Texas Chainsaw Massacre & The Man Who Knew

Summary

The Promote Podcast: "Texas Chainsaw Massacre & The Man Who Knew" (July 1, 2026)

Host: Hitan Sumtani & Will Krasny

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Episode Overview

This episode of The Promote Podcast centers on three major themes shaking Commercial Real Estate (CRE):

1. The Legacy of Alan Greenspan – Reflection on the influence of the recently deceased, longtime Fed Chair and his pivotal role in shaping financial and CRE markets.
2. Sam Charney and the Gowanus Transformation – A deep dive into the origin and ambition behind Charney Companies’ bold multi-billion dollar Brooklyn redevelopment efforts.
3. The Aftermath of Texas’ Traveling HFC Property Tax Loophole Closure – Exploring the industry fallout, distressed asset sales, and questions of governance following the end of this controversial tax program.

Alongside, the hosts weigh in on the latest CRE news, candid market analysis, and classic "war stories" from the field. The tone is insider, sharp, witty, and often irreverent.

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Quick Punch List: CRE News Rundown

Start: 01:39

• World Cup Recap & Heartland Real Estate Vibes
  • Hitan recently visited Dallas, Houston, and Kansas City for the World Cup. Praises Dallas’s world-class entertainment infrastructure.
    • “Dallas is the frickin future...They just have this sensational, spectacular showmanship built into everything.” (02:22) - Hitan
    • “We have been accused on this podcast of being a little bit too NY and LA centric, but the middle of the country... that’s what it’s all about.” (02:50) - Will
• Road to Housing Act Update
  • New Senate version removes the "BTR" (build-to-rent) forced-sale provision. Surprise: Trump threatens veto unless a voter ID bill is attached, risking freezing investment.
    • “...it’s like holding a gun to your own head and saying, stop or I’ll shoot. Because this is such a win for him. It actually helps create more housing...” (03:47) - Will
• NY Rent Freeze
  • Legislation passes, freezing rents on ~1M rent-stabilized apartments.
    • “Buying into the rent stabilized market in an environment like this is essentially like options trading.” (05:04) - Hitan quoting “Triple G”
    • “Obviously stupid policy. Obviously the free market needs to be involved here to renovate these units...” (05:17) - Will
• Charles Cohen Pays Off Fortress
  • CRE billionaire Charles Cohen sells assets and clears $187M in debt.
    • “The payoff is consistent with Mr. Cohen’s integrity and confirms his character as an honorable businessman. It just sounds so godfather to me.” (08:15) - Hitan
• Elm Communities’ Liquidation Problems
  • A terminated contract for Riverside Apartments puts $520M of Elm’s portfolio and their Goldman Sachs term loan into limbo, shares sink by 35%.
    • “Stock is down 35% on the news...Even the people trying to do the right thing and liquidate and sell can’t do that.” (09:04) - Will

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Segment 1: Alan Greenspan – The Man Who Knew

Start: 10:40

Greenspan’s Aura and Influence

• The First "Celebrity" Central Banker
  • “This was the first banker who acquired a status that was a little bit more of a pop culture figure almost.” (11:01) - Hitan
• Architect of Modern Finance Era
  • Will summarizes Greenspan’s timeline: “[He] took over right before the stock market crash, 1987...S&L crisis, the tech bubble, and then dipped out right before the GFC...(He was) one of the creators.” (11:18) - Will
• The "Greenspan Put" Mentality
  • “The effect known as the Greenspan put...no matter what happens, the Fed’s going to step in...It created a kind of false sense of security in the market.” (12:21) - Hitan
  • “He really would let things run hot. And that is what the CRE guys, that’s what we want. We just call it let ‘er rip. He’s as responsible for the growth of the modern CMBS market as anyone.” (13:16) - Will
• Downside Realization, Regulatory Failures
  • “His inability to understand human nature. He thought that the system would be the best cop of itself. And that turned out to be completely wrong.” (14:10) - Hitan
  • Notable Greenspan quote: “I was shocked at how poorly the banks policed themselves.” (14:27) - Will quoting Alan Greenspan, paraphrased)

Memorable Quote:

“If you let people do whatever they want, you end up with Don Jr’s crypto scams or Jared Kushner buying an island in Albania.” (14:36) - Will

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Segment 2: The Gowanus Takedown – Sam Charney’s Brooklyn Gambit

Start: 16:06

Charney’s Origin & The Two Trees Playbook

• From Two Trees to Charney Companies
  • “He was senior at Two Trees...co-founded their in-house GC team. They self perform quite a lot of work and that was really his baby.” (17:05) - Will
  • Two Trees’ legacy – turning Dumbo and later Williamsburg into premier NYC neighborhoods, “bare-knuckling this thing into existence.” (17:53) - Will
• Sam Charney’s Independence & Deal Machine
  • “Sam goes out in 2013...now he’s everywhere. What’s the pipeline? It’s massive. Basically all of Gowanus.” (20:13/20:21) - Hitan & Will
  • 3M SF of Gowanus under ownership/development, 2,000 residential units, billions in play.
• The Modern Capital Stack Challenge
  • Major buy: 175 Third St from RFR for $160M; now $785M lined up for development.
  • “Not all dollars in a capital stack are created equal...a big chunk...is, I think, Pref from RXR.” (21:34) - Will
  • RXR, Affinius, Apollo all participating; discussion of pref equity and layering in the stack.
• Strategic Partnerships and Iceberg Economics
  • Tavros Capital and “iceberg” deals: “I would bet that Tavros puts up most of the GP co-invest, Charney is the face, helps raise the money and is the construction guy...” (22:50) - Will
  • “If you’re the developer, you gotta go find not only the debt...you need someone else to give you the money for the GP co-invest you don’t have.” (23:35) - Will
• Narrative Management & Profile Building
  • “He just went to Romania to accept one of those Bizarro Red awards, that crazy gala we’ve talked about.” (26:54) - Hitan
  • “...to break in this way so fast...that is worth examining.” (27:00) - Will

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Segment 3: The Texas Traveling HFC Debacle

Start: 28:42

Loophole Mechanics and Closure

• What Was the Traveling HFC?
  • “If you could commit to keeping rents affordable...you’d get a property tax break in perpetuity. But in most cases, the delta between the market rent and the affordable rent was non-existent...developers were giving away nothing and in exchange getting a property tax abatement.” (29:15) - Hitan
• Retroactive Clawbacks: Industry Fallout
  • Draconian “clawback” law now retroactively threatens 340 properties, 100,000+ units, $12.5B in asset value.
  • “...the buyers are going to assume the absolute most punitive [tax hit]...and that does not do a lot for values.” (31:43) - Will
• Predatory Uncertainty & Distressed Sales
  • “Just to put a number on it, Greater Dallas has about 160 properties...collectively valued at $6B...It’s going to be really bloody for a while.” (33:44) - Hitan
  • “Somebody’s going to do this...but if you’re buying something now, you could be catching a falling knife...” (36:13) - Will
• Legal & Ethical Dilemmas
  • Lawsuits are emerging. Post Investment Group sues, arguing the law is a violation of contract: “It sounds like the predicate that they’re using for this is no takesy-backsies.” (35:05) - Will

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Notable Quotes & Moments

• “Messi’s a lot better than Ronaldo, which I confirmed in real life.” (01:56) - Hitan
• “I love the statement that [Cohen] filed. It was something to the effect of the payoff is consistent with Mr. Cohen’s integrity and confirms his character as an honorable businessman. It just sounds so godfather to me.” (08:15) - Hitan
• On Dodd-Frank as a Greenspan reaction: “He is all gas.” (13:58) - Will
• “There’s something about a scheme.” (29:15) - Hitan, summarizing the appeal and dysfunction of the Texas tax loophole sector
• “If the deal worked without the HFC and then it goes away, your deal still works. But none of these deals work without it.” (33:05) - Will

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Timestamps for Major Segments

• News Punch List: 01:39 – 09:32
• Alan Greenspan’s Legacy: 10:40 – 15:08
• Gowanus & Charney Companies: 16:06 – 27:32
• Texas Traveling HFC Fallout: 28:42 – 36:31

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Final Takeaways

• Alan Greenspan’s legacy is both monumental and deeply controversial, with the CRE world still feeling the effects of his deregulatory, “let ‘er rip” philosophy.
• Sam Charney is a next-gen developer using old-school relationship savvy and modern “narrative management” to corral capital and reshape one of Brooklyn’s last developable frontiers—Gowanus.
• The Texas tax loophole saga is a case study in regulatory whiplash, market distortion, and the perils of “free money”—with billions now in play as distressed assets.

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For further insights and the full unfiltered story, subscribe to The Promote Podcast and newsletter at thepromote.com.

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[End of Summary]

Transcript

[Hitan Sumtani]

I got two months till 40, so I have a hot by 40 program I'm starting.

[Will Krasny]

You look like 32. You look great.

[Hitan Sumtani]

I'm cute, but I'm not always fit.

[Will Krasny]

It's all upside though. It's value add story. If you're in Kansas City and you're a fancy guy, you might find yourself in a box next to Taylor Swift at a Chiefs game.

[Hitan Sumtani]

In New York, you could get Chalamet spraying champagne with the Nova Knicks.

[Will Krasny]

But in dc, if you're a young lad at a Redskins game, you might find yourself walking out of a game hearing the crowd chant lower interest rates as Alan Greenspan walks to his car. True story. That happened.

[Hitan Sumtani]

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

[Will Krasny]

And I'm Will Krasny.

[Hitan Sumtani]

A shout out to our sponsors, Real Property Captive. They're the first group Captive Insurance for mid market owners.

[Will Krasny]

Bravo Capital, a leading HUD and bridge lender with extensive experience in the multifamily and sniff worlds.

[Hitan Sumtani]

And Loan Boss, the best in class CRE debt management software. This week we take stock of the legacy of Alan Greenspan, the long serving Fed chair who died last week at the ripe old age of 100. Greenspan's moves, for better and for worse, have shaped the CRE market as we know it today. Next we visit the rapidly gentrifying swamp that is Gowanus, where Sam Charney is remaking the neighborhood with a little help from his friends. And finally, we dive back into one of the promote's pet the fallout from the end of the traveling HFC property tax loophole in Texas.

[Will Krasny]

But before all that, let's get started with the punch list. Our signature rundown of the News east news and cre. So co host Zeten was on the road for the World Cup. He was like, fred, I had a break.

[Hitan Sumtani]

It was fantastic.

[Will Krasny]

Soaking up the culture. First of all, where did you go? And then any big takeaways?

[Hitan Sumtani]

I was in Dallas, Houston and Kansas City. Got to see Argentina play, Portugal play. Messi's a lot better than Ronaldo, which I confirmed in real life. And then I went to Kansas City to watch the Dutch play. My takeaways is this is an amazing country. You really feel patriotic when you're on the road. The World cup. The vibes are unbeatable. Everyone's randomly hugging each other. And listen, Dallas who? Dallas is the frickin future. I know we've taken some shots of Dallas in this pot.

[Will Krasny]

Do I have to eat Some crow

[Hitan Sumtani]

the way that they put on a show. I was at the Cowboys Stadium for the Argentina Austria game. The scale of stuff there, kind of inspiring. They just have this sensational, spectacular showmanship built into everything. What I liked about this World cup is they're putting in the best of America with the best of what world soccer has to offer. So, for example, in this much derided hydration break that they have in the games in Dallas, you get the Dallas Cowboys cheerleader going at it.

[Will Krasny]

We do have a wonderful country here. We have been accused on this podcast of being a little bit too New York and LA centric, but the middle of the country, the heartland, that's what it's all about.

[Hitan Sumtani]

Shout out to our listeners. There were some very, very kind notes. We got, I'll take you to barbecue, I'll show you around, et cetera. Couldn't end up doing most of that just because we were in World cup mode and had very tight windows. But whoever reached out, Ben, John, Mo, cool to see the pod spreading, getting a lot of love from the heartland.

[Will Krasny]

And next World cup, hopefully it's going to be people who are playing in the World cup who are like, come to my box.

[Hitan Sumtani]

From your lips to God's ears. Okay, next one, the Road to Housing act, which had that specific BTR killer bill that we've discussed in depth here.

[Will Krasny]

We have indeed.

[Hitan Sumtani]

There is some new drama on that front.

[Will Krasny]

Went through the Senate. The version that they put together took out the BTR killer provision, which was the forced sale. After seven years. Everyone's happy, actually. Bipartisan bill goes to Trump's desk and what does old chaos Donnie do?

[Aaron Kurowitz]

Surprise.

[Will Krasny]

Says he's not going to sign it unless we get a voter ID bill passed. It's like holding a gun to your own head and saying, stop or I'll shoot. Because this is such a win for him. It's a bill that both parties like. It actually helps create more housing. And now that we have clarity on the for sale provision, it's actually pretty good. The bigger thing is that the Pandora's box is open. Capital's already worried about this sector and it's gonna take a long time for those memories to go away. The longer this stays out there, just the more the capital markets for new development are gonna be frozen.

[Hitan Sumtani]

I don't know if you caught Mike Johnson's statement. He said, I certainly want him to take the biggest, boldest marker that he has and do that big Trump signature proudly on the legislation because we're delivering for the people. They know how to Appeal to this guy's lizard brain instincts.

[Will Krasny]

People have finally figured out, other than Mamdani, how to do it. I wonder though, did Mike Johnson say this before or after Trump said to his face, nobody bed housing.

[Hitan Sumtani]

Okay, next one. Speaking of Mamdani, he got it done. The thing the industry's been terrified of for a while. He got the rent freeze on about a million rent stabilized apartments in New York. This was one of the cornerstones of his campaign, if you remember.

[Will Krasny]

You can't. It was a very, very catchy part of, I think, why he caught fire.

[Hitan Sumtani]

Now that this has happened, how do we feel about investing in the rent stabilized market? Our guy Triple G had a very apt way of putting it. As always, he said that buying into the rent stabilized market in an environment like this is essentially like options trading.

[Will Krasny]

I think that's totally right. One of the owners who voted for the rent freeze actually said, we are better off having no rent increases and getting some sort of subsidy or help from the city and the state on operating expenses. Like, that's actually kind of genius. They're right because the investment it would take to fix up a lot of these units and bring them to market is so massive. And then you're taking all of the bad debt risk. Even if they increase the rent 5%, how much incremental bad debt is there? How many people don't pay? Whereas if they just cut your property taxes or they give you a massive utility bill break, there's no leakage. This is obviously stupid policy. Obviously the free market needs to be involved here to renovate these units and bring them to market so that more people can live in New York, which is a good thing, which everyone wants. And ironically, of course at this time New York media rents are at all time highs for market rate units and

[Hitan Sumtani]

ain't going anywhere but up.

[Will Krasny]

Yeah, everyone's sort of talking past each other. Everyone ultimately wants the same thing, which is a more affordable New York. If we just let our own political views and dogmas get in the way of achieving that.

[Hitan Sumtani]

Think about some of these acquisitions that have happened recently. The Summit acquisition of the Pinnacle portfolio. We've talked about our guy Peter Hungerford buying into all of these things on the cheap. I wonder what the conversations look like right now in those boardrooms.

[Will Krasny]

Those were always longer term bets though. No one was doing this betting that within a year or two that the rent law of 2019 would be repealed or there would be a 10% rent increase. This was a longer term play. I think on the episode I said something like you're underwriting maybe a mid to high teens return where all of the return is in year 14 of a 15 year old or something like that. So I don't think it really changes the calculus from that perspective. But. But if there's all of a sudden a big property tax break that makes the yield on these more real, then it's the same difference because rent going up is great, but if operating expenses go up faster, that's bad. And the whole game is getting noi to go up.

[Hitan Sumtani]

There is the possibility of a Supreme Court challenge to this. They're gonna attack this for being unconstitutional, for being essentially a taking.

[Will Krasny]

What's the John Gershon? We need the Pelican brief. We need Julia Roberts and Denzel Washington with a case to get to the Supreme Court to make this change.

[Hitan Sumtani]

Okay, next one favorite son of the promote, Charles Cohen. Billionaire Charles Cohen has paid off his debts to Fortress. There was a $187 million PG, one of the largest I've ever seen that. Fortress was coming hard after this guy. It looks like he's sold a couple of big things and made good on his debts.

[Will Krasny]

I remember Fortress being upset at the prices he was getting and at the level of detail they were receiving from him. They just kept saying, we don't understand where this money's coming from. We haven't gotten the details.

[Hitan Sumtani]

They accused him of, like, moving assets over to his wife and shielding from him and all that.

[Will Krasny]

Of course, what got this done for him is that he ended up doing a ground lease sale on two assets he owned to Empire State Realty Trust for 110 million.

[Hitan Sumtani]

You mean he sold a fee is what you mean, right?

[Will Krasny]

Yeah, he sold a fee. Yeah. Yeah, so he sold the dirt underneath it.

[Hitan Sumtani]

He's also sold a bunch of things to Vornado and other people as well. I love the statement that he filed. It was something to the effect of the payoff is consistent with Mr. Cohen's integrity and confirms his character as an honorable businessman. It just sounds so godfather to me.

[Will Krasny]

I take everything.

[Hitan Sumtani]

All right, next one. The Reid hard times continue. This is Elm Communities, if you remember them. They sold a big chunk of their holdings to Cortland. They're on the way out of the game entirely. But there's been a snag in a pretty important deal here.

[Will Krasny]

The artists, formerly known as Wall street, they were in the process of liquidating their whole portfolio, paying out shareholders. They had a deal with a buyer called the Buytel Group. They terminated an agreement to buy Riverside Apartments, which was the largest ass that Elmstell owned. It was a 1200 unit community in Alexandria and they were going to pay 280 million bucks. So quite a big transaction. And the contract had been extended without shareholders knowing and without hard money. The terminated contract is a problem because they have a $520 million term loan from Goldman Sachs with quite a bit still outstanding. They don't know when that's going to get paid off, when shareholders are going to get distributions. Stock is down 35% on the news. Everyone's merging to try to get lower cost of capital. Even the people who are trying to do the right thing and liquidate and sell can't do that.

[Hitan Sumtani]

That's it for the punch list. When we come back we'll be talking legacy. Well, what if I told you insurance could become an asset instead of just an expense?

[Will Krasny]

I'd say you're trying to sell me something, but also I'm interested.

[Alan Greenspan]

Fair.

[Hitan Sumtani]

Here's the Math. You spend 2 million on insurance annually. Loss ratios well under 30% over five years. That's about $10 million out the door. Zero return.

[Will Krasny]

Painful but accurate.

[Hitan Sumtani]

What if 7 million of that built up in reserves that you actually owned?

[Will Krasny]

That's pretty interesting. Tell me more.

[Hitan Sumtani]

Real property captive built specifically for scattered site gps. Top carriers issue policies for lender compliance. Reserves stay in your account and after a few clean years you're converting spend into equity.

[Will Krasny]

I like this because that's what the big boys do.

[Hitan Sumtani]

Exactly. And now it's accessible for mid market drivers like yourselves too. Check out the [e-mail] that's rpcaptive.com and tell them the promote sent you.

[Alan Greenspan]

I think it's certainly fair to say that the overall performance of the American economy has continued to surpass most forecasters expectations. The current cyclical upswing is now approaching reaching 6 years in duration and the economy has retained considerable vigor.

[Hitan Sumtani]

Here's where I want to start with Alan Greenspan. As an outsider to America who came here, this was the first banker who acquired a status that was a little bit more of a pop culture figure almost. He wasn't just a banker. So let's talk about why that is. Let's talk about how he shaped cre.

[Will Krasny]

I have to jump in on behalf of the worst people in finance and say well actually it was Paul Volcker, you know, who saved America by hiking rates and if only Jay Powell had the courage. So just getting that out of the way. But yeah, you're totally right. So Greenspan was fedshair for 20 years and oversaw one of the most interesting periods of finance in US history. He took over right before the stock market crash, 1987, oversaw the SNL crisis, the tech bubble, and then dipped out right before the gfc. And some people would argue he was one of the creators.

[Hitan Sumtani]

He was one of the architects, unknowingly,

[Will Krasny]

the soft power of the Fed, which everyone now is talking about. Fed speak that really started with Greenspan. He was a guy who got recognized at Redskins games and people chanted lower interest rates. Part of it, I think, is because he was so active. And I think he was seen really as one of the first activist Fed shares. And his actions right after Black Monday, I think, were seen to really stabilize the market. And that was not something that had really happened before.

[Hitan Sumtani]

He gained a reputation as someone who was not shy of using his considerable power in the event of a shock. Right. He would act very decisively to get something done. The effect known as the Greenspan put, which was like, no matter what happens, the Fed's going to step in and handle this. And it created kind of a false sense of security in the market.

[Will Krasny]

I think that's exactly right. And he was someone who looked at data and relied on data. But at the end of the day, his biography is called the man who Knew.

[Hitan Sumtani]

Excellent book, by the way.

[Will Krasny]

We talk a lot about the capital G. Great man. This is the perfect example of it, where I can look at all the reams of data, but me sitting in my office, I shall determine, determine the fate of the economy. And you take the good with the bad. He was widely credited with helping preserve the market. In 1987, went through the SNL crisis.

[Hitan Sumtani]

His overall approach to governing the markets, how did it shape CRE as we know it? What did it spawn or repress?

[Will Krasny]

He really would let things run hot. And that is what the CRE guys, that's what we want. We just call it let er rip. He's as responsible for the growth of the modern CMBS market as anyone. And he was really sort of deregulatory. Not free credit, but the freely available credit, because that's what drives asset pricing. If you have more debt available, there is more demand for assets. And that's really what happened here, is we had bubbles across every part of the economy. And real estate, of course, chief among them with 2007, 2008, and we're still dealing with the effects of that today.

[Hitan Sumtani]

A torrent of capital available which obviously increased prices. And that kept going and kept going and kept going until that burst.

[Will Krasny]

Yeah. And he's also shifted everything the other way now, because you could look at Dodd Frank, you can look at Battle 3 and people saying this is a response to Greenspan not hitting the brake at all. I mean, he is all gas.

[Hitan Sumtani]

That's the big asterisk on his career. His inability to understand human nature. He thought that the system would be the best cop of itself. And that turned out to be completely wrong. That turned out to be so wrong that it might have contributed quite heavily to the GFC and everything that followed.

[Will Krasny]

He's even quoted as saying, I was shocked at how poorly the banks police themselves.

[Hitan Sumtani]

It reminded me of that scene in Casablanca. I'm shocked. I'm shocked, shocked to find that gambling

[Will Krasny]

is going on in here. We're all capitalists here. We believe in the free market, but it's not perfect. And there needs to be intervention at certain times. And that's what's made America great. Looking back at busting trusts from John Rockefeller all the way down. If you let people do whatever they want, you end up with Don Jr's crypto scams for Jared Kushner buying an island in Albania.

[Hitan Sumtani]

Or you end up with traveling HFCs, which we're going to talk about.

[Will Krasny]

Traveling HFCs. Exactly. So we need a little bit of intervention. And Greenspan seemed to think otherwise. And it had far ranging repercussions.

[Alan Greenspan]

Considerable. Considerable vix. Considerable.

[Hitan Sumtani]

So will you violate any debt covenants recently?

[Will Krasny]

So funny you should ask. I have been in technical default recently. I mean, who among us, right? But not since Q4. And that's not because I paid off the loan. It's because that's when I started using Loan Boss.

[Hitan Sumtani]

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

[Will Krasny]

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

[Hitan Sumtani]

They've just got it sorted here for you.

[Will Krasny]

Much better. So thank you lone Boss listeners.

[Hitan Sumtani]

Check them [e-mail] that's loanboss.com and tell them the promote sent you. A few episodes ago. Will, we talked about a Two Trees alum Asher Abasera, who's now overseeing Kushner's Weird freaking semi grifty project in Albania. Today we're going to talk about another Two Trees alum who's doing something perhaps a little bit closer to home, a little more institutional and equally fascinating. So let's talk Sam Charney of Charney Companies.

[Will Krasny]

Sam Charney is everywhere right now. So hot right now.

[Hitan Sumtani]

Seriously. Every third article in CO or TRD you see Charney companies. He's all over the branded content space, he's cooking in the real deal's kitchen. He's going and accepting bogus awards in Romania. The man is everywhere. Let's talk origin story, let's talk what he's up to now. And there's so many interesting capital relationships. They've developed quite a machine here.

[Will Krasny]

He was senior at Two Trees and he was really a bricks and sticks guy. He co founded their in house GC team. I think they self perform quite a lot of work and that was really his baby.

[Hitan Sumtani]

For people unfamiliar, Two Trees is responsible for creating this neighborhood out of nothing Dumbo. And it became one of the most fancy neighborhoods in New York City in the process. David Walantis, who founded Two Trees and apparently sold a pint of his own blood to get things started when he ran out of money, he became a billionaire off the back of this incredible neighborhood shaping project that he had. And then they repeated it again in Williamsburg.

[Will Krasny]

You talk about entrepreneurs, this guy, I think there's an article, it's called on the Waterfront. It's in New York magazine from gotta be 1980. One of my favorite articles ever.

[Hitan Sumtani]

And the oral history is wonderful as well, but we'll put it in the show notes.

[Will Krasny]

The oral history is where I think Jane, his wife at one point says, oh you were in your Stalingrad phase. Where he was saying I didn't pay property taxes for three years because I didn't have any money. And I knew it took him five years to foreclose and he just bare knuckled this thing into existence. And his son Jed, who worked for Donald Trump after college came in, developed one of the condo buildings on Water street just to generate some cash. They really had no money and ended up going building by building and creating the modern Dumbo with super high end residential creative retail.

[Hitan Sumtani]

The basis was basically zero.

[Will Krasny]

They sold a condo at the Main street building for more than they paid for the whole neighborhood. The thing is for these master plans to work, you need the land value to come compound at a crazy rate. And that's what happened here. It wasn't the buildings. The buildings were dog and got rebuilt. The land got insanely more valuable.

[Hitan Sumtani]

The best parallel for what Will just talked about is the Aventura story with Don Sofer. That's exactly what happened there. So why do we bring up two trees? Because in my opinion, that was probably the best place for a would be developer like Sam Charney to be at the time that he was at that firm. It is a combination of a cowboy, someone who had this incredible vision, someone who wanted to city ship shape, combined with a firm that was getting increasingly institutional. So the capital relationships.

[Will Krasny]

Well, to be very clear, the capital relationships are between Jed and David. That's it. They're all internally funded. It's just their family. So that provides a level of freedom and ability to scale as your career that isn't there anywhere else. You're working on super complicated public private partnerships, but it's with folks who are writing the checks themselves. It's not.

[Hitan Sumtani]

Yep.

[Will Krasny]

You don't have that layer between the allocator and you. You're playing with the livest ammo that you got. So there's a freedom there too because they wouldn't have allowed a, I don't know, late 20s, early 30s person to sort of lead. That's not happening at related. You've got to really earn your stripes.

[Hitan Sumtani]

You're saying the mom and pop nature of a shop like that helped Sam create opportunity?

[Will Krasny]

Yeah, absolutely. Because you're not just going like associate 2 years VP, 2 years senior VP. He co founded the in house GC. They gave him that moniker, which is a big deal. You could do the most complicated things and then you have quite a portfolio to look at when you're going out on your own.

[Hitan Sumtani]

So Sam goes out in 2013. He wasn't really on my radar until maybe two, three years ago, but now he's everywhere. So what's the pipeline?

[Will Krasny]

It's massive. It's basically all of Gowanus. He's got 3 million square feet owned or under development, but it's nearly 2,000

[Hitan Sumtani]

residential units under construction, which is in New York.

[Will Krasny]

That is so much money. That's billions of dollars worth of construction projects.

[Hitan Sumtani]

And this. What I was saying was if you look at what Will Entice did from up close and you're like controlling a neighborhood. Gives me opportunities that compound exponentially. That's what he's trying to do here. So one of the sites I wanted to Talk about was 175 Third street in Gowanus. This is a very interesting backstory. It was formerly owned by rfr AB Rosen, Abi to Will and they were in distress on this one. And then they sold the site to Charney for 160 million odd. And then he has just landed pretty significant financing package there.

[Will Krasny]

Oh, my gosh.

[Alan Greenspan]

Yeah.

[Will Krasny]

I mean, $785 million in debt and equity to build this thing. I think it's the fifth building that he's got going on there too. So this is not a speculative pioneers get arrows in their back type thing. This is building off of an existing portfolio.

[Hitan Sumtani]

They've also branded it. Right. They're calling it the Gowanus Wharf Campus.

[Will Krasny]

Yeah.

[Hitan Sumtani]

When you could throw the word campus in, you know something's going on.

[Will Krasny]

When you can have the Gowanus Canal as a wharf, that's another way of doing things.

[Hitan Sumtani]

Super fun. Contaminated side by what's interesting here too.

[Will Krasny]

We throw out these massive numbers, but not all dollars in a capital stack are created equal, as we well know. Good point. And of the 785 million, a big chunk of that is, I think, Pref from rxr.

[Hitan Sumtani]

It smells like Pref to me. Yeah, it's an RXR deal we've talked about. RXR is coming in really hot nowadays. They lost a bunch of buildings, they wiped out a bunch of equity, but they're now ready to deploy with new partners and they're injecting 185 million in here. It seems like pref, but we'll find out. And then there's 600 million from Affinius, which has been all over the construction loan market. And our boys at Apollo.

[Will Krasny]

Apollo. We talked about someone who's competed with Apollo and compared them to the T shirt cannon at an NBA game of the NYC commercial debt market. They are again, everywhere. But this is not the only thing he's got going on. He has a massive project out in Queens as well.

[Hitan Sumtani]

They've done a bunch of projects in collaboration with Tavros Capital, Dove Barnett and Nick Silvers on a bunch of projects. Their backer is a company called Inkoko Capital. And Inkoko is founded by someone called Pha park, who is best known as the inventor of the dry nail polish.

[Will Krasny]

Incredible. Just. Yes.

[Hitan Sumtani]

This is how you gotta go. You gotta find someone who did something incredible for their money and just latch on.

[Will Krasny]

It's interesting because you look at the commercial development, you look at the articles, you look at the public profile and all of these things, there's a lot of iceberg underneath the ground here. It seems to me that Tavros and Charney are sort of co GPS here. How much of the economics they have what is the split like? How much of the GP are they putting up? This is my surmise. I have no inside info. I would bet that Tavros puts up most of the GP co invest. Charney is the face, helps raise the money and is the construction guy and they sort of are marketing around him because he's got a great story and the track record with two trees. Just, just let's back of the envelope this, right? Let's assume that this project 785 million of debt, right? So it's 185 prep. So let's just assume that's prep so it's really debt.

[Alan Greenspan]

Okay.

[Will Krasny]

You probably need 400 million of equity to do this deal. And a 10% GP coin desk is $40 million. I can guarantee you San Fergus does not have $40 million. If you're the developer, you got to go find not only the debt to give you the money. You need someone else to give you the money for the GP co invest that you don't have. So finding a partner like that is huge because he's spread so thin across all of these project, even the most well capitalized gp. It's a huge balance sheet that you need to put these things up. And someone's also gotta be the warm bodies behind this too. Which again don't know if that's Tavros, don't know if that's somebody else, but those are all factors into getting these things built.

[Hitan Sumtani]

There's another project that has a fascinating cap stack. So this is a skyscraper that's planned for Long Island City. They got a roughly $500 million financing package. The equity is Tavros in Coco and Charney. The senior lender is Madison Realty Capital, kicking in about $400 million. And then the pref is coming from Kushner Companies and one IM. Ooh. Now one IM is a fascinating vehicle. It is the former SoftBank bigwig Rajiv Misra. The promote recently described him as the most eccentric investor in cre. Is that saying something? This guy has amazing juice or what we call wasta in the Middle East. The lore with his new font for one IM is he went to Abu Dhabi a couple times, talked to the Royal Family because he's connected there and came back with like $7 billion in commitments. It's just amazing. And he's putting that money to work with several people. They've got a JV with rxr. They're putting Pref into a lot of developments that we're talking about.

[Will Krasny]

Pref in development is Sort of a new phenomenon which is always really fascinating to me because again, the whole point of PREF is that you can take it out and it's cheaper than equity, but it's also a lot more expensive than debt. There's been a lot of private credit, Sturm and Drong and PIK interest in particular has. People were really fascinated that you can pay interest on debt with more debt and that is prep because especially in a dev, there's no cash flow. So all of this is just pick. The whole thing is picking. So the whole time RXR's 185 million is compounding it, I don't know, 12, 13, 14, 15%, whatever the number is. And by the way, they also have a minimum multiple there. I would wager there's a 1,3ish preference. Not that they're going to get taken out early, but that 185 could very easily be 250 million to take them out when it's time to take them out.

[Hitan Sumtani]

These are stomach churning numbers, but we should remind listeners that Gary Barnett currently has a billion two in pref on that slate of development projects. So there are levels to this game.

[Will Krasny]

But my point being that the whole game of development is you create a value spread to your basis and if you have senior debt, you just need to be $1 above that senior debt and you're fine. That is not the case here. You have to do quite well to outrun the pref here.

[Hitan Sumtani]

This is a fascinating hypothesis. It jives with something that I've been thinking about a little bit is why is a developer suddenly so out there? I mean it's basically Zoran Mumdani and then Sam Charney. He's doing interviews everywhere, he's doing sponsored content placements everywhere. He just went to Romania to accept one of those Bizarro Red awards, that crazy gala that we've talked about. He went to Romania and accepted an award in front of Romanian dignitaries and investors from the Republic of Moldova were also present.

[Will Krasny]

Did like Tristan Tate give it to him? What's going on here?

[Hitan Sumtani]

Narrative management is such a big part of real estate development. There's something going on here that bears more examination.

[Will Krasny]

The club of building projects like this is a really hard one to join from scratch. And again, he had background but like, like I don't think Jed Willentis is writing a big check. And to break in in this way so fast. 12 years is a long time. But to build these types of projects in a relatively short period of time is really something. And it Takes. Kismet's the wrong word. But zhuz, that is worth examining.

[Hitan Sumtani]

Okay. I'm here with Aaron Kurowitz from Bravo Capital. Aaron, you've done $2.5 billion or so of deals so far. How are you thinking about scale going forward?

[Aaron Kurowitz]

There is a divergence between optimizing for scale and optimizing for quality. And when you're running a debt fund, you have to pick. You have to say, am I really fee driven and do I want to maximize how much I could put out? And the other business model is, what we've chose is slow and steady. We want the reputation to precede ourselves investor returns. That's more important for us than volume. If you look at some of the REITs, they were forced to deploy in the realm of 2 to 8 billion a month. First the AUM gobbled right, as your sweatshirt says. But then they were forced to like regurgitate that aum more rapidly than they really could, and it forced them to pick terrible deals. Their returns are negative. To just go for scale for scale's sake. That's a short lived business model.

[Hitan Sumtani]

Thank you, Aaron. And where can people find you?

[Aaron Kurowitz]

People could find [e-mail].

[Hitan Sumtani]

There are stories that I love more on an individual basis. Like the gypsy private credit king that we talked about gave me a lot of joy. But on an ongoing basis, pound for pound, this might be my favorite story that we've ever done at the promote the traveling HFC saga. It's just, it's exceptional.

[Will Krasny]

It really is. I was talking to a friend of mine about a business and he works in private credit, and he was saying, oh, is this a business or a scheme? And he goes, the scheme is fine, but just let's be, let's call a spade a spade.

[Hitan Sumtani]

Just tell me what it is, just

[Will Krasny]

tell me what it is so I can underwrite appropriately. And so there's something about a scheme.

[Hitan Sumtani]

There's something about a scheme. So for those who came in late, the traveling HFC program was this property tax abatement program in Texas. And the whole idea was if you could commit to keeping rents affordable, so basically below a certain AMI threshold, in exchange you would get a property tax break in perpetuity. And the property tax break could be issued by a jurisdiction that was far away, in many cases hundreds of miles away from the jurisdiction that you own the property in. Now this all sounds okay, you're creating more affordability. In exchange, you get something that's fine. The clincher was that in most cases, the delta between the Market rent and the affordable rent was non existent. In fact, the market rent was sometimes lower than the AMI threshold rent. So in a nutshell, developers were giving away nothing and in exchange getting a property tax abatement, which in Texas, I'll remind you, is the single biggest line item. It changes the economics completely of a deal. And so this went on for years. There were billions and billions of dollars of property taxes that were wiped off the tax rolls permanently. Last year, the Texas legislature finally put the kibosh on this and it went away. All good. You know, sometimes parties are meant to end. However, this one came with incredibly punitive retroactive regulation where they're like, listen, those deals that got the property tax break, if they're not kosher, we want that back. And so predictably, that set off a wave of distress.

[Will Krasny]

There was a deadline and it's what, early next year, I think.

[Hitan Sumtani]

Yep.

[Will Krasny]

If you had the HFC from a jurisdiction far, far away. Yeah. And you're, you're in Tarrant county, you had until this upcoming deadline to get your own taxing authority to let you keep the break. And you had to show that, I think, what, 50% of the tax savings were being used to keep rents under market. So essentially you weren't just dividending that out or paying down debt with it.

[Hitan Sumtani]

So obviously you have a far less sympathetic audience locally because you actually have to prove that you're creating a public benefit. Whereas if you're going to Pecos county and paying them a few hundred thousand dollars to set up this traveling hfc, they don't care if your rent in Dallas. They're just making money hand over fist. We had done a special episode which I'll put in the show notes about this. And this was about a year or so ago. We had Barrett Lindbergh on to break it down with us. Then the nuclear version of this bill passed, the one that the industry was most afraid of. So now we've checked in on a bunch of these projects and it ain't pretty. What is the latest?

[Will Krasny]

Almost none of them are gonna, none

[Hitan Sumtani]

of them are gonna meet this new bar.

[Will Krasny]

None of them are, gosh, like just putting number. It's something like 340 properties over 100,000 units. And the tax authorities value them collectively at 12 and a half billion dollars. And you sort of have a couple of options. The first is try to build up reserves, raise equity and just deal with your noi going down tremendously and work out something with your lender. The second is try to sell it and just try to get ahead of it. Speaking of, we talked about the New York rent stabilization laws. This is like in 2019, a lot of times your first loss is your best loss. The guys who sold in 2019 did much better than the guys who and said, let's figure out what's going on here. So right now people are trying to shop these deals. I would just say if there's uncertainty around your property tax calculation, the buyers are going to assume the most punitive, like the absolute most punitive. And that does not do a lot for values. So people are taking it on the chin. S2 Polaris tides, the whole kit and caboodle.

[Hitan Sumtani]

In many cases, these were the same deals that multifamily syndicators had put together with the expectation that there was going to be perpetual rent growth. They loaded up, they made their money on the fees up front, and then they ran these deals. When this loophole became available or when they learned of it, they just said, why not? And this is the thing will, right? As a fiduciary, don't you kind of have to take advantage of the loophole if it exists? Wouldn't your investors say, hey man, why aren't you taking free money?

[Will Krasny]

To be very clear, we don't live in an idealized world. We live in the world we have. And you got to take advantage of the rules that are there. So, yes, I don't begrudge anybody for doing a traveling hfc. What you should have done is said, what's the worst that can happen here? Maybe they try to claw this back. Let's keep some reserves and buy T bills or whatever. Like, we need to keep a lot of cash at the property just in case. Or we do this immediately and sell. I have zero sympathy for people who just did this and dividended out all the cash. Yeah, like that is not a business plan. If the deal worked without the HFC and then it goes away, your deal still works. But none of these deals work without it.

[Hitan Sumtani]

Just to put a number on it, Greater Dallas has about 160 properties that are this list of properties that are probably not going to pass muster in this new standard for traveling HFC. They're collectively valued by tax assessors at north of $6 billion. But like, who knows where they actually trade at? Who knows which opportunistic investors? Like, I'm going to take a flyer on these. It's going to be really bloody for a while. We've already seen a bunch of short sales, We've seen some take backs. So lenders are finally Like I don't have any more options.

[Will Krasny]

I think the GPs and lenders, there's a big group saying you can't just take away this free money that you gave us.

[Hitan Sumtani]

That's the big argument which is like, hey, okay, so the tax break, all right, I get it, it was a little bit unfair, I get it. But this is America argument that's being made. There's a legal argument being put forward now. So Jason Post, who runs a company called Post Investment Group, which was one of the pioneers of using the traveling HFC structure and then also said, hey, if I'm using it, there's probably a market for it. So they put together a lot of these deals and very lucrative business for them. So Post Investment Group is suing the Bexar Appraisal District, which is the county seat, San Antonio. They're saying that HB21 violates existing contracts and gives municipalities, quote, incredible power to pull the rug on tax breaks.

[Will Krasny]

I didn't go to law school. And it sounds like the predicate that they're using for this is no takesy backsies.

[Hitan Sumtani]

That's exactly right. Can someone raise a fund to go and then just buy up these deals on, I don't know, cents on the

[Will Krasny]

dollar, 20 on a dollar it is. There's going to be a group that takes a view on this. You can quantify this. The problem is a lot of these markets are the ones that we've been talking about that are struggling with occupancy, struggling with rent growth. So when you have your number one expense going up massively, exponentially, exponentially, and you've got your top line going the other way, that makes it even harder. The short answer is somebody's going to do this. I, I have heard of a couple groups looking at older properties saying like there's a basis for this, that let's go buy this at scale. But the basis has to be right. So that's what it comes down to is the basis has to be right. We don't know where that number is. And if you're buying something now, you really could be catching a falling knife because these things do bottom out. I remember my first multifamily properties I've ever worked on were in Dallas, post GFC. And we worked forever so hard to make like a 2 IRR over like a 10 year hold. And our operating partner also bought a bunch of other deal in Texas in class C apartments. I talked to one of the guys years later and he said, yeah, our thesis was we're paying $40,000 an apartment. How can that go wrong? And they paid like $39,000 a unit. Too much.

[Hitan Sumtani]

That's it for the promote podcast this week. The mother of all property tax loopholes is died and she's left widespread distress in her wake. There's a new contender for the outer borough development crown. And the call is coming from inside the house. And the world's most famous central banker passes at par. I gotta give a little credit for the loss.

[Will Krasny]

I mean, that was a joke that a lot of people made, so I can't really take credit for it. But with that said, thank you to

[Hitan Sumtani]

our sponsors, Bravo Capital. They're a leading hut and bridge lender that lives and breeds capstadt. They'[e-mail] real property captive.

[Will Krasny]

They're the first group captive for mid market owners. You can find them at rpcaptive.com and

[Hitan Sumtani]

Loan Boss, the best in class CRE debt management software. Find [e-mail] I'll see you next week, William. May the fourth be with you.

[Will Krasny]

That is the wrong month for that. May 4th is the May 4th. These aren't the droids you're looking for.

[Hitan Sumtani]

Oh my God. Where did I steal this line from? You know what? I'm gonna leave it at? I love it.

[Alan Greenspan]

It.

[Hitan Sumtani]

All right, thank you, thank you. Ciao.