. Until it's not.

[A]

The little bank that could. Until it couldn't. So Bank Ozk agrees to come in. According to our sources, this is speculative, so please don't take this as gospel, but according to our sources, Bank Ozk agreed to step up with their $245 million loan.

[B]

Oh, boy.

[A]

Atlas Capital, which is a partner on 80 Clarkson, the Zeckendorf project that we've talked about, agreed to step up with Pref as well. So he was well on his way. Until he wasn't.

[B]

And so Bank Ozk drops out.

[A]

Right. At some point in this process, Bank Ozk got cold feet. One of my sources said it's a Mamdani thing. I don't know if that's just cover or whatever, but Banko ZK said we're out. So now Landau, who is relying on them for a quarter billion dollar chunk of money, has to go and find more money.

[B]

And by the way, before they backed out in the materials, it's saying, you know, this is our preferred equity partner. So it's not as if this cap stack is just filled to the brim. It's already structured.

[A]

Yeah. So they had the senior construction loan from them. They had Atlas Capital as the preface. Ozk stepped out. Landown needed more money. And now we know that Northwind is coming in. Our boy Ran Aliasaf, who we've had on this podcast before, he's not gonna.

[B]

Be the cheapest, but he might be the quickest.

[A]

He's not the cheapest. He said that himself. But he's pretty fast and he can close. So Ran's Northwind is coming in with like a hundred low hundred million dollar land and pre dev loan.

[B]

Oh, man, what a. That's a great piece of paper.

[A]

Yeah, it's pretty good. And then King street, we've talked about King street before with the RXR Gemini deal because they're one of the investors in that venture. King Street's coming in, according to our sources, with a healthy chunk of mes. Like we're hearing 90 million type of mes.

[B]

That is so much mez. Oh my God.

[A]

And apparently it's pretty expensive. Again, speculative here.

[B]

Right. And then Atlas behind, that has 60 million of pref. So you basically have 150 million of highly structured mes and pref behind a not super cheap senior Right.

[A]

And you're still not done. You still need like 100 something million to get going.

[B]

The carries are rolling in some of.

[A]

Their equity, so the carries paid, I think 30 million for the site. And it seems like they're just rolling that into this deal.

[B]

I wonder what they're thinking about all this because they're probably like, we could just fund this thing by selling a.

[A]

Beach house and deal.

[B]

Oh my God. I think it probably says something that guys who are really sharp who have the balance sheet to do this and actually own the land are not the one stepping up. That probably says something.

[A]

Well, I mean, their basis is so phenomenal. Right. Why would they take on all this risk if they can just be a part of something great?

[B]

Exactly. I mean, unless they're thinking that this thing's going to get built and he's going to default, but even then you end up with a weird site where your equity's trapped.

[A]

Did you have some rates on the. On the mez and pref, by the way? I was told a mez is between 12 and 15% and the pref is at 18%.

[B]

Oof. I didn't see the terms on the pref, but I saw the terms they were offering their LPs.

[A]

What are we hearing?

[B]

10% pref, a 40% promote up to a 2x multiple, and then 60% over a 2x.

[A]

That's quite generous. No?

[B]

Yes. They were looking at like a mid 2000s blended sellout. $80 per square foot rents. And those are. Both of those actually feel very achievable. 80 bucks a foot is what people are getting in, like Prospect Heights or Gowanus for new builds. So that actually feels like pretty cheap.

[A]

I say this a lot to you, Will. I think in these prime areas, getting the thing funded is the thing. Once you get it funded, a tall condo in Brooklyn Heights, you're going to get some of the best views of the city. You're in a pretty good spot if you can get there.

[B]

No, it's sort of binary. Like, you get this thing done or not. It's going to sell, it's going to rent. But again, I say that and then one Clinton, like lost a bunch of money directly up the street, though. I think there's some specifics to that building which probably caused the issue and the issue with the public library as well, which you don't have here.

[A]

So filling these holes in the cap stack, I feel like, is something every developer, big or small, can relate to. Right. We spent a whole episode Talking about Related's $25 billion donut in Hudson Yards and how they had to do all kinds of creative structuring to get that one funded. But this applies, you know, even to humble developers doing rinky dink industrial deals in western pa. Like, everyone can feel.

[B]

This Central pa. Yeah, I feel for John Lando because this is the absolute worst. I've been through it and look, we're in this business because it's hard. No one would be in this business if they weren't sick of the head. And the good thing about real estate is there's always someone who wants to do it.

[A]

In the spring, he was talking, he said, it's a great time to be developing in New York City, but let's see if the money lets him do it.

[B]

It's a great time to be doing renderings, but we'll see if he can actually get it built. Reston Town center, the sexiest address in commercial real estate.

[A]

You know, I spent three nights there. Did I tell you?

[B]

No, you didn't.

[A]

This is a couple years ago, SIA had a conference. Such an unusual world in of itself. Like it really was one of those planned complexes. And you really feel it as soon as you step in. It feels like the Truman Show. Good morning. Oh, and in case I don't see you, good afternoon, good evening, and good night.

[B]

It was the brainchild of one of the underrated, most impactful people in real estate over the last 50 years, Mort Zuckerman over at Boston Properties.

[A]

You think he's underrated? I feel like Zuckerman's considered a goat.

[B]

The youths today, you know, don't consider him in the same vein as like Sam Zell or one of the other guys. And word, Zuckerman did just as much. So bxp again, Boston Property. I'm going to call them Boston Properties.

[A]

We're going to call them Boston Properties.

[B]

They're Boston Properties. Yeah. So their whole thing, again, the name was, we're only going to develop in certain cities where it's really hard to develop because we're going to be the best at it. We can handle the complexity. We have the balance sheet. We can do it. And it's just ironic that Reston, at this exurb of DC ends up being one of the places where they stick their flag. And so they've been in this since the 80s.

[A]

Can we talk for a second about the scale of the project?

[B]

It's just massive. 40 years, you're like, wow, they must be done. They're half done, right?

[A]

It's absolutely massive.

[B]

They've delivered 5 million square feet of apartments, office, retail, everything, and then another 4 million square feet. I guess they can add onto it in the next 40 years unless they sell it all.

[A]

We talk about sort of planned neighborhoods like Columbus Circle, Hudson Yards, et cetera. They're still plugging into the most dynamic city in the world. They're still plugging into New York, Reston. They kind of have to work this magic from nothing, right? So you go there, there's nothing and then there's Reston and there's all these happy hours and the chatter. It was like sociologically very interesting to go there.

[B]

Well, now it's one of the sort of. You're very close to Data Center Alley. So Amazon has a huge presence there. Data center's going up left and right. And now people fighting against data centers left and right. There are areas which when I would go play baseball there as a youth in the early 2000s. Oh, what was that word? Excuse me, your honor, you. Not a lot there. And now it's really, really dense, which speaks to why we're talking about this. BXP sold two major apartments in Reston Town center for like a quarter billion dollars.

[A]

Imagine the basis there. I mean, this is one of the. This is a record deal for the area for sure, but this is just a massive deal overall.

[B]

What they're doing though is they're doing this to refocus on their core, sort of the back to basics, massive, super tall, super complex developments in Manhattan.

[A]

Like 343 Madison, which we've talked about.

[B]

Exactly.

[A]

So BXB listed. It's a building called Signature. It's a multifamily building, about 500 units. And they wanted to get pricing. They were like teasing pricing of 240 million, which comes to about $470,000 a unit. That's a big number. So the buyers that came in were Sterling, which is out of New York, and Denver based Simpson Housing. And it seems like they're paying in line with that guidance. So pretty damn good, pretty good execution.

[B]

And I think it's a bet too that this market's going to continue to run. And you know, it's one of these plays which I think a lot of people are talking themselves into, which is actually kind of smart, which is we're going to buy something new. We're maybe not going to have the juiciest yield day one, but we're going to be cheaper than whatever the supply is that comes behind it. So if the market continues to move, we're going to be the on the shoulders of the next deals that come behind it. And we're gonna have a new asset that's gonna be easier to run, not a ton of R and M. And we know it's gonna cash flow from the jump from that lens, it kind of makes sense from the lens of $470,000 for Reston, which is just where like you would go to buy a Subaru. Sort of a little staggering.

[A]

One point I want to make is about the. If you control basically all the inventory in that area, you are the price setter. Right. So the last record was also 2022 Boston Properties, again, Reston Town center, they sold that to Carmel properties for 400, just under 400,000 a unit.

[B]

That's still a pretty big number. And Carmel is a huge national firm, like very sharp, big portfolio. So the fact that they're paying big numbers sort of again, and this now completely justifies it. So that's what almost half a billion dollars of apartment complexes at Reston Town center that can go to fund superstructure of 343 Madison.

[A]

And that's just the start. By the end of 2027, I think BXP Boston Properties wants to sell close to $2 billion worth of assets.

[B]

Right. And I think they have nine currently under contract for like $400 million. Wow.

[A]

And then there's another 10 or so on the market.

[B]

I didn't even know they owned that much stuff.

[A]

Is there something about the way that REITs are structured that they cannot go and fund this stuff any other way?

[B]

The whole REIT game is really about are you trading above NAV or below nav? And you think of it that way. If we're trading above nav, you want stock. And then that's very creative. You could buy anything and it's accretive. And if you're below nav, you don't want to ever issue stock because it's just completely dilutive. So sell stuff down, buy back your own stock or do your own projects.

[A]

That's been the broader landscape in the REIT world for a while. Right. Stuff's trading well below nav, Vornado. Steve Roth is crying about that. Every. Every earnings call.

[B]

Steve Roth, if you think this company is so cheap, go raise the money and take it private.

[A]

That's right.

[B]

Like period, full stop. Mark Holiday, same thing.

[A]

Run and hide. Will run and hide. Go run and hide.

[B]

Yeah. It's indicative of where the market's going, where these clean assets with good stories are trading tight. And they're not always the sexiest assets, the ones that people historically would say, yeah, that's worth the most. But I mean, even on a per foot basis, like, I don't have the number in front of me, but this is probably significantly more expensive per foot than like a bunch of Manhattan offices traded for.

[A]

Sounds about right. And then Simpson, I mean, Simpson's a pretty interesting buyer as well. They're, they're massive. They have 23,000 multifamily units across the country. So not some Mickey Mouse here.

[B]

Well, that's the other thing too about multifamily is that you have these groups which like no one's ever heard of. Like how many people listening to this podcast have heard of Simpson housing?

[A]

And then you go check NMHC lists and they're all there.

[B]

Yeah, and it's just if you buy a couple of projects a year over a long period of time, that really adds up. Doesn't need to be the splashiest, it just needs to be cash flowing.

[A]

You know what I'm curious about with BXP here? So they're selling off these assets. They're going to continue probably developing out this Reston town center. What did we say? What 4 million square feet planned?

[B]

4 million square feet.

[A]

So they're just going to keep building this thing and then selling it off piecemeal when they want to go build some more Manhattan skyscrapers.

[B]

Think of it this way. What's their book value on this stuff that they build? Because again, the land they've owned forever, it's nothing. Whatever you sell, it's a huge mark to market gain. You're building things that are new and liquid.

[A]

If you can build quality, primo class A office in Manhattan, right now you're building into a pretty, pretty incredible market. Right? This is net absorption is at its highest it's been in 25 years. Tenants are paying record sums for their right buildings. And yeah, if you can get something built there and Boston Properties knows how to build stuff, you could be in a pretty strong position.

[B]

This cap stack I'm not worried about. Unlike 205 Montague.

[A]

That's it for the promone podcast this week. Senior housing is giving the grizzled heads at Blackstone a run for their money. A quarter billion dollar hole in a Brooklyn cap stack is fodder for big drama. And BXP is selling legacy assets to build on its legacy of skyline shaping assets.

[B]

It's Boston Properties. It's a shame when the consultants get to a beautiful name.

[A]

It's like, why do that? I hate it. Like just, just own it, man.

[B]

What Burt Cooper said about London Fog. It's a great name.

[A]

We'll be back next week with more cre. Insider. Goodness.

[B]

As always, hit us [e-mail] for advertising. We haven't seen a new review in a bit, so please go write us one. I check every single day.

[A]

Maybe twice a day. Please do that. And then check out the promote [e-mail] upgrade to level up. That's thepromote.com upgrade. We will see you next week. Will. Thank you and good luck in New York.

[B]

Thank you.

[A]

Ciao.