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- [00:03]
A
I finally had my Goodfellas Copacabana moment. It just happened to be at a kosher steakhouse.
- [00:09]
B
Did you also completely unnecessarily walk your guest through the kitchen? Because if you look in the clip, he just goes in and he goes, right, right, right. Like you could have just avoided it.
- [00:19]
A
There is no reason for that to be as long as it is. Absolutely. But I was at Reserve Cut a few nights ago. I just hear this guy hitting and I turn around in this place of all places. Turns out it's this big agency dealmaker. He was beyond chuffed. He took me over to his table. People started taking selfies. It was a cool moment. It's like, okay, we're building something here.
- [00:39]
B
And that's without even having the podcast on video yet.
- [00:42]
A
Anthony, right in the front.
- [00:43]
B
Great, great, thanks.
- [00:44]
A
Anything you need, Anthony, just let me know. Welcome back to the Promote podcast, your insider guide to the money and mania of the CRE markets. I'm Haten Sentani.
- [00:56]
B
And I'm Will Krasn.
- [00:59]
A
Speaking of steakhouses, we've got a pretty meaty lineup today. More multifamily wreaths are offering themselves up at the altar. Just doesn't seem to be a real path forward for many of these midsize players. We then look at Marriott's mercy killing of Sonder and the lessons to take away from yet another high profile prop tech flameout. And finally, the Much's Oz fund is kind of like the Much's White House tenure short and painful. Let me leak thing and see if I can block these people.
- [01:26]
B
Hit us up@partnershipsofthepromote.com for advertising if you want to get in front of this growing array of rainmakers, backers, deal makers, random guys at Reserve Cut based on Haten's stardom and something similar that happened to me. We're a hot commodity. So don't write checks to Procter and Gamble anymore. Write them to us.
- [01:45]
A
We are really hot. We're going to get even hotter when we start video after Thanksgiving, so that's something to look forward to. Also check out our Premium offering at thepromote.com upgrade Insiders pay 20 bucks a month for behind the scenes intel you really can't find anywhere else. Let's get started. Well, I think we have to hit these. We're not going to spend a segment on them, but they're pretty important.
- [02:06]
B
They're factors in the promote cinematic universe and we wouldn't be completionists if we didn't at least mention them.
- [02:12]
A
Let's start with The Blackstone Cub. We have a talent for doing this, by the way, this has happened more than once.
- [02:16]
B
I think we will it into existence, unfortunately for Kathleen.
- [02:20]
A
What are we talking about? A couple weeks ago we did this podcast on Blackstone Cubs and we were talking about how if you get high enough in a place like Blackstone, you either keep rising and then the air gets thinner and thinner or you find your way out. And that's what's happened with Kathleen McCarthy, probably the top woman in institutional CRE. So what's going on?
- [02:40]
B
We just discussed how she is the co CEO or was the co CEO with Nadim earlier this month. And it's like having two quarterbacks. As Steve Spurrier said, if you have two quarterbacks, you got no quarterbacks. So looks like they only have one now.
- [02:52]
A
And this is funny, right? It rhymes very, very closely with what we talked about with John Gray and Chad Pike. Maybe a decade and a half ago, there was only room for one.
- [03:01]
B
It's like Highlander. There can be only one.
- [03:06]
A
Nadeem had actually come into the job after Kathleen. Kathleen and I think it was Ken Kaplan were doing the co head job together. Ken Kaplan was kicked up to co CIO of the entire Blackstone. And so then it became Nadeem and Kathleen and Nadeem very quickly became the go to guy on some of the hairier stuff. Do you remember the whole B REIT rescue capital infusion from University of California.
- [03:28]
B
Yeah. Which is a tremendous piece of paper for University of California pensioners.
- [03:33]
A
Nadim was on honeymoon in New Zealand somewhere like, I think it's the South Island.
- [03:37]
B
Is that where they filmed Avatar?
- [03:39]
A
It looks exactly like that. So Nadeem was on honeymoon there and then he had to step in and kind of work this deal. His profile's kind of been building up over the last couple years and I don't know what happened exactly. A few months ago, Kathleen said she was out. I don't know if she said she was out. She was told to leave tbd. But that's yet another high profile Blackstone.
- [03:59]
B
Cub leaving the lair just in time to hibernate for winter.
- [04:01]
A
It just comes back to like. Does having two bosses ever work in the long run?
- [04:06]
B
No.
- [04:07]
A
So what's the next item we got? Worldwide Plaza. What's going on there?
- [04:10]
B
Yeah, this was like our second or third episode, I think.
- [04:12]
A
Yeah. I think we called it a skyscraper Ransom.
- [04:15]
B
Yes. Yeah. And this is the ugly ass building. That's like too far west to be good, but not far west enough to be good. So you had SL Green and RXR on one side and then you had the liquidating New York REIT on the other. They were fighting over a big old capex reserve that was held post close.
- [04:31]
A
It was like a 90 million pot that was to be held by New York REIT.
- [04:34]
B
Cravath, I think was one of the biggest tenants. And they left and everyone knew they were leaving. So you're like, we're going to have this massive hole in the rent roll that we gotta fill.
- [04:42]
A
Yeah.
- [04:43]
B
And they never did.
- [04:44]
A
They never did. So now the skyscraper is heading to auction. So I think it was Goldman and Deutsche had the mes.
- [04:49]
B
Yep.
- [04:50]
A
They've now foreclosed on the MES and it's going to UCC foreclosure. Just for people who might not be aware of how it works, a UCC foreclosure is a non judicial foreclosure. It allows you to bypass the courts and quickly take something to auction.
- [05:02]
B
Right. Because this thing could get leased any minute.
- [05:06]
A
It's so bad. All right, let's get into our first big story of the episode. So what's going on with the REITs?
- [05:13]
B
Used to be back in the day that everyone's goal if you had a big portfolio is to get to the public markets, you know, get the lower cost of capital, be able to grow the portfolio. You can think of when the REIT industry really became mature in the late 80s, early 90s, Sam Zell, Simon Property going public. All of these groups which are like very eminent real estate people, that's no longer the case. Now it's private equity really. So just since 2020, this is a list of multifamily REITs that have either gone private or liquidated or liquidating. Liquidating in process. Thank you, Jay Parsons for this list. I stole it from you.
- [05:48]
A
Thanks Jay.
- [05:49]
B
So appreciate it. Here we go. ACC Air Communities, Blue Rock Dream Residential, Elm Communities, Front Yard Preferred Resource Steadfast, tricon.
- [06:04]
A
So it's like billions and billions of dollars of enterprise value either gobbled up by a big private thing or just fade away into the night.
- [06:11]
B
Go back into the great beyond. So the reason we're talking about this today though is there's three real big stories. Center Space is considering a sale. They owned 13,000 units, mostly non core markets across the Western U.S. so places like Grand Forks, Rapid City. I actually like this strategy. I think these are good markets.
- [06:29]
A
You want to own some hotel in the badlands or something.
- [06:31]
B
I mean, there's a guy named Gary Tharaldson who was like the richest guy in North Dakota. He owned a Gazillion hotels and sold them the Goldman for a couple billion dollars or something. I think they got torched. Cortland and ELM just closed. $1.6 billion deal for most of Elm's portfolio.
- [06:46]
A
Yeah, this is, I think, 19 or so properties. I got some deets on the pricing, so cap rates were in the mid fives. So you're looking at a shade under 300,000. A door for the properties.
- [06:56]
B
Some of that stuff in Northern Virginia is old.
- [06:59]
A
Yeah.
- [06:59]
B
And could have some deferred there.
- [07:02]
A
The ones that are big are looking to get bigger. Cortland's kind of hunting for a, a bigger war chest. They're out in the market now to. To raise capital. The ones in the middle are really struggling. So another one is aimco, which has had a couple of very big, very profitable sales. They're in the middle of selling something to Oak Row equities, the house that asbestos built. They're selling them like this giant, giant waterfront site in Brickell for half a billion dollars.
- [07:26]
B
Right. And now they're liquidating the rest of their assets. I think they don't own that many, but they're very high end. Aimcode, they sold a bunch to Kushner.
- [07:32]
A
As well recently in the Miami area.
- [07:34]
B
Aimco used to be, remember a couple of different companies, they split out.
- [07:37]
A
Didn't air communities kind of come out of aimco as well?
- [07:40]
B
Yeah. So they're complete. They're liquidating as well. I think it's just a tough market for multifamily REITs. You talk about mid size, but the issue is just what's the value of being in the public markets right now if you're a reit? Yeah. I mean, think of it this way. Like, you can't lever as aggressively on each individual asset. Like, ostensibly you have a lower cost of capital, but if you're trading below your nrv, you don't. And then you have this huge G and A drag. Because again, think of that center space portfolio, 13,000 units. Right, right. If that was in a private equity firm, that deal team, like four people.
- [08:13]
A
Five people here you've got an entire army of people just doing a thing, filling a job.
- [08:18]
B
The scale you need to have to, like, eliminate the G and a drag is just, it's a lot. And if your stock gets pummeled, you're just every day, like bleeding out. So that's why we see these things either considering a sale, which is, by the way, the right thing for the shareholders. If you're trading below Nav, go do.
- [08:34]
A
It and what about the tax benefits? I think one of the things that people always say with REITs, oh, yeah, it's structured in a way that's very tax beneficial to investors.
- [08:42]
B
They don't pay corporate tax. If you distribute a certain amount of your income out every year, again in the private markets, with the change in the tax bill, the ultimate taxable investors get huge depreciation benefits, which if I buy a share of maa, I don't get.
- [08:55]
A
Okay, who else do we have? We have Bell Partners. As we talked about 20,000 odd units. They have a huge property management business as well. They're going through a process right now. We're probably going to see more and more of these pop up in the next, call it six months.
- [09:08]
B
People too are just sort of throwing in the towel on waiting for, you know, survive till 25. We're going to get hitched in 26.
- [09:15]
A
I need a moratorium and all this crap. Seven heaven. All this stupid.
- [09:19]
B
Yeah, but I think it's like we've been through a really tough period for the last three, four years. We're staring down the barrel of like a really tough period over the next three or four years. Potentially with the economy slowing, inflation comes back, there's a path to where it says pretty ugly. And you're like, all right, do we really want to slog all the way through this? First stock to be down 30.
- [09:36]
A
So the idea would be you take this private and then you kind of work your magic behind the scenes, whether it's restructuring dispositions, what have you, whatever you need to do.
- [09:44]
B
If you take center space private, you just eliminate the entire company. What is the VP of Acquisitions at center space going to do for the acquirer? Nada.
- [09:52]
A
Right.
- [09:53]
B
See you later. All the corporate overheads gone. Depends on who buys it. Like, they probably have internal property management that goes in.
- [10:00]
A
Might be a side note, but I think worth noting, REIT executives are paid very well, perhaps too well.
- [10:05]
B
How much comp is Mark Holliday taken relative to SL Korean's stock price?
- [10:10]
A
Well, are you saying with or without the casino license? Because, you know, go run and hide.
- [10:14]
B
I mean, without, like, yeah, you get paid huge if you have a $500 million market cap REIT, I mean, there's CEOs and C suite executives make like $7 million a year that me personally are making like a one and a half percent NAV fee.
- [10:28]
A
People who are looking to target these as acquisitions, are there good discounts to be had on the properties themselves or what?
- [10:35]
B
You're basically buying these things wholesale and then you can spin off retail. Like, that's the whole thing of like buying stuff below.
- [10:40]
A
Nav, let's talk office for a second. Even though it's been a pretty blockbuster year in New York office, as we've talked about before, if you look at the kind of New york focused office REITs and you look at their share price, it hasn't really been reflected in that, has it?
- [10:54]
B
That's what I'm saying. Your job as a CEO of a public company is to make the stock price go up. It's not to like lease space, especially in today's market. You have to build a narrative around your company. Aura is the lowest cost of capital. It's the motto of this podcast that it is. If you're doing all of this great stuff and you can't get your stock up, what a huge black eye on the management team of that company.
- [11:17]
A
You've got private players like RXR who are able to spin narratives like project code and Gemini Office ventures and dislocation and seem to be able to move and make things happen.
- [11:26]
B
Because again, you have to recycle properties. You can't just own stuff forever in the public markets because you want to show growing noi. If you're reinvesting in the properties, it's going to be lumpy. If you're just going to be in and out of everything, you can't leverage stuff enough to really get the deal level of returns that private equity can. So they're going to pay more than.
- [11:44]
A
You in a couple years. Are we talking about the return of REITs?
- [11:47]
B
These are all epochs. A certain time, everyone wants to have a public read. Certain markets, no one wants to have a poker. Things will turn and eventually that will come back to this. For now, don't be public.
- [12:05]
A
Well, my friend, not all who Sonder are lost. Sonder was lost.
- [12:10]
B
To clarify, this is Sonder the vacation hotel, apartment thing. Not wander, which is another.
- [12:18]
A
Yes, correct. Which is still around. They're doing their thing.
- [12:20]
B
So Sandra this week liquidated very abruptly.
- [12:24]
A
Very, very, very abruptly. So Sunday Marriott comes out with something that says, hey, you know that partnership with Sandra that suddenly juiced the stock price? The license agreement we had, that's over.
- [12:35]
B
Right. And apparently what happened is that Sander went to Marriott and said, hey, we're about to go to chapter seven. And maybe they're thinking, oh, well, this has gone well for Marriott. Maybe they'll give us some money or do that. And Marriott's like, all right, ciao, deuces.
- [12:49]
A
And so they Came out with a release on Sunday and I think by Monday mid morning Saunder was gone station. It was brutal.
- [12:55]
B
You can read the articles on Bloomberg and people are in the lobby of these Saunders being like hey, like what's going on? And the employees are sitting there being like, we don't know. I don't work for Sonder anymore. It just got laid off.
- [13:07]
A
It's incredibly abrupt and this is something that when we talk about tech adoption in real estate writ large, one of the things that people ask is like how do I know your company's going to be around next year? And honestly, pretty warranted question given how quickly and how the carcasses of these things are just like thrown out. It's really rough. I think one thing, when this deal happened, which is about, I think about a year ago, we had our hotel insider write a really fun piece for the promote. The kind of piece you'd see on the promote Insider. By the way he wrote the Marriott very, very cheaply bought themselves an option on Sonder getting their shit together. The $15 million in key money it came with can probably be scrounged from the couch cushions in Bethesda. If I'm the Marriott CEO, a true blue deal guy, I do this deal 10 times out of 10 hit the.
- [13:54]
B
Nail on the head. 15 million bucks of key money. And by the way, key money is just money to improve the property. Yeah, it's a no brainer because if it works, great. If it doesn't. Now that said like the PR hit for Marriott is like they cut, they could have done better.
- [14:08]
A
I think they should have been a little more graceful in the last couple of days and just said like hey, we will process your refunds, not contact Sonder, which is now dead.
- [14:16]
B
Yeah. And then go contact your credit card company to dispute the charges.
- [14:20]
A
Hospitality above any other asset class really needs to think about customer perception. And I think Marriott had a bit of an L here with that part.
- [14:28]
B
Agreed. But Saunder itself I think is a pretty interesting story and like you said, very emblematic of this boom and now bust that we've seen. So they raised $600 million.
- [14:38]
A
More than 600, like well over $600 million in venture capital. So this is, let's be clear, a combination of venture capital, venture debt and a bunch of other instruments to raise their money.
- [14:48]
B
SPAC.
- [14:49]
A
Yeah, they went public on via Spacipo in January 2022. I figured you'd get a kick out of the sponsors of the spac.
- [14:56]
B
I knew them well.
- [14:57]
A
Yeah, let's go, let's go Will.
- [14:59]
B
So we got Alec Gores and then Dean Mitropoulos. Dean Mitropoulos. The family, they bought Twinkies, correct? Our own Twinkies. One of the sons bought the Playboy Mansion and let Hugh Hefner stay there. And then Alec Gores. The Gores family is just fascinating because you've got Alec and Tom, one of them owns the Detroit Pistons.
- [15:18]
A
You know that Gores then bought the Twinkies thing from Metropolis.
- [15:21]
B
Yes. Yeah. So they took a public buy SPAC, $1.9 billion valuation just under three years ago. And the market cap was. What Was it in 2024?
- [15:30]
A
In 2024, the market cap had dropped down to $41 million.
- [15:34]
B
So about the value of the house that the CEO of Sonder bought, that's unfair.
- [15:39]
A
It's about four of those houses. Let's be accurate on this podcast.
- [15:42]
B
Sorry.
- [15:42]
A
Yeah. So should we back up a little bit and talk about kind of the ethos of Sonder, what it was, what it set out to do? One thing that people look to the promote for is, is a post mortem post game on some of these companies because they're very, very poorly understood when the ramp up is happening and momentum is such a drug that when someone's raising money like this, everyone's throwing money at them. They keep reinventing the definition of what the fuck they are. WeWork was a classic example of this too. And then when they die, people are like, hold on, what was this company? All right, so what was Sonder?
- [16:13]
B
Sonder was basically, we work for apartments and hotels. Like it was the same thing. You'd sign a master lease and then they would sublease everything out, which is, you know, ingenious. Who's ever thought of that before?
- [16:27]
A
Everyone I've spoken to who views Sonder as a consumer has liked the experience until maybe last week.
- [16:32]
B
So there's this unfortunate thing called the market where the consumer doesn't really matter and doesn't really impact your feasibility as a business. You know what else other businesses consumers like? When you get a dollar for 90 cents, that's subsidized, they like that. Can we make a business around that? Can we take that public bias back?
- [16:50]
A
But again, this was a very compelling story and it came at just the right time. This was founded by a couple guys, I think one was out of Montreal. His name is Francis Davidson. And during the peak, the peak of the proptech bubble, he went on a podcast called Invest like the Best. And he said the following.
- [17:06]
B
We think once we've fully built out the technology we think we're going to be able to be at roughly 30%, what we call property level profit margins, but without owning the underlying real estate. This is absolute fucking nonsense. He's basically saying that the real good business is not owning the hotel.
- [17:22]
A
It's the asset light model and all of that.
- [17:24]
B
It's the asset light model. Yeah. The best business is fucking Marriott, where you don't have to do anything. You have national branding, property management. It's not actually operating. You're doing the worst parts of it. This is ludicrous. Operating the things really hard. We're gonna operate it but not own it.
- [17:42]
A
Yeah.
- [17:43]
B
So we get the worst of every world.
- [17:45]
A
You get all the headache, but none of the, none of the sauce.
- [17:47]
B
Because even if you're the property management firm, like, you're not taking any operational risk. You're getting paid no matter what. These guys had to like eat cash if they couldn't meet their obligations.
- [17:56]
A
And we kind of saw this with another company in an adjacent space called Co Living. We saw this with common, raised a shit ton of money.
- [18:02]
B
Same thing and then.
- [18:04]
A
Same kind of thing. They basically build themselves as an operating system for multifamily. I think that was the most recent characterization. Raised a ton of money and then went sort of belly up maybe about a year ago.
- [18:15]
B
Property management's a really hard business when you layer on the fact that you have huge obligations to pay rent and you're still running a property management company. If you think of it intuitively, it makes no sense.
- [18:24]
A
This is the broader question. We agree that technology in real estate is a good thing, correct?
- [18:30]
B
Absolutely.
- [18:31]
A
We agree that layering technology atop antiquated processes is a good thing.
- [18:37]
B
Absolutely.
- [18:38]
A
But most of these companies have just been disasters. What's up with that?
- [18:43]
B
What is technology about? Basically, like borrowing long and lending short. Like that's what they're doing. That's not technology. They were saying, hey, we figured out a way to turn units with robots in an hour. That's technology. You know, just me being like, I took on a bunch of lease obligations and I'm gonna sublet. Like, that's not fucking technology.
- [19:04]
A
One of the things about what Adam Neumann did is he just kind of. I almost think of it like escape velocity. You're bleeding, bleeding, bleeding. Can you raise enough money to just distract for long enough and just exit?
- [19:15]
B
And I'm painting a little bit with a broad brush and being pretty, a little bit reductive. Like these businesses can work and they can be run quite well. So what's the Regas Group iwg, that's a really well run company that makes money. But they are also not a prop tech company. They're not going to get a venture capital valuation. They're going to be valued off of ebitda. Because they generate ebitda. Correct. And all of these businesses, they work at small scale and you can grow them slowly over time, responsibly. But the idea that if you raise a ton of money and you can scale with the just brute force economic reality of this business model, it's just ludicrous.
- [19:52]
A
The problem is the narrative that you need to tell the tech people is very different from the narrative you need to tell the real estate people. But the narrative that needs to be true is the real estate narrative because that's where you're earning your keep.
- [20:03]
B
Well said. I'd like to note that Sander is a major player in another real estate disaster that we've sort of been tracking.
- [20:11]
A
Oh yeah, and the one we've talked about on this podcast. Nathan Berman at 20 Broad. What happened?
- [20:16]
B
So Sonder, Mass. Released eight floors of that building.
- [20:20]
A
Huge boon for Berman at the time, by the way. He got his takeout financing from. I believe it was Apollo at the time.
- [20:25]
B
Yeah, athene. But then Sander kept trying to break its lease. You get this loan financing based on this valuation from Sonder and this master lease from Sonder and then they're like, oh yeah, we the money, we don't have it.
- [20:40]
A
I signed the paycheck over to you, Charlie. I swear to my mother, we don't have. And we don't need to pay it.
- [20:45]
B
Because there's an outbreak of Legionnaires disease here. It's Ereborn.
- [20:50]
A
So Sander attempted to use reports of a legionnaires outbreak at 20 broad to get out of paying rent. A long, bitter court battle. The courts did not go with Sander on this one. Sander was found liable to pay Nathan Berman the rents. However, by this time, you know, 20 broad had its own problems that we've talked about before.
- [21:08]
B
Too little, too late. And.
- [21:09]
A
And now is a return to lender story.
- [21:11]
B
Anyway, I think PropTech is. We've seen this. With what I mean, you can go through the list of companies that went public in title insurance, regular property insurance, Sonder, wework. Latch, you know, delisted. Hold on.
- [21:28]
A
Latch. Financial chicanery of some kind. Let's put that in a separate category.
- [21:33]
B
But again, like, PropTech is tough because you have to increase noi for somebody, for the property owner. And a lot of these things are like, good for the consumer, Like Latch, I think, is a good product. Like, it's helpful for me as a renter. Like that would be. That is nice. How does it help me charge more rent? I don't think it does. I think that's the problem with a lot of these things is that they ultimately don't help you improve noi, which is like, what you have to do for this to work. The VCs and the market can, can say, this is such a great product, such good product. Market fit. Consumers love it. The consumer is not the client. The client is the guy who owns the building who's like, why am I paying $10 a month per door for these fucking locks?
- [22:14]
A
Where is the value in hospitality? You're a hotel investor or former hotel investor who wants to be a hotel investor. Where does it lie?
- [22:21]
B
Hotels, at the end of the day, they are a trade. They are flat out a trade. They are nothing more than that. You rent it out by the day. That's the good thing and the bad thing. So we just saw Blackstone buy with Four Seasons in San Francisco and someone said that it's a great way to play, like the San Francisco Revival. It's not just that. It's just that hotels are the highest convexity way to do it because you can reset your rents the fastest. You don't have to wait for all of your office tenants to roll their leases in three, four, five, six, seven years. You don't have to wait for your multifamily tenants to empty the building. You can do it right away.
- [22:56]
A
You're basically locking into the sentiment off the present day as opposed to off the next three years, five years, etc.
- [23:01]
B
Exactly. And so what that means is if you time it right, you can make a ton of money. You can make a ton of money very fast. The other thing is they're super operationally intensive. So if you know what you're doing and you buy from people who don't, there's a lot more operational alpha than there is in a lot of cases in office or multi or industrial. The problem is because you can rent it by the day. If you time it wrong, you can operate the hell out of it and.
- [23:23]
A
Still get torched to that point. VC money gets you a lot. It gets you great status. It gives you firepower, it lets you hire great talent. One thing it doesn't do necessarily or historically doesn't do is make you disciplined about cost.
- [23:39]
B
Yeah, unfortunately, you gotta be super disciplined about cost because you're not gonna make a lot of noi if you're charging all your meals to San Vicente Bungalows.
- [23:48]
A
Or buying Pharrell's house, or buying Pharrell's house, should we end with the definition of sonder?
- [23:55]
B
I actually don't know this.
- [23:56]
A
It's the profound awareness that every person you encounter has experienced a lifetime of hopes, fears, loves, and heartaches that you'll never know.
- [24:05]
B
Is that for real?
- [24:06]
A
That's for real.
- [24:08]
B
Good Lord. Glad this thing went bust. I'm making a 10. Talk about this because I just got a lot of enjoyment out of it this week. So, Anthony Scaramucci, the Mooch. The Mooch. Everybody loves the Mooch. You know how you miss me? I'm like human cocaine. The president of the Hunt and Fish Club. I don't know if he's the actual president, but he's there a lot. Former White House communications director, former 12 Days investee of Sam Bankman Fried Salt Conference.
- [24:44]
A
A very, very high profile guy. What is a high profile guy with a massive presence do? What's the zeitgeisty thing to do a couple years ago?
- [24:53]
B
Well, attendant to raise an OZ fund.
- [24:55]
A
That's exactly right.
- [24:56]
B
The question though you might have is, have you invested in real estate before?
- [25:00]
A
Nope.
- [25:01]
B
Do you have real estate experience?
- [25:02]
A
Nope. But it doesn't matter. It really doesn't matter.
- [25:06]
B
Did you hire people who have real estate experience?
- [25:09]
A
Listen, if you do things the conventional way, you're going to get conventional results.
- [25:13]
B
Will. Great, great point. Nothing ventured, nothing gained. But I will say this, that if you've not done a lot of estate investing, you should not buy a off brand hotel in New Orleans, of all places.
- [25:27]
A
So, Oz Fund. This is 2018. This is hot. Everyone's talking about it. Sean Parker's all over the airwaves talking about OZ funds. All the big investors, not OZ funds.
- [25:38]
B
Oz. It's cleaner.
- [25:41]
A
Well done. So how much was the Mooch looking to raise?
- [25:44]
B
Looking to raise 3 billion smackaroos.
- [25:47]
A
That's a pretty ambitious target. How much did he end up raising?
- [25:50]
B
Oh, 50. That's pretty good million. Shit.
- [25:55]
A
Oh, my God. You have limited sort of ballast with that kind of sum. So what do you go and do?
- [26:02]
B
You might say, let's spread this across. A lot of really diversified bets, disciplined.
- [26:06]
A
Investing, stuff like that.
- [26:07]
B
Disciplined backstop by cash flow. Not operationally intensive, not in really hard to understand markets. So of course you go buy the Virgin Hotel in New Orleans.
- [26:19]
A
Oh my gosh. You could see the calculus in the Mooch's head. All right, Richard Branson, Big brand, the Big Easy. Let's go.
- [26:25]
B
Virgin Galactic has gone public via spac. It's doing great. So, hey then, since this property was purchased, how much in distributions have the investors gotten?
- [26:36]
A
0.
- [26:37]
B
0? That's correct.
- [26:39]
A
And I think that is going to be the case going forward as well.
- [26:41]
B
That is indeed the case. So Skybridge sent a letter to their investors recently that said that they're getting wiped. However, Skybridge did okay. They got paid 1.75% of NAV every year despite the investors never getting any distributions. Surely after a result like this, Skybridge is really sorry. They show contrition and like they say, they're going to do better. Right.
- [27:04]
A
You would typically expect that to be the case. That is correct. What happened here?
- [27:07]
B
So we're going to do a dramatic reading. I'm the client And Haten is SkyBridge President Brett Messink.
- [27:14]
A
Let's go.
- [27:21]
B
I'd like to ask about the results of the share sale and how much it's going to dilute current holdings.
- [27:27]
A
Given your intemperate and unprofessional communications and false and offensive accusations, we will not be responding to your inquiries, questions or requests anymore.
- [27:39]
B
Fantastic.
- [27:40]
A
They also somehow missed that. What Noi was a million bucks less than they had reported in 2023 and.
- [27:45]
B
24 in New Orleans, you gotta pay property taxes and insurance, especially insurance, you know, because there was this like storm 20 years ago. I think it was pretty big. I can't remember. But yeah. So in 2023 and 2024, they didn't report property taxes or insurance in the P and L, which like no one caught.
- [28:02]
A
When you're doing things differently, that could happen. So they got an appraisal. We've talked about this very broadly. The original sin in real estate is often appraisal. So they got it appraised for $95 million. JLL's now taking it to market at 45. Quite a Delta there.
- [28:18]
B
The Mooch called this surprising and disappointing. If you're going to invest in an Oz, maybe don't do it in a off brand hotel in New Orleans. Maybe just consider something else.
- [28:31]
A
Do some diligence of your own. Figure out who has a track record and maybe hit him up.
- [28:35]
B
There you go.
- [28:36]
A
Don't go for the Mooch just because he's the Mooch.
- [28:38]
B
But the Mooch has no regrets, baby. Or go for the Mooch just for the entertainment value. It's like, you know, it's like going to. It's actually probably better for your relationship than going to New Orleans and burning a bunch of cash in the French quarter. So if you want to go to New Orleans and have a good time, you know, save your marriage, give it to the Mooch. Same result.
- [28:56]
A
When these NBA top shot collectible things came out, I just wanted to. I almost wanted to follow the journey as an observer. So I said the best way to do it is just. So I put a few hundred bucks and just watched how the thing was going and the valuation of that company went from like double digit billions to no one knows anymore kind of thing. It was just fun to go along on the ride.
- [29:15]
B
When any of these things happen like that, I think of it's like Leighton Parks and Rec when the guy from workaholics is at griddle and he's like, I was working at a taco truck nine months ago and now I am part of the Portland Trailblazers.
- [29:33]
A
That's it for the promote podcast this week. Multifamily reits are finding that the middle is truly mediocre. Saunder, look. It's yet another illustration of Will's favorite maxim in hospitality real estate.
- [29:43]
B
Well, I have two. It's fucking hard and they're a trade.
- [29:47]
A
And the mooches Oz bet was kind of a perfect illustration of the difference between fundraising and operating. A silver tongued salesman like the Mooch with a huge profile can raise a couple bucks for anything, but what happens next is anyone's guess. We're off for Thanksgiving week, so you'll have to do without our dulcet tones for a week. But we'll be back the following week with more cre. Insider goodness.
- [30:08]
B
I may find a way to take the airwaves without Haten. I need this validation or else I might combust.
- [30:14]
A
You have all the logins, man.
- [30:15]
B
Have at it.
- [30:16]
A
In the meantime, listeners, please write us a review on Apple. Make it simple but significant.
- [30:21]
B
Was that Hemingway?
- [30:22]
A
It's Draper.
- [30:24]
B
Oh, God, it is.
- [30:25]
A
Sorry, kids. Game called on a kind of wind. Wow, I did not expect that from you.
- [30:30]
B
Reach out@partnershipsthepromote.com to advertise and please consider becoming an insider@thepromote.com upgrade. Lots of good stuff there that you can only get by being an insider.
- [30:40]
A
There's so much juice and there's so much more to come, and we've got a pretty good pipeline. Happy Thanksgiving, listeners. We really appreciate you more than you know. And I appreciate you, Will.
- [30:49]
B
Oh, I appreciate you too. Look forward to giving you a big old hug soon.
- [30:51]
A
As do I. Ciao.