Soho House Postgame And Billion-Dollar Capstacks

Summary

The Promote Podcast: Soho House Postgame And Billion-Dollar Capstacks

Date: August 27, 2025
Host: Hiten Samtani (A), Will Krasne (B)

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Episode Overview

This episode of The Promote Podcast dives deep into three attention-grabbing stories in the commercial real estate (CRE) world:

1. The private takeout of Soho House, examining the prospects for its future under high-profile new ownership and big financial moves.
2. Recent billion-dollar deals in Manhattan, with breakdowns of their intricate capital stacks and what they signal for the market.
3. The perils of real estate crowdfunding, focusing on immense investor losses at YieldStreet and the flawed mechanics of the model.

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1. The Soho House Saga: Return to Cool or Glamorous Flame-Out?

(00:28 - 13:31)

The Set-up

• Opens with an amusing exchange between Paramount Group’s CEO and his ex (00:03), then pivots: “We have much bigger fish to fry today. We’re talking Soho House. Can Tyler Morse and Ashton Kutcher make the members only club cool again—and profitable again, despite the appearance of Apollo?” (A, 00:50-01:02)
  • Will confesses he was twice rejected by Soho House, but once a member of Soho Works at Dumbo House. (B, 02:03-02:25)
  • Notable quote:
     “I drank them out of Pellegrino and home. It was completely unsustainable.” (B, 02:25-03:04)

The Deal Details

• Soho House is being taken private for $2.7 billion.
  • Headline buyers/investors: Ron Burkle (serial dealmaker), Tyler Morse (MCR, hotel operator), Ashton Kutcher (celebrity/tech investor), and Apollo Global Management (finance titan).
  • Morse’s background: Ex-Barry Sternlicht chief of staff, later founder of MCR, legendary for select-service hotels (think Marriotts/Hiltons).

    “To run those well, you have to be super focused on costs. You have to be an operations assassin.” (B, 04:48-05:13)

What Makes Soho House Different, and Maybe Doomed?

• Soho House isn’t a hotel; it’s a global members club (40+ clubs, ~300,000 members, $5k/year fees).
• The catch-22:

  “Growth is completely against what makes it popular, which is exclusivity.” (B, 10:02-10:11)

  • Massive competition in high-end club space (Zero Bond, San Vicente Bungalows, etc.)

  “Unless there’s some sort of Ashton Kutcher voodoo to make it cool again, I don’t really understand this.” (B, 10:40-11:01)

• Apollo’s big $700M investment is puzzling:

  “It doesn’t seem like their type of business. There’s not really assets, not really cash flow. It hasn’t been profitable.” (B, 11:13-11:18)

Memorable Moments

• “These are gonna be some excellent board meetings: Burkle, Apollo, Ashton Kutcher and Tyler Morse.” (B, 12:52-13:09)
• Groucho Marx reference:

  “I think this unholy combination…are going to challenge that notion.” (B, 13:22-13:31)

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2. Manhattan Megadeals: 590 Madison & 800 Fifth Avenue

(13:31 - 24:02)

590 Madison (IBM Tower): First Billion-Dollar Office Deal Since 2019

• RXR buys for $1.08B, with Elliott Investment Management as equity partner.
• Financing led by Athene (insurance arm of Apollo)—$785M in total debt, $135M in mezzanine, $60M for improvements (14:42-15:16).

  “That is a lot of mez. And frankly, I’m a little bit surprised that Elliott agrees to be common behind that mez.” (B, 15:16-15:31)

• Building is 1M sq ft, bought for about $1,000/sq ft; leases range from $85/sq ft (LVMH) to $150 (Cemex)—with long free rent periods (16:38-17:20).
• Cash flow will be tight:

  “The mez is going to eat up a lot of that cash flow.” (B, 17:33-17:43)

  • But: If RXR can reposition and raise rents, big upside is possible.

Seller Drama & Financing Intrigue

• Seller: Stirs Ohio Pension Fund, embroiled in infighting; RXR paid $5M for a closing extension after original lender Kale Street dropped.
• Notable:
  “The kind of details the Promote lives for.” (A, 19:44-19:46)

800 Fifth Avenue: The Ultra-Luxury Condo Bet

• Mickey Naftali buys Spitzer-owned site for $810M; secures $675M in debt from JPMorgan and Golden Tree (private credit), plus equity from Mexican, Israeli, and Japanese family offices (20:19-21:09).
• Plan: Redevelop into ultra-high-end condos (possibly $11k/sq ft).
• “Such a big number, but…if anyone can do it, it’s Mickey.” (B, 22:18-22:53)
• Discussion of “overbuilt” rental, potential for creative redevelopment to maximize value.

Market and Timing Context

• “Equity markets at all time highs…crypto booming…maybe this is time for a new buyer.” (B, 23:34-24:02)

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3. Crowdfunding’s ‘Original Sin’: YieldStreet Investor Wipeout

(24:02 - 31:40)

The Debacle, By the Numbers

• CNBC analysis: Of 30 YieldStreet deals, 4 are “wipeouts” (total loss), 23 “watch-listed” (in trouble), only 3 active with any distributions (24:36-24:52).

  “Four wipeouts mean: equity all gone.” (B, 24:52-24:55)

• Real-world pain:

  “There isn’t a day that goes by without me saying, I can’t believe what happened… I consider myself moderately financially savvy and I got duped by this company.” (Investor, 27:04-27:24)

Core Problems & Sharp Critique

• The model syndicates CRE deals to retail investors—often those institutional capital has rejected or sponsors can’t fund elsewhere.

  “If you are one of these firms… and you can’t raise the money from them, like, those deals go here.” (B, 25:20-25:27)

• Will’s take:

  “Democratizing investing, which means we’re trying to get the dumbest f—ing people and steal their money.” (B, 27:52-27:58)

Anatomy of a Loss: The Flow Nashville Deal

• Flow’s Nashville project (part-owned by Adam Neumann’s firm) defaulted, investors lost everything:

  “YieldStreet told investors… the property has been sold to Tishman Speyer, resulting in a complete loss of capital for investors.” (A, 26:45-26:58)

• Not only total loss, but also tax pain:

  “It’s an extra loss of capital post the depreciation recapture.” (B, 26:58-27:04)

The Crowdfunding Ecosystem: Web of Failure

• Noted incestuousness:

  “A16Z never miss. Good for them.” (B, 29:40-29:44) (sarcastic, referencing A16Z’s disastrous investments in Cadre, Flow, and others)

• A16Z’s repeated bets lost hundreds of millions.

Should Crowdfunding Be Allowed?

• Will argues for regulation, not liberalization:

  “If you have a $1 million net worth… you need zero private real estate exposure.” (B, 31:16-31:21)

  • “This exists to take money from people who can’t afford to lose it.” (B, 31:39-31:40)

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Notable Quotes & Moments

• “To run those [select service hotels] well, you have to be an operations assassin.”
  — Will Krasne (B), 04:48

• “Growth is completely against what makes it [Soho House] popular, which is exclusivity.”
  — Will Krasne (B), 10:02

• “These are going to be some excellent board meetings: Burkle, Apollo, Ashton Kutcher, and Tyler Morse.”
  — Will Krasne (B), 12:52

• “There isn’t a day that goes by without me saying, I can’t believe what happened. … I got duped by this company.”
  — YieldStreet Investor (quoted by Hiten), 27:04

• “Democratizing investing, which means just like, we're trying to get the dumbest fucking people and get—and trying to steal their money.”
  — Will Krasne (B), 27:52

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Timestamps for Key Segments

• Soho House Deal Begins: 03:04
• Tyler Morse’s Background: 05:19
• Soho House: Business Model Breakdown: 08:19
• Apollo's Role & Boardroom Guessing: 11:01 – 13:31
• Cap Stack at 590 Madison: 13:54 – 18:43
• 800 Fifth Avenue Analysis: 19:32 – 24:02
• YieldStreet Crowdfunding Crisis: 24:02 – 31:40

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Tone and Style

The conversation is insider-y, sharp, irreverent, and sometimes profane. Hiten and Will alternate deep financial analysis with caustic industry humor and namedrops, positioning them as critical yet affectionate insiders in the CRE game.

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Summary Takeaways

• Soho House’s future remains an enigma, caught between operating costs, exclusivity, and boardroom circus vibes—despite some big names and deeper pockets.
• Manhattan’s billion-dollar deals signal selective market strength, but also highlight the risky new normal for capital structures, especially reliance on big slices of mezzanine and private credit.
• Crowdfunded CRE investments are facing a crisis of trust, as losses mount and the entire business model is raked over the coals—a warning to individual investors and an indictment of “democratized” platforms that often serve up institutional leftovers.

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Transcript

[A]

What you're about to hear is an exchange between Albert Baylor, the CEO of embattled office REIT Paramount Group and his ex girlfriend at Guardian Services. Now that's a security firm that Baylor pushed a no bid contract towards for his massive Manhattan office tower. How are you Hope? All well. Talk tomorrow.

[B]

Yes, please call me anytime. Xoxo.

[A]

Time for lunch.

[B]

That will be so nice to see you. Yes, I am available.

[A]

12:30 Le Bernardin Lounge. Perfect. Welcome back to the Promote podcast, your insider guide to the money and mania of the CRE markets. I'm normally Hatan Zamdani.

[B]

And I'm Will Krasny.

[A]

We had to start with that because of how glorious it is, but it's kind of a non sequitur. We have much bigger fish to fry today. We're talking Soho House. Can Tyler Morris and Ashton Kutcher make the members only club cool again and.

[B]

Profitable again despite the appearance of Apollo?

[A]

We then get into the debt stack at two Manhattan megadeals that just closed. RXR's 590 Madison buy and Mickey Naftali's ultra luxury condo bet at 800 Fifth Avenue. Finally, we talk about the original sin of crowdfunding. Yield street investors are facing total losses. Is that the rule rather than the Exception?

[B]

Some of YieldStreet's investors are facing total losses also, so who knows?

[A]

It's pretty bad, man. It's really, really bad. Just a couple housekeeping notes before we begin. If you haven't already, please write us a review. Go to Apple or Spotify. Helps us a ton to get discovered among fellow CRE maniacs.

[B]

For feedback on the show and ideas, hit up hattenodcasthepromote.com because again, I have thin skin and don't want to hear anything bad.

[A]

And if you want to reach our devoted audience with your brand messaging, reach out to partnershipsthepromote.com that's partnershipsthepromote.com. all right, let's go. Will, take us back to your days as a yuppie queuing up to get into Soho House.

[B]

So, full disclosure, I was rejected from Soho House.

[A]

Oh no.

[B]

Twice.

[A]

For being like a finance nerd or what?

[B]

Well, the second time I like to think that it was Covid because I applied in mid February 2020 and then they said they reviewed at the end of the quarter. So I like to think I got lost in the shuffle.

[A]

There is zero hint of bitterness in Will's voice, as you'll hear.

[B]

Also was a member of Soho Works at Dumbo House, which was the absolute Best deal on shared office in the entire world. It was like $300 a month, and they had the super fancy 0 Cal Pellegrino. I drank like, 15 a day.

[A]

The Chows.

[B]

Oh, yeah, I love the Chows. And I was getting, like, my entire membership back just through Pellegrino.

[A]

These sound like casual observations, but they kind of speak to the problem here a little bit, don't they?

[B]

Oh, yeah. It was so funny because every time, like, when Dan Loeb's letter came out about Soho House, I'm like, yeah, goddamn right. Like, this thing is completely unsustainable. I'm drinking them out of hells and home with this Pellegrino.

[A]

So let's back up. Why are we talking about Soho House right now? There is a deal in place to take it private, I believe at a $2.7 billion valuation. And there's a couple of interesting characters in the mix.

[B]

So Ron Burkle, first of all, is just one of, like, the Zelig like, characters over the last 20 years.

[A]

Your KP. Yeah, he's just all over.

[B]

He's in film production. He's involved with, like, Taylor Sheridan and, like, the nonsense with Paramount Hebrew Stores, like, classic houses. I think it was a big Clinton booster. Like, there's a whole, like, Ron Burkel thing. The two guys I think we really want to mention. The first is someone who's very well known within real estate, private equity, and particularly in the hotel space, Tyler Morse over at mcr. We'll get into him because he's. He's a very important part of this. And I don't think he's as well known as the other guy we're about to mention. The other, of course, is ashton kutcher.

[A]

Hey, Mr. Demi moore.

[B]

One of the earliest tweeters.

[A]

Yes.

[B]

Various backer. Various tech platforms.

[A]

He was involved with Adam Neumann at one point, too.

[B]

Yes.

[A]

Was it wework? Yes.

[B]

We want to get into Tyler Morse because I think he's really the key man here. And Soho House is not actually a hotel by itself. It's a private member's club. And Tyler Morse is a hotel guy.

[A]

And he's generally, like, in select service kind of hotels. Right. They're one of the largest owners of Marriotts and Hiltons across the country.

[B]

Yes. So MCR has raised a series of funds, and they've done. Done very well, especially early on focusing on select service. And so select service is exactly what it sounds like. There are only a select amount of services at this hotel. You can't go down to the restaurant and order a $17 Diet Coke. You have a free continental breakfast until 9am you gotta fight off, you know, the government contractors down there at six o' clock in the morning for, like, the good eggs.

[A]

It's the Keurig in the room with a couple of pods.

[B]

It's a much better business than full service because the only good business in the hotel business, ever since long distance calling fell by the wayside, is renting the room. And so at select service hotels, that's all you do. And so you can staff them more cheaply, you can build them more cheaply, and the NOI margins are much higher. So they are very good business. But to run those well, you have to be super focused on costs. You have to be an operations assassin.

[A]

So in that fairly specialized world, I would imagine that Tyler Morse is one of the GS, right?

[B]

Absolutely. Like, there's not that many purely hospitality focused firms out there. Ksl, who we've talked about previously, MCR is one. Blackstone historically is in a lot of hotels. And Starwood is really important to the story as well. Because what begat Tyler was Starwood. And not even Starwood Capital Group, this was Starwood Hotels. So we're really going back in the day. So Tyler had the Barry's guy job.

[A]

What is the Barry's guy job? That sounds like a very, very fun concept.

[B]

Every AI founder now has like a chief of staff. And this was like, very early on, like a chief of staff type role. But you're really just like the guy, the guy Friday. You're the operating system for Barry's life, basically.

[A]

I remember you once describing Barry Sternlicht of Starwood as a nation state. And I thought that was a really great way to put it. He's really like the center of the empire. And so he has these vassals, in a sense.

[B]

It's not even just like, oh, he has vassals. Like when I say he's a nation state, the business of him is so big. It's not just him, it's any of these guys. The Jongrey of Blackstone. Same way.

[A]

All right, gentlemen, let's get on with it.

[B]

Battleships turn. Based on a look, you are not like the blunt instrument, but you control access, help set the schedule. You get him back and forth to places you like, do the briefings.

[A]

One of the famous chiefs of staff from our industry is Rob Refkin. I think he was chief of staff at Goldman before he started Compass.

[B]

Good for him. I saw him at La Fouquet one time.

[A]

If you're in that position, you kind of garner tremendous influence. And you know everyone, right? Because everyone Barry knows you kind of know too.

[B]

Totally. You have a ton of visibility. So it is a. I would say it's a very high beta position where if it goes well, it can go really well. And if it goes bad, it can go really, really bad.

[A]

So there's two exits out of that thing. You become the heir apparent for someone like Barry Sternlicht or you step out and do your own thing.

[B]

You become like a maid guy.

[A]

Oh yeah.

[B]

Tyler, one of the first guys who's had this job and ends up starting mcr. We said they were historically select service hotels. So if you go look at their fund returns, which their decks are out there, you can see they've slowly gone down over time. They've drifted into like broader hospitality platforms, showier assets. So famously, they did the TWA hotel, which I have to say is extremely fucking cool.

[A]

It's one of the coolest executions. I wonder what it looks like from a ROI standpoint. It's not an easy and not a cheap job.

[B]

Definitely not either one of those. Yeah. Also did the Highline Hotel and then also ancillary stuff. So they've invested in like some parking tech companies, some other hospitality tech platforms.

[A]

What you're trying to say is going from faceless commodity that is a proven business to these little more bespoke one off opportunities that come up.

[B]

Yes, exactly. And all of them hospitality related. And they've moved away from that again because this is, again, it's not even really a hotel.

[A]

It might be helpful to break down exactly what Soho House is. It's a network of about 40 odd clubs across multiple countries. And they have a membership base of, I want to say just under 300,000 people. Membership can be like 5,000 bucks a year.

[B]

That's a lot of First national bank of dad paying for that, I can tell you.

[A]

Exactly. So what is the play here?

[B]

These are all generally very good real estate in gateway markets. That's sort of the whole gestalt of the things.

[A]

Super prime locations.

[B]

The meatpacking. Soho House is famous. It was in Sex and the City. Samantha had to wait to get in or something. Do you know who I am? No, I don't. But we can't accommodate you right now. I remember this exactly, but I'm pretending that I don't. It is hospitality in that they're clubs but they're not hotels. So to run these as hotels kind of doesn't make sense because the room count isn't high enough. To make the profitability work, especially with the service level that you need to have there. And what we mean by that is I can run a Hilton Garden or I can't, but like MCR could run a Hilton Garden Inn with like six employees. Maybe like F2 full time equivalents, six.

[A]

Patels, but maybe 20 normal guys.

[B]

No, no, six. No, six like full time people.

[A]

But Taylor was an ethnic joke. But that's okay.

[B]

No, I know what you're saying, but the whole point of select service is like the margins are really good because you don't have to staff environment. The super high end. You need to staff really high because everything is super high. Touch. You can't make that work with like nine keys. Unless it's like Splendido Mare, which we've talked about, where LVMH does not care about profitability. It's all about having that be a showroom. I don't know how that's really the case here.

[A]

There's not that much real estate in this playbook as of now unless they go around and do something a little different.

[B]

Part of the issue with this being a public company is that the growth is like completely against what makes it popular, which is exclusivity.

[A]

If it's a free for all, like MoviePass, is it still effective? Right.

[B]

Never forget that the quickest way, which Silicon Valley has shown us time and time again, is to sell dollars for 90 cents. And the other thing is there's a ton of competition in the Private Memory Club space. I mean, just think in the last however many years alone, like San Vicente Bungalows, like they've come to New York.

[A]

I had to tape my phone when I went there. It's. It was annoying really.

[B]

Yeah.

[A]

Well, they will tape it for you.

[B]

Zero Bond in New York.

[A]

Eric Adams, baby. Shout out to Miss.

[B]

It's where you can sail away with the boys before you wake up with the men. There's a lot of compression on the side of you're just going to keep it and run it as members clubs. And then there's a lot of challenges if you're going to run it as a hotel company. So absent some sort of Ashton Kutcher voodoo to make it cool again or do something there like, I don't really understand this.

[A]

It's less interesting to us, the Ashton angle. What is interesting to us though is the third player here, Apollo Global Management. They're coming in with a 700 million slice of money.

[B]

It doesn't seem like their type of business. Like there's not really like assets Here there's not really cash flow. It hasn't been profitable.

[A]

Is this just like athene money that needs to go somewhere? We've talked a lot about how Apollo, kkr, Blackstone, they've all got these giant proceeds from their insurance businesses, either owned or partnered with. And they're like pumping it into private credit deals. And there's a great quote. Did you see the quote in. I think it was in the Wall Street Journal article, a blind quote saying the investment firm was also central to the deal. The people said, like they wanted to. They really wanted to emphasize that Apollo was core to this whole thing happening.

[B]

They brought the box.

[A]

What's the exit here? Is this an LVMH buying this thing for a big markup in 10 years? What. What do you do?

[B]

No, I don't think so. LVMH already has their own brands. Like they've got Belmond, they've got the Mayborn, which they've expanded.

[A]

Cheval Blanc.

[B]

Yeah, Cheval Blanc. Like they don't need more. I can see sort of at a high level how this makes sense. We got a great hospitality guy, we got a cool celebrity who can sort of make this happen. And then we've got a financial juggernaut who can write the checks. But I just don't know at a micro level, like how you make this profitable on a, like four wall clubs every year.

[A]

Last Christmas they had an offer that was valued at about $1.7 billion. I think this was an offer, internal offer. I guess it's a Ron Burkle offer.

[B]

I think Burkle is trying to do a take under.

[A]

Yeah. And Dan Loeb was having none of that. He's an activist investor who took a stake in the company and was like, yeah, that one's not going to happen. So this one's coming in at a much higher valuation. 2.7 billion, 60% more.

[B]

I think it was 80% above the VWAP.

[A]

What is Berkle's role now?

[B]

I think he owns a big chunk of it. I think he's rolling and he's gonna be chairman. Those are gonna be some excellent board meetings between Berkle, Apollo, Ashton Kutcher and Tyler Morse. And don't sleep on my guy Tyler. Cause he might just be throwing some elbows in there. So Groucho Marx said he never wanted to join club that would actually have him. And I think this unholy combination of Tyler Morse, Apollo Global, Ron Burkel and Heston Kutcher are going to challenge that notion.

[A]

I would imagine that A lot of the people who were vying to get into Soho House in The in the mid 2010s are now vying to take office space at 590 Madison or perhaps a pad at 800 Fifth Avenue.

[B]

I think you're wrong. I think it's the dads of the people who are trying to sell for now working at the office space for trying to buy these condos.

[A]

Important caveat. But listen, two massive deals closed in Manhattan. Really, really important deals for the market. Very closely watched. The first, 590 Madison Avenue, which is also known as the IBM tower, closed for like a billion. 1.08 billion, which is the first billion dollar office trade fee. Simple billion dollar office trade in Manhattan since 2019. So that's a big fucking deal for the market. And the second one is Mickey Naftali closed on his purchase of 800 Fifth Avenue. This is going to be a moonshot bet that Manhattan is ready for 11,000 square foot condos. So these are two deals. I thought it'd be fun to get into the cap stacks. So let's start with 590 Madison. RXR is the buyer. Elliot Investment Management is the partner, the equity partner. And the lender is Da da da da da da.

[B]

Athene.

[A]

Athene. So again we've talked about insurance money just chomping at the bit to try to get into the action.

[B]

Champing at the bit.

[A]

Champing. Fuck that. I use the one that I like. But they're trying to get in on the action on all these big ticket real estate deals and we're seeing so much of this money pour in. Athene is now one of the alpha players in the space and that happened very, very quickly and here particularly interesting. So it's about 785 in total debt that they're offering 135 million of. That is mes. I thought that's a lot of mes.

[B]

785 upfront. I think there's an additional 60 for TI's, LC's and whatnot. That is a lot of mes. And frankly I'm a little bit surprised that Elliot agrees to be common behind that mez.

[A]

There's no path to real returns then or what?

[B]

I speak from experience. Like trying to pitch institutions when you've got a big slice of mez or prep in front of them is not great.

[A]

Maybe why Go Partners went public on the Canadian Stock Exchange just a month or so ago because they had all that prep loaded on that portfolio.

[B]

That's exactly right. So I'm surprised that Elliot agrees to be LP Equity with this in the cap stack. That said, it juice the returns if the deal works because you just put in less equity. Mezz is a lot tighter than you might think for this. Like the coupons, maybe, maybe like seven or eight, which isn't as bad traditionally.

[A]

I think of it as like 10, 11, right.

[B]

Somewhere around there. In which case you're saying, oh, God, we've got, you know, $14 million of current pay on this while we're trying to reposition the building. But there's, I think, pretty good mark to market in the, in the rent roll. RXR knows what they're doing on the management and leasing side. So if they're able to juice the building, they can use the TI money to help improve it and attract more tenants and, and get those folks in, you know, then you're thinking, okay, like our basis is what?

[A]

They're putting about 300 million in equity on this thing.

[B]

How big is the building again?

[A]

Exactly? One million square feet.

[B]

Okay, so they're in it for, you know, a thousand a foot. Yeah, we can get the rents up to120,150.

[A]

I can give you some insight. Our friends at Comstack helped a little bit with the data here, but they were 77% leased as of summer 24. Then we had two big deals signed. One was LVMH and one was Apollo. And collectively they took about 200,000 square feet. LVMH started their lease at 85 bucks a foot, which is probably a little bit under what I would have thought. And they have 24 months of free rent, and then Apollo has a lease that starts at 98 bucks a foot, and they have 15 months of free rent. And they're both in their free rent periods at the moment. Cemex, which is a buildings material firm, is paying like 150s a foot, which is kind of where.

[B]

Where they want to get people to.

[A]

Get the building to. Yeah, but there's not that much crazy upside. Just under 7% of the building's current lease space is set to expire in the next 24 months. So there's not that much you can do in the very, very near term.

[B]

It doesn't sound like it, but at the same time, you need to buy a deal with the cash flows right now. And this cash flows now, that said, I think the mez is going to eat up a lot of that cash flow.

[A]

You mean like the payments on the mez? Yeah, so the debt service will eat.

[B]

Up a Lot of their rough numbers. They paid a billion dollars. What cap rate are they buying at? Six and a half. All right, that's $65 million of NOI. You're paying, you know, 10 of it to the mez. Before you get to the Senior, you got 650 a senior. And if that's at 6, you know, you're paying 36 million or whatever, assuming it's not amortizing or anything of that. So that's 46 million. You got like, you know, 20 million of NOI left. And that's before CAPEX. That's before leasing commissions. That's before TI's.

[A]

There is a 60 million slice held back for. For TI's and CAPEX, right?

[B]

Yeah, but like then you're just increasing your debt service too. So, I mean, the cash flow is going to be tight. But again, that's sort of like what juices the equity returns. So if they're able to execute, they get those 7%, they roll them to 150 a foot, they get a little bit more velocity. In three, four years, there's a 14, $1500 a foot exit here and everyone makes really nice returns. I think that's sort of rough math.

[A]

The seller was stirs Ohio, which is the pension fund that's been. They've been embroiled in some crazy infighting. I don't know if you ever read the pension trades, but sometimes it can get really ugly. They don't. It's so good like this. All the directors were at each other's throats. There was calls for resignation, et cetera. But they were supposed to close by end July. And RXR had been negotiating with our boys from Kale Street. The promote has featured them in our quiet Kings of Capital list, which I'll put in the show notes. And Kale street was supposed to lead the financing here. That didn't happen. And then RXR had to negotiate an extension of two weeks, which cost them 5 million bucks to get that extra time. So Apollo comes in, but there is still a possibility that Kale Street's going to take a part of Apollo's debt at some point. Kale likes to do that anyway.

[B]

Like someone sells off a piece of it.

[A]

Yeah, exactly.

[B]

This is like a type of deal that used to get done in 2014, 2015, and it's the first one we've seen like this. I'm really surprised that Elliot makes an office bet like this where there's so much mez ahead of them.

[A]

Did you see the Estill LinkedIn post. I really enjoyed that part. Estill did like this animated GIF on LinkedIn which says, first fee simple Billy billion transaction since 2019. And those kind of details are what the promote lives for. All right, let's take a carriage over to 800 Fifth Avenue, where our boy Mickey Naftali, who we've professed to being fans of, has just closed on that site, which is the Elliot Spitzer Rental Building, which is on the site for $810 million. Now, he's just landed his financing, 675 million. Who did it come from?

[B]

Syndicate. Syndicate, JPM and Golden Tree, a big private credit player.

[A]

Did you see the video of Stephen Tannenbaum of Golden Tree explaining to David Rubenstein how private credit works in this bright suit? I think of credit as a contract.

[B]

In credit, you have a preferred return. You're first in line. I'm missing all these videos. You gotta send them to me.

[A]

Are you not reading the promote anymore? What's going on here?

[B]

I do read the promote.

[A]

Okay, good. So Golden Trees come in. I didn't really know much about them. Do you have a sense of what they're about? I know they have, what, 60 billion under management?

[B]

They're just one of these massive firms that put out a ton of money. And then the founders are worth like $11 billion.

[A]

Naftali also scored equity. We suspected that the money would come from his buddy Len Blavatnik, Access Industries, who he's been partnering with on those Brooklyn megaprojects. But turns out its family offices for Mexico, Israel and Japan.

[B]

Apparently, according to Bloomberg, everyone shits on multifamily syndicators in the Sunbelt. But if you're syndicating multifamily on fifth Avenue, that's totally cool, it's totally above.

[A]

Board, and it's very respectable. This was a Newmark deal all the way. Spies and Harmon did the acquisition here. And then Jordi Rochlaub and Nick Scribani. Do you know anything about Nick Scribani? I feel like that name's all over the place now.

[B]

He's on the come up. Good for him.

[A]

Yeah, he's doing well. So they arranged the debt. Right now the building that's on the site is overbuilt. It's 355,000 square feet. So these reports of demolishing the building are a little weird to me. I guess you could, like, just strip it down, but not tear it down.

[B]

We talked about this on our previous episode where you kind of do what they did at 425 fifth, where if you keep like enough of the initial building itself, you can basically rebuild the building as a new building. The issue is some of the floor plans here are small, a little wonky, and if you're going to get 11,000 of, you need like brand new functional floor plans. And the only way to do that is take it down.

[A]

So 2300 a foot land basis, you're gonna go for 11,000 a foot.

[B]

That is such a big number. But as we said before, this is a like a plus isn't a high enough grade for how good the site is. And you talk about a guy who's done it on the same corner because he did it at the Plaza, which is just as complicated a project, even if, you know, Scott Schliefer ate his deposit rather than clothes because the condo construction was apparently like so bad. But he knows how to work in New York, he knows to work on this corner. And if anyone can do it, it's Mickey. And I think New York might be ready for a fifth Avenue tower like this. You look at the sales downtown, 80 Clarkson, that's selling really fast.

[A]

And as you've talked about, that's like a charitably a B B plus location.

[B]

Yeah, exactly.

[A]

Methadone clinics and such, as.

[B]

They said the men in blazer. It's the craft part of soho, I think New York. Just a lot of the time it's like, what are we due for? And you know, like you reread House of Outrageous Fortune and like people just wanted like a big pre war AM Stern apartment complex to that point.

[A]

When Gary built his building 157, I mean, the Russians were just hankering for a piece of New York. The Chinese were hankering for a piece of New York, and they were willing to pay 5, 6, 7,000 a foot to get it. That buyer pool might be tapped out, but like fifth Avenue, Central Park, I mean, that's freaking classic.

[B]

We've got equity markets at all time highs, we've got crypto booming. Every kind of grift is going well. So, you know, maybe this is like time for a new buyer who's interested in this type of product. So, so much of this is timing. Like, Mickey is as skilled as they come. He's as good as they come at this type of project. But you're at the mercy of the gods on a project like this. And if he gets the timing right, it's going to work.

[A]

Yeah. So crowdfunding. Well, fucked by design or what?

[B]

It's so stupid. This is a real estate spac.

[A]

I feel like this happens over and over and over again. Sometimes it's outright wrongdoing slash fraud. Ellie Schwartz with crowdstreet and the failure of that company to keep the money in escrow. And now we've got YieldStreet, which is actually probably the biggest player in the space. They acquired our boys at Cadre a little while ago.

[B]

Man. Ryan shouting out again.

[A]

Why we're talking about this right now is that CNBC did this really great investigation where they analyzed 30 deals. Out of those 30 deals, we had four wipeouts, 23 were watch listed and then three are currently marked active but are no longer making distributions.

[B]

To clarify, four wipeouts mean equity. All gone.

[A]

All gone. Wipe.

[B]

Watch listed means probably not getting back the equity.

[A]

That's right. YieldStreet's been blaming the turn in interest rates as well as overall market conditions which have severely compressed values. But I think that there is more here. I do not think that this bad performance is a one off. I actually think that crowdfunding, real estate, crowdfunding is designed to kind of give retail investors the dregs of what's going out there.

[B]

Totally is. Because think of it this way. If you are one of these firms that has a real. But you're an investment management business, you have other investors and you can't raise the money from them. Like those deals go here. Yeah, that's where it goes. Because if you could raise the money elsewhere, you would.

[A]

We've contradicted this point before. We've said, like, if you can go raise retail money, you're much better off in many cases. Right. Your margins are better, your fees are better. Yeah.

[B]

But you're not paying the vig to crowd to Yield Street. Like, if you can go raise the retail money directly yourself. Yes, go do that. But if you're like, oh, I can't even do that. Like, let me just go to Yield street. Crowdstreet. Peer street was a company. Like there's. Why are they all called Street? Who under why?

[A]

Someone started the convention and became a meme and they went from there.

[B]

Yeah.

[A]

These deals, I mean, should we point out one of them? So there was 2010 West End, 2010 West End Avenue in Nashville. Now this was a building that was part owned by Flow Flow, Adam Newman's It's a feeling. 358 unit rental in Nashville. This was bleeding cash. CIM had about 120 million of debt on this property. And Yield street needed to go out there and purchase a rate cap. Did you see the offering?

[B]

My eyes are going to explode.

[A]

So annualized returns that were basically touted in the offering were 20%. Cool. A few months later, we reported that Flow was searching for rescue pref for this property.

[B]

Yeah. And then eventually it sold to Tishman for less than for under the debt.

[A]

We are reaching out to share difficult news. Yield street told investors of the Nashville project. Following multiple restructuring attempts, the property has been sold to Tishman Speyer, resulting in a complete loss of capital for investors.

[B]

The funny thing is it's not just a complete loss of capital. It's an extra loss of capital. Post the depreciation recapture.

[A]

You're seeing a lot of people burned. There was a dude who spoke up in the article. He said, there isn't a day that goes by without me saying, I can't believe what happened. This is a dude who invested about 300,000 in the flow project. I consider myself moderately financially savvy, and I got duped by this company. And by this company, he's referring to YieldStreet.

[B]

I feel terrible for this guy. I feel terrible for everyone who lost money in these deals. Because when you're going through Yield street, what they're trying to do is basically disintermediate financial professionals. So if you were to go to your wealth manager and they're like, put me in this Yield street deal, the guy's going to be like, no, what are you talking about? And it's not this guy's fault. It's not your fault. Don't fuck with me. You know, it's not. And it's. It's the whole crowdfunding mechanism.

[A]

Democratizing investment, all that.

[B]

Democratizing investing, which means just like, we're trying to get the dumbest fucking people and get. And trying to steal their money.

[A]

Just a caveat, like, Yield street has not been accused of any wrongdoing as such. This is different from where, you know, crowdstreet's being sued for over the Ellie Schwartz thing. Very, very different case.

[B]

Yes, of course. Like, it's immoral. It's not illegal. I just. The whole point of this is to disintermediate financial professionals and to take retail people's money who don't. Who aren't, you know, necessarily sophisticated real estate investors. And I just broadly believe that absent some sort of, like, specific view, like, you shouldn't be putting money you can't lose into a real estate deal like this. And this is something that, like, really matters to me. The people who you take money from. It's a huge responsibility. And if you're trying to, like, foist a deal on someone or you're doing fees or, like, going through this crowdfunding. You have the layer of people between the firm raising the money itself and the investors.

[A]

As they said, they got a lot of buffers.

[B]

The family had a lot of buffers. Yeah, there's a lot of buffers. And, you know, you can think, oh, this. This must be safe. And it's not safe. There's risk everywhere, and people have to be honest about the risk. They're promising 20% analyzed returns on rescue prep. Like, that's just awful. It's just awful. And I'm sorry. Like, I'm getting a little heated up, but it's just. That is, like, so wrong.

[A]

The 20% is on what they were trying to do with, like, purchasing rate caps and stuff. Like, they were going.

[B]

That's what I'm saying.

[A]

That's worse.

[B]

Yeah, like, we buy the rate cap, we're going to get a 20% return on that. Are you fucking kidding me? Like, get out of here.

[A]

Have you ever zoomed out and seen kind of the universe of, like, players in the space? It's a pretty incestuous web of people. Should I. Should I break it down a little bit?

[B]

Yeah, let's do it.

[A]

A16Z, Andreessen Horowitz, of course. They fund Cadre at this insane valuation a few years ago. $800 million.

[B]

Those guys. A16Z never miss. Good for them.

[A]

They fund cadre at an $800 million valuation. Okay, that's in 2018. Yale street acquires Cadre five years later, six years later, for reportedly $100 million. Right. So there's a lot of investors who've lost a lot of money in that interim period. Guess who else a 16Z backed?

[B]

Oh, I mean, Flow. Yeah.

[A]

They're the biggest investor in Flow, and they're a partner. It's not just a VC investment, as we've talked about. There's like, an extra layer of things here where a 16Z has a share in the actual portfolio, too. So they own part of the real estate.

[B]

I mean, I'm kind of glad because they lose money two ways.

[A]

When the yieldstreet cadre deal happened, Elon Stern, who's one of Adam Neumann's guys, he helps run the family office that came out of the golden parachute from WeWork and Stuff. And he commented on LinkedIn on the post. I think it was Ryan Williams post. And he said, been excited about this for a very long time. It's the crew.

[B]

It's great. It's just fantastic. Just all the way around.

[A]

At what point does crowdfunding as a model just break?

[B]

This is somewhere where regulations need to protect individual investors from themselves. And saying that you're democratizing investing or changing the accredited investor statuses or making the qualified purchaser designation less, I think that's all really bad because. And if you have a $1 million net worth, like, first of all, congratulations. Like, that's a lot of money. You've worked really hard for it. Like, you need zero private real estate exposure. Like none of it. Yeah, like you need none. The level at which you start, like that being an option is so high that the folks who are at that level and where it's appropriate, they're never going to go to Yield street because they're getting pitched to be investors in like various real estate private equity funds or very high heeled sponsors or like pitching them directly. Like they don't need YieldStreet. Like, this exists to take money from people who can't afford to lose it.

[A]

That's it for the promote podcast this week. We'll be back next week with more cre insider goodness.

[B]

Please go write us a review on Apple, Spotify, other podcasting platforms.

[A]

It helps us a lot to get discovered by more cre crazies.

[B]

I don't even want cre crazies. I want regular crazies. Let's get some swifties in here.

[A]

I think we're getting some regular crazies.

[B]

Let's get some people from new heights. Like, come on over, the water's warm.

[A]

For feedback on the show and ideas, hit us up or hit me [e-mail] that's podcasthepromote.com and if you want to.

[B]

Reach out to our devoted audience of not yet swifties, but soon to be swifties with your brand message, reach [e-mail] that's partnershipsthepromote.com well, that was a lot of fun, man.

[A]

Thank you.

[B]

Thank you.

[A]

Ciao.

[B]

We got Ashton Kutcher, Ron Burkel, Tyler Morse, the Boys, Apollo and board meetings. Who knows how that's gonna go?

[A]

The Boys.

[B]

Two big deals. The biggest office deal in New York.

[A]

And probably the biggest condo deal too. I think it'll be the best condo a long time.

[B]

Definitely. Definitely the highest price per foot in a long time. I almost remember when people thought Zeop.