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- [00:03]
A
Hey, promote listeners. Hatan here. We're off this week for the holidays, as you know, but Business Insider just dropped a banger story on Floyd Mayweather's tangled financial web. And somewhere in the center of that web is a guy called Jonah Rechnitz. Now, Jonah's someone that the promote cares a lot about. He straddles the worlds of diamonds and real estate, and he is the catalyst for a lot of Floyd Mayweather's recent splashy purchases, or, you know, semi purchases and in the CRE market. So we thought it would be a perfect time to rerun this episode. Check it out. Hope you enjoy. Happy New Year, and we'll see you next week. I almost don't want to do a preamble with this one. This story is so extraordinary, it's crazy.
- [00:43]
B
Don't.
- [00:48]
A
Welcome back to the promode podcast, your insider guide to the money and mania of the CRE markets. I'm Hatan Sumtani. Will Krasny is here, as usual. What's up? Listen. The promote is fascinated by commercial real estate's netherworld characters, those that operate in the shadows of money and power. They seem to show up over and over in the rooms that matter, and no one really knows how they got there. One such character was Jonah Rehnit, big guy in New York real estate. Unbelievable amount of juice. That is, until he got caught up in a major corruption scandal and had to flee New York for a new life in la.
- [01:19]
B
Have to go west, young man.
- [01:20]
A
You just gotta go west. Controversy, however, followed in there. Today we chop it up on Jonah, developer, family man, diamond dealer, Floyd Mayweather, whisperer, scapegoat, witness, and a hell of a lot more.
- [01:34]
B
All of this is alleged. We have no inside information.
- [01:37]
A
Yeah. And finally, we dive into a case that shows how supertall living ain't really what it's cracked up to be. Pun intended. A shout out to Air Garage, our sponsor for this episode. Air Garage is the modern parking solution for real estate owners. You'll hear more about them in a bit. Listen, we got. We just got to start with Jonah. It's rare that an article hits me this hard. The Atavist. Do you remember them? Yeah, they put out something great. This is, by the way, a from source of mine sent me the article and they said, have you seen this? And I was riveted. I was enthralled. I spent the next maybe 90 minutes just reading straight through.
- [02:15]
B
I had some time, went through it yesterday and, oh, boy, like, it is just phenomenal on so many levels.
- [02:22]
A
Our audience is probably confused. Why the hell are these guys geeking out about this magazine article? Well, it was about a guy called Jonah Reichnitz. And if you're in New York real estate, that name's going to be familiar.
- [02:32]
B
Or if you're from Borough park, or if you're related to the New York police, or if you know diamonds, or.
- [02:39]
A
If you said courtside at Knicks games or Lakers games.
- [02:41]
B
Yeah.
- [02:42]
A
This guy was one of those characters that had an outsized influence. Like as a developer, I want to say like mid sized, Charitably, not even.
- [02:51]
B
He didn't even really do anything.
- [02:53]
A
He didn't really do anything. Yeah, but like when it comes to juice, when it comes to influence in the right rooms, when Lev, he used to work for Lev Levive, Africa Israel diamond billionaire, you know the guy, he used to work for his real estate company and at some point when Lev flew into town, Jonah Rechnitz got him a police escort right from his private plane. Like, like that's the kind of juice he had.
- [03:15]
B
It's hard to even like get into this article because there's so many places to start. But I think your point about being in the right room. All of these levels in real estate, fashion, entertainment, whatever, they are really small. And if you get in, once you're in, no one really asks how you got in. And so he's here.
- [03:37]
A
I always thought he was like an heir or scion of some sort. Turns out he's really not.
- [03:41]
B
He dad is one of like the nebulously wealthy. He's wealthy enough to where his dad could vouch for him a lot of times.
- [03:47]
A
Sure.
- [03:48]
B
And by the way, like I have a son now and let me just say if he committed this much fraud at some point we'd have an issue.
- [03:55]
A
Listen, we're new dads. I don't think we can say it yet, but I would venture to guess that if my son, who is now 10 weeks old, took some jewelry on consignment and never returned it, I, I would, I would stick up for it. He's my son. What are you going to do?
- [04:10]
B
Anyway, so we're way off topic. Bring it back. So why is, why did we want to talk about this? Because it touches on a lot of the things that are behind the real estate industry, particularly in places like New York, la, and not even just New York and la, like the diamond district in LA and Tarangulus in Los Angeles. Like all of the places that aren't necessarily institutional. It's not John Gray, it's not Steve Ross, but there's big money, big personalities and questionable legality.
- [04:44]
A
And there's always been a nexus between the diamond world and the real estate world. There's a lot of commonality, not only the players. I mean, we spent an entire hour gushing about one of the most famous, Gary Barnett, who came from the diamond world. But there's something about the way that you're operating. You're operating a lot of times on good faith. You're pooling money from a bunch of different people to, to buy the gemstones or buy the dirt. You're operating often without sufficient documentation. You're kind of going by gut. And then you have to take what is, you know, a rough diamond and turn it into a polished gemstone, which is very similar to development in some ways.
- [05:20]
B
Totally. And I just. Everything that is in the built world right now exists because some crazy person said, I'm going to put that together. And, and it's the same in the diamond world. These things are worthless. You can't use them for nothing.
- [05:34]
A
Yeah.
- [05:34]
B
And someone's like, you know what? I can get a guy to pay this much for a wedding ring. Well, less so now. It's a little tough out there for a diamond cartel.
- [05:43]
A
Well, you're thinking about wedding rings. Think about kg. Kevin Garnett. Let me get the fucking Opal, man.
- [05:47]
B
Why's it got so many colors in it, man?
- [05:49]
A
What is this? That's the thing. Yeah.
- [05:50]
B
It's got its huge risk tolerance, hard assets, not a lot of liquidity. So there's a lot of overlap. And so we talk about this guy and it's sort of beggar's belief at times that he's not in prison or dead. But what's interesting in real estate is that one, he's affiliated with like Lev Leviev. Two, he rents his house in LA when he moves there from a pretty big developer, England off. And then he somehow gets Floyd Mayweather. He probably cost Floyd Mayweather more money than he stole in fraud by getting him to invest in New York City real estate. But all of this stuff is just about the vibes of the hugely wealthy, non institutional crowd and how much crypto money has been wandered through real estate he's involved with that he's got a crypto scam. One of his creditors is the guy who owned that insane site in Beverly Hills. The Mountain.
- [06:48]
A
The Mountain. The Mountain in Beverly Hills. Which again, each of these. When I was trying to summarize this piece for the promote last week, I was falling into each rabbit hole and I can't go there. So with the mountain, there is an accusation that the money that put that together came via the Kuwaiti royal family. And now the Kuwaitis are mad at that developer, Victor Naval.
- [07:08]
B
Yeah, that's a lot to digest.
- [07:11]
A
It's hard. And I'm thinking of our poor audience here. Where are these guys going with this? But okay, so what happens here initially is that Rechnence is working for Africa Israel, major holding company with big interest in real estate in the US at some point he notices someone in a circle who has sheriff on his license plate, right. And he notices that you can basically, it's carte blanche to do whatever you want. He figures out how to get that for himself. And the way he gets it is through this guy called Jeremy Reichberg, who is a go between the Orthodox community of New York in Borough park and the nypd. He's like the official liaison for them.
- [07:47]
B
And, and let me just say there's a lot of money to be made being the liaison between the Orthodox Jewish community of Borough park and variety of different things. David Werner, Correct. Jeff Sutton. I mean, there's lots of lots and lots of money there that doesn't necessarily love, you know, a 6040 stock bond portfolio.
- [08:09]
A
Yeah, there's a big reward in New York real estate, I think, particularly if you're the person who can speak to the sheets and the streets. Right. And these are the guys who could.
- [08:18]
B
Do it very well.
- [08:19]
A
And Jonah Reichnow found himself in that world. He starts juicing, I'd imagine like a patrolman to begin with, and then moves up the ranks. Pretty soon he's having bi weekly meals with the chief of police, which is the. The highest uniformed officer in the nypd. Phillip Banks.
- [08:35]
B
Frankly, like, I'm just impressed. I'm not even mad. That's amazing.
- [08:38]
A
It's. That's. I, I am too. I mean, like, you gotta, you gotta admire the pluck of this guy. He took it too far.
- [08:44]
B
But still, you know, I mean, that's what's so funny about a lot of these types of guys is that they're all really talented. Like he's a really talented guy and maybe uses it for ill. But you can't say that he doesn't have it. I mean, because the line between this and guys who are. Gary Barnett is not like that wide.
- [09:05]
A
Somehow I don't see Gary Barnett sitting courtside trying to find the next, you know, wealthy person to juice.
- [09:10]
B
But he does it in his own way, but he still does it.
- [09:13]
A
Yeah.
- [09:13]
B
And we all do.
- [09:14]
A
And I think your point stands, which is like he has figured out where the money is, where the action is. He's put himself in those rooms figuring out how to be around the money and being part of the IT crowd. Even if you're not, like, made of the same money, if you're in the mix, you can get access to that kind of opportunity.
- [09:31]
B
Yeah. And it's all about selling and creating an image. I mean, I saw this great clip of Ken Griffin the other day talking about. I think he spoke at Harvard and he just said that everything is sales. And he's talked about how he was when he was raising money for citadel in the 90s. And, you know, he was just getting crapped on left and right. But he's like, you're selling all the time to everyone, and you have to get it. Be comfortable hearing no. And you have to learn how to convince other people of your view of the world. They have to. You have to convince employees to come work for you. You have to convince vendors to work with you, convince your clients to invest with you. And it's the same thing here. And say what you want about Jonah Recknitz. My is a little bit challenged relative to you, but he was able to convince all these people to part with gargantuan sums of money for the craziest of schemes. I mean, he got. What the. This guy. What's his name? Bob Anglinoff.
- [10:25]
A
I think it's Robert. I don't know if you can call him Bob. Sure.
- [10:27]
B
Okay, Bob.
- [10:28]
A
Sorry.
- [10:29]
B
Bobby E. He got Mingo off to put up $2 million against the pay per view for the Floyd Mayweather Jake Paul fight. And then he rolls it, like four fights in a row.
- [10:38]
A
Yeah. He's like, hey, no, no, no. We've. There's a new fight that we're going to, you know, stick your influencer versus another fighter into. And what I think that Jonah does that maybe is something to be appreciated, is that he takes advantage of the fact that even when these things are legal, they're often done like this. They're often done word of mouth. I know a guy in the entourage who knows a guy, et cetera. Right. The economy here, the gray economy, is really how this works. And he mastered how to get into that.
- [11:07]
B
The gray economy is how development in real estate investing writ large works. Because if you're a developer, you don't know necessarily how to, like, lay sheet metal. I don't know what gypsum is.
- [11:17]
A
Right. Except you like saying it.
- [11:19]
B
I do like saying it, but you need to have a guy for everything. You don't need to know how to do it. You need to know someone who knows how to do it. And so again, the reason why we wanted to talk about this, even though it's not necessarily like directly real estate, is because you see these things and this is what powers a lot of flows into New York real estate. So the reason why 157 sells so well is because of guys like this and the money flows in from here. And so all of this stuff has such big impacts on what gets built. Because then, you know, does 111 West 57 get built if diamond money doesn't go into 157, does 432 Park? Does Miami have the boom that it's having if crypto doesn't come in?
- [12:04]
A
Well, what you're saying here is that the catalyst for many things that we do see is often the source of the money is often these kind of fuzzy gray areas like this. That's what you're saying.
- [12:14]
B
A hundred percent, yeah.
- [12:16]
A
So while he's collecting real estate cloud, he's also importantly collecting political clout. He's in with de Blasio, he's in that inner circle. And then he gets wrapped up in this massive corruption scandal, the nypd, right. And then there's a very dramatic scene in the Atavist story where he's walking around with like a luxury bag full of cash, like $60,000 in cash. And that's kind of when it's the beginning of the end for him in New York.
- [12:42]
B
Somewhat unclear as to how literally everyone involved except him went to prison. And I guess he turned states to that point.
- [12:50]
A
Will, there is an amazing, amazing quote from one of the lawyers whose client is suing him. He says the following quote, Jonah's pretty much judgment proof he's the Jewish John Gotti.
- [13:01]
B
I would have said he's like the Jewish what's his name from Boston, Whitey Bulger, who's. I mean, it's the same thing.
- [13:08]
A
That didn't end up too well.
- [13:09]
B
No, it didn't, but it's incredible. And a lesser man might have been chastened when he moved to la.
- [13:19]
A
This episode is brought to you by Air Garage. Air Garage is a full service parking management solution with braiins. Goodbye gate arms and ticket dispensers, hello QR code based payments and license plate reading cameras. For drivers, that means ease. For owners, it means an NOI boost. And unlike other parking operators, Air Garage's tech is all built in house, so it actually works. Go to airgarage.compromote to learn more, that's airgarage.com promote one thing we should have probably said when we talk about him leaving New York is I want to probably read this quote. So Jonah Rechnitz, he gets busted in New York and he turns witness, right? He turns witness. In what became probably one of the biggest NYPD corruption cases in the modern era. A US Attorney called him the following, quote, one of the single most important and prolific white collar cooperating witnesses in the recent history of the Southern District of New York. That's a big fucking statement.
- [14:16]
B
Yeah.
- [14:16]
A
And somehow he avoids prison time on some kind of random technicality.
- [14:20]
B
I forget exactly what it was.
- [14:22]
A
Somehow they proved that one of the judges in the case had a conflict of interest of some kind.
- [14:26]
B
Now, the other thing I always wonder here, and this is like, maybe just know something I've thought about too much. But who pays for all the lawyers here?
- [14:33]
A
I. I have the same question at all times. You'll see, like, guys are supposed to be destitute with like the fricking Ben Brafman type.
- [14:40]
B
Someone who's like, oh, I'm getting sued, you know, or I'm suing over this money and I'm hiring freed Frank at fourteen hundred dollars an hour. You can't get like a will done for less than like 5 grand from like a decent attorney. Like, these lawyer bills can be like mint six figures, like in a second. Yeah.
- [14:55]
A
Anyway, we come back to LA, and.
- [14:57]
B
In LA, he rents a $17,000 a month house in Beverly Wood for his six kids, as one does, and starts.
- [15:04]
A
A jewelry business, as one does.
- [15:06]
B
And I, I think one of my favorite pieces of the story is when he walks into the other famous jeweler's office and goes, people tell me that you're my number one competition. And I figured we might as well just work together. And the guy's like, who the fuck are you?
- [15:19]
A
Again, the chutzpah that it takes to put a New York real estate deal together translates perfectly into putting these diamond deals together. And so pretty soon, this guy is like the celeb magnet. He's got Kimmy K. He's got Kim Kardashian wearing one of his pieces because it's iconic. He's got Floyd obviously kind of pimping a lot of his jewelry as well. He's become the designer to the stars.
- [15:42]
B
He's got Josh Altman from Million Dollar Listing Los Angeles. He's got all this stuff. The deals are apparently working, but again, all this stuff is done on faith. And it turns out he wasn't actually selling these diamonds, unsurprisingly, in la, these.
- [15:57]
A
Patterns of shady money disputes with partners, et cetera, proliferate. There have been, at least, according to the ATAVIST, at least 13 lawsuits filed against Rechnitz or his companies since he's moved back to la. And he's only had to. There's only been a judgment against him on two of them. So again, Teflon man here, he kept taking out loans.
- [16:18]
B
So he would get these drools on consignment and he would take out these loans.
- [16:21]
A
I'm not sure if all our listeners will be aware of what consignment is. It's a very standard way of doing business. Jewelry business.
- [16:28]
B
Yeah. So basically you would go up and say, I want. I think I can sell four of these things, these big diamonds, and they'll give them to you and you take the risk. So if you make us. If you can sell it for more than you took them on consignment for, you make the spread. And if you don't, you have some very scary people who want to come after you.
- [16:49]
A
Did I tell you my dad was a gold jeweler back in Dubai back in the day?
- [16:52]
B
You did not.
- [16:53]
A
It's like one of the most interesting things about him. So even now, when we go buy a jewelry or something, his, like eyes light up. He's got the. The old trade in him.
- [17:00]
B
Amazing. So, Jonah, what he would do is go get loans against those. And I know what you're thinking, you know, oh, gosh, like it's a home equity line of credit or whatever. Maybe he's paying a crazy interest rate. Maybe he's paying like 14%. No, he was paying like 8% a month.
- [17:16]
A
That's like a loan shark rate.
- [17:17]
B
I mean, it's usury.
- [17:18]
A
You know what's interesting? Those kind of rates. Where else you see them is in these. They're called. Are you familiar with the concept of show capital?
- [17:25]
B
Oh, yeah. If you have to show proof of funds. Yeah.
- [17:28]
A
Correct. So this has been happening a lot. And a tangent that's important here. This has been happening a ton in New York real estate, particularly in sub institutional New York real estate, where if a buyer needs to show that they have a certain level of assets to do a deal, they're going to some of these deeper pocketed guys and they're getting the money in their account for a small period of time and then they're paying that kind of interest on it.
- [17:51]
B
Yeah, everything's done like a little bit with a wing and a prayer here. And again, this is not typical necessarily for the promote, but I think what's great about attend, because he brought this to our attention is just real estate touches everything. Real estate is every trend that's in the world. Real estate's involved somehow and this guy's just in the middle of all of it and it all flows through and.
- [18:16]
A
He is an object of serious fascination. I can tell you by the numbers. So our audience is generally developers, lenders, brokers, hedge funds, blah blah, blah. The article that I embedded in the promote, the Atavus article, was clicked through more than 300 times from last week's newsletter. So people are obsessed with this guy. They're probably connected to this guy. He probably owes them money in some cases. But Jonah Rechnitz, one of one guy, New York real estate, Los Angeles real estate and diamonds, fascinating character, touches upon so many of the things that I guess human nature is just drawn to, right? Shady money, gray areas, political power, celebrity and diamonds.
- [18:52]
B
He's just like a Shakespearean character.
- [18:57]
A
I feel like developers only care about one thing, which is sales velocity. Once you've sold enough units to make your promote like, eh, who cares what else happens?
- [19:06]
B
I think they care about fees and the fees come before the promote. But in condo sales, yes, these things are built not to last necessarily. They're built to sell. And sometimes you can as the buyer, people have to hold in the bag. I mean caveat emptor is a thing for a reason.
- [19:27]
A
And I think the point you made about not being built to last necessarily is kind of at the center of the story. We're going to talk about, we're going to talk about a major lawsuit at 432 Park Avenue filed against the developers, CIM Group and nominally developer Harry Macklow. But what's interesting here is the kind of the life cycle of billionaires Row. We talked about Gary Barnett a couple weeks ago kind of birthing this corridor, 57th street now one of the most famous real estate kind of mini markets in the world. But it's only what, 15ish years old. So all the product that came online, all the crazy amounts of money that were spent building the stuff, lending on this stuff and then buying this stuff, we're only now starting to see what it actually kind of when there's a little bit of wear and tear on it, what does it look like? And that's why I thought this story was so interesting. This is like finding it at a moment where you start to see a little cracks in the facade, so to speak.
- [20:22]
B
And it's not even just that. It's also just the taste. 157 people thought it was, you know, had a different view of it architecturally than they do now, for sure. Question I have is like, has anyone made any money on 57th Street?
- [20:36]
A
What do you mean? Like, I think Gary Barnett did very well on 1 57.
- [20:39]
B
They still have sponsor units.
- [20:41]
A
They sold out enough to. To make their nut, I'm sure.
- [20:44]
B
I don't know.
- [20:44]
A
I mean, Vornado said they cleared a billion dollars in profits on 220.
- [20:48]
B
No, that's true. And I guess that again, they started that land sound of how many years ago. And again, this stuff's all super hard. And these people are incredibly impressive. I'm not trying to demean anybody, but like Harry, for instance, paid what, four hundred and something million dollars for the Drake that was vaporized. And, you know, this thing got built. I actually think it's quite attractive.
- [21:11]
A
You're. You're a fan of 432?
- [21:12]
B
Yeah, maybe. I'm in the minority.
- [21:14]
A
It's a pretty building. It's inspired by a trash can, but it's quite aesthetically pleasing, I think.
- [21:18]
B
I think so. What's interesting, though, is that these projects take a while to sell out, especially at this high price point. And, you know, if you're a developer, you're on to the next one. Harry Macklow was on to One Wall Street. You know, CIM is one of the most active real estate firms around. You need to pay back the loan. That's the first key. Like, so can developers care about payment And.
- [21:42]
A
Yeah, but. But they did. I mean, they took a construction loan from children's investment fund. They got the hedge fund out. They. I will say that they crossed. So they launched sales in 2013. They crossed the $2 billion sales mark in 2018. My gut is that they made money here, even though they might have had some units kind of still in the pipeline.
- [21:59]
B
Right. No, Fair enough. But again, I think the most important number. You said there's 2013.
- [22:03]
A
Yeah.
- [22:03]
B
So that was 12 years ago.
- [22:05]
A
Jesus.
- [22:05]
B
Yeah. So this thing is starting to age a little bit. It's not quite dog years, but in skyscraper years, it's getting up there. And so there have been famously, a couple of articles about this. Yeah.
- [22:16]
A
The New York Times had this front page story, I think it was called Life at a Super Tall. And they were talking about how when you throw the trash down the chute, it sounds like a bomb's going off.
- [22:24]
B
Because it wasn't angled. And so it just went straight down. Just Straight down, kind of amazing.
- [22:29]
A
So imagine you're like a friggin, you know, Russian oligarch type who pays 30, 40 million dollars to. To live in this cocoon of luxury.
- [22:36]
B
Well, the Russian oligarchs are paying to not live there.
- [22:39]
A
Fair.
- [22:39]
B
But, you know, these things aren't. Aren't necessarily made to be livable. Like, that's not the point. The point is the view. Everything's constructed around the views. They're not constructed around, like, modern life. I mean, how long do you spend in the elevator if you're on the 88th floor?
- [22:53]
A
Correct.
- [22:53]
B
I mean, I know they have super fast elevators, but it's like minutes.
- [22:56]
A
Right. And even the, Even the amenities that, you know, we talk a lot, even in the rental market. I'm sure this happens where you, you know, you walk and you tour a place that has a billiards room.
- [23:05]
B
I just was talking about this the other day. I was touring something and like, the pool is only important for the leasing tour. Yeah. The gym is only important for the leasing tour.
- [23:14]
A
Yeah.
- [23:14]
B
You know, no one uses this stuff, but you have to have them. It's like an amenities arms race.
- [23:18]
A
Whatever. The amenities, arms race is when you're paying 7,000, 8,000, $9,000 a square foot changes. Right. And in this case, you have stuff like a private restaurant.
- [23:27]
B
Yeah.
- [23:27]
A
That's supposed to be free for residents, but is no longer free. Right. Because the reality of managing a property like this catches up.
- [23:34]
B
Yeah. And you say whatever you need to do to get these things sold. And then it's like, oh, yeah, actually, like your HOA fees are going up like a thousand percent because it's really expensive to keep up a building like this. And so what's actually happening here is these aren't, you know, lifestyle issues. These are actual, like, structural defects.
- [23:53]
A
Yeah. Yeah, we should. Well, that's a good point, Will. I'm glad you made it. We should distinguish. Distinguish between the stuff that people are saying, which is like, this building is a freaking disaster, as I live in the garbage. Sounds like this or that. And the lawsuit. Now the new one, which is $165 million legal action, which says the developers were aware of structural defects and yet continued to, like, fuck it.
- [24:14]
B
Yeah. I mean, the condo board is basically saying that the developers were aware that there were signs of, like, cracks in the facade and kept going. And again, there are laws about how long developers liable for construction defects. You know, Florida just changed it. They extended theirs, I think last year from seven to 10 years.
- [24:32]
A
What is it in New York?
- [24:33]
B
Are you are you where? I'm not sure off the top of my head. But it's a real problem. Like, and I'm not. Again, all of this is alleged. We have no inside information. But if they have proof that Matt Clow, who was, quote, not a concrete expert, argued that the invisible sealant was good enough for his yacht and therefore was good enough for the building, that's not awesome.
- [24:58]
A
The vibes of this thing, he's like, oh, yeah, unfurled my yacht that I, you know, sail away with my French wife. It works there. It's probably going to work on this 1400 foot tall tower that has a lot of people living in it.
- [25:10]
B
So dumb. It's brilliant.
- [25:11]
A
No, it's just dumb.
- [25:14]
B
Yeah. And again, to differentiate, like, there's this thing called ve. Right. Like you can literally see in an Excel spreadsheet for a construction budget, there'll be like a ve line that means value engineer. And what that means is like, hey, that really nice, like, bathroom tub we were going to have, it's going to come from Home Depot.
- [25:34]
A
So the travertine marble is replaced with something that you can buy down the street.
- [25:37]
B
Exactly. So it's basically, if you go over budget areas, you know, you can cut and still like deliver a building that's livable, but maybe not at the level that you thought. Yeah, like, that's everywhere. Every developer does that. That's not specific to this building. That is everywhere. And this is not that.
- [25:54]
A
So this is the point they're making in this new lawsuit, which is why it kind of elevates the seriousness of it. What they're saying is Rafael Venioli, the late startchitect who designed this, his firm flagged some of these issues, the structural engineer flagged some of these issues, and the developers just went ahead anyway. And that, that's what makes this a pretty explosive lawsuit.
- [26:14]
B
Right. And again, we're not. It's sort of not clear the severity. Right. Because you know, they're not saying the building is going to fall over, the building is going to collapse or anything like that. But obviously anytime you have cracks in a facade of something that's 1400ft tall, like, it's a problem.
- [26:29]
A
Yeah. And also we should obviously say for the record that cim, which is the primary developer on this thing, controls the purse strings, has vehemently denied the claims in this lawsuit, is going to move to dismiss it, obviously. But I think there's a couple of broader points here. Whichever way this lawsuit goes, we're kind of seeing what the long term Vision of living in one of these things looks like what it actually means for the well heeled residents who chose to buy in that. And I think that's really interesting. And the other part is in any other asset class, right. Once you do a thing, you learn from it and you can kind of do it and do it kind of over and over again. There was an elevator consultant who told New York magazine made a great point. He said for these kind of skinny super talls, once you get over 40 stories, every one of these towers is a prototype. So learnings from one may not necessarily apply to another because every different shape and these come in all matchbox 432 park. You've got Steinway's a whole different thing. 220 is a whole different thing. And he said each one kind of has its own personality. And once you go above a certain height, all bets are off. I thought that was super interesting.
- [27:38]
B
No, that's exactly right. I mean we only got good at building by building over and over again. And we've only built what a half dozen of these types of buildings ever. I mean there's a reason that like Hilton Garden Inns don't really have this issue, you know, like you build a lot of them or same with like garden apartments. I mean not to say that those all don't have issues, specific issues, but we know how to do it and you can almost like do it road templatize it, right? Yeah. And I mean first of all, and to go to the other side of the equation, it also just brings home like how staggering in an achievement it is for any of these ever get built.
- [28:17]
A
The fact that these are around is just really staggering. Yeah.
- [28:21]
B
So you know, all credit to everyone who has the got the capital and the just ability to do this because it is truly something.
- [28:33]
A
Yeah. And you know, I've been binging the B1M former partner of the promote as well. And a couple things, but the level of intricate engineering and design and financing, all the stuff that has to come together to even put one of these things up is pretty astonishing. But there is something here that is being said which is that developers are passing the buck when it comes to for sale condo projects. They're passing the buck on to a buyer who may not be as sophisticated, may not understand what's going on. So there was a structural engineer who kind of really hit this home and he said that what's going on in these supertalls is structural corruption. It's the way development operates in New York. The people who put up the buildings are not accountable for their quality. As long as problems don't crop up before they unload the property, they can do whatever they want.
- [29:18]
B
And the last thing I would say too is that if you've ever bought a home of any kind and you do your home inspection, you have your guy in there for 90 minutes and he looks at the, you know, the radiator, he looks at the. Make sure the toilet flushes, make sure the lights go on and off. You can't reasonably due diligence on any of these buildings before you buy it. It's just impossible. And so you're just essentially like giving a ton of trust to the developer that the thing was built well incorrectly. And again, and these things are so complicated, it can happen, you know, layers and layers and layers below the developer 100%. So but just no one can really diligence it. If you're buying into any of these super talls, I mean, are you. How do you know that like the ES was installed correctly? Like, how do you know if the foundation is done correctly? I mean, we have famously. What is it, one seaport that's tilting. Yeah, this stuff happens. It's so hard. So again, we don't mean to like highlight this article to demean anybody, but it's, you know, we've created something that like we almost can't really control.
- [30:24]
A
Yeah. Can I cook on the media side for a second?
- [30:26]
B
Of course, go for it.
- [30:28]
A
So. So what happens in these things I've always found interesting is when a luxury project of this stature comes up is there is like this intense period, I want to say it's like a 12 month, 18 month period where the PR people are basically, they're paid double, they're all over it. Right. That they just come at you with all these articles. One day it'll be a profile of the starchitect who was inspired by the sacred geometry of the whole thing. The next day they'll give you access to the developer, which is quite rare. The next day they'll kind of get wonky about the design. And there's this whole strategy of all the publications you want to hit. The net result of something like this is that you have this web of coverage that creates this impression that this is the building you got to be in. Right. And that impression is super important for sales velocity. And once that passes, then people start asking the questions. But that, but that cocoon is so strong and it's kind of addictive. Like it's really a, it's an Art.
- [31:24]
B
It's almost like launching a movie. Like, you gotta open. Yeah, yeah. Because if you don't sell right away, that's when you're gonna get most of your sales. So what we're seeing now is that the skyscraper dreams that got these things built were waking up at the end of it, because it's now 10, 15 years later and we're figuring out exactly the results of the science experiment and construct an engineering experiment that we did on 57th Street. And we may not like what we found.
- [31:53]
A
We're not singling out this building, even though we'll see how this plays out in court. But I think the lawsuit here at 432 Park Avenue brings up a broader issue, which is like these buildings are now, you know, they've gone. Enough time has passed that we can ask the question, are they going to stand the test of time? Right. There's enough wear and tear. There's a little bit of hair on these buildings now. They're no longer the shiny buildings they were maybe five, 10 years ago. And what happens with these kind of things might kind of bring up broader questions for new developments of this kind. Super tall luxury projects. There might be more skepticism, there might be more examination and there might be stricter standards. And that's why I thought this was a great story to talk about. Absolutely.
- [32:36]
B
And I think you're going to see it not just in New York. You're going to see it in Miami, you're going to see it in other markets in Florida.
- [32:41]
A
Oh, Miami, God, yeah. Have you ever been in Toronto? Those buildings are fucking disaster. It's like the facade just falls off. It's terrible. That's it for the promote podcast this week. Sketchy diamond dealers slash developers and then super tall luxury towers with literal cracks allegedly in them. Thanks again to our sponsor, Air Garage. You can see how their full service parking management solution benefits you by going to airgarage.com promote. That's airgarage.com promote.
- [33:18]
B
Like Share Subscribe 5 star reviews only. And please write us@podcastepromote.com we'd love to hear from you. Tell us what you like, what you don't like. Just tell what you don't like. I.
- [33:31]
A
He just needs the praise. He's still a little fragile from the last couple weeks. But listen, our listeners. This is our 10th episode. A lot of podcasts don't make it this far. We intend to keep going. We're really having a great time. So thank you to our listeners. We really, really appreciate you.
- [33:45]
B
Yes, thank you.
- [33:46]
A
Well, I really appreciate you, man.
- [33:47]
B
Appreciate you, buddy. I love you, dude. I love you, bro.
- [33:51]
A
Montana. I love you, Holmes.
- [33:52]
B
I love you, bro.
- [33:55]
A
Ciao.