The Skyscraper That Broke America

Summary

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The Promote Podcast – Episode Summary

Podcast: The Promote Podcast
Host: ten31 Media (Hiten Samtani & Will Krasne)
Episode: The Skyscraper That Broke America
Date: October 22, 2025

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Episode Overview

This week, The Promote Podcast delivers a deep-dive into three stories capturing all the drama of the Commercial Real Estate (CRE) world:

• The wild, spectacular saga of Manhattan’s 666 Fifth Avenue, including its record-setting purchase, financial woes, and political intrigue.
• The high-stakes—and sometimes explosive—game of bulk condo buyouts in Miami.
• Banco Santander’s aggressive moves with distressed rent-stabilized portfolios in New York.

With their signature wit and insider perspective, hosts Hiten Samtani and Will Krasne dissect headline-grabbing deals, sharp-elbowed negotiations, and the characters who shape today’s real estate market.

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1. 666 Fifth Avenue: America’s Most Controversial Skyscraper

The Ultimate CRE Cautionary Tale
[02:09] – [22:28]

The Kushner Era: Ambition, Overreach, and Dominoes Falling

• 2007: The Record-Breaking Purchase

  • Jared Kushner leads the Kushner Companies’ $1.8 billion acquisition of 666 Fifth, a sum “gargantuan” even for overheated times.
  • Quote:
    • “They just go balls out ... sent him a one page offer and it had a number on it ... $1.8 billion.” – Hiten [05:41]
  • The deal was financed with a mere $50 million in equity and $1.75 billion in debt from UBS and Barclays—a typical leverage for the era.

• The Backstory: Family Drama & Reputation

  • The deal followed patriarch Charlie Kushner’s scandal and prison stint—a “really dark scheme” involving hiring a prostitute to entrap his brother-in-law.
  • Quote:
    • "There's been a lot of lying in this family and a lot of love. More lies. Incredible upheaval." – Hiten [04:07]

• Red Flags from the Start

  • Even before any leases were signed, the building’s office component was appraised at $2 billion, more than the Kushners paid for the entire property.
  • Quote:
    • “How do you get an appraisal like this? What the hell is going on?” – Hiten [07:54]
  • The structure of CRE deals was exposed:
    • “When the ducks are quacking, you gotta feed them. Everyone's incentivized to have these deals close. Everyone eats. And that includes the appraisers.” – Will [07:57]

Crisis & Rescue: Sharks Circling

• Financial Trouble Hits

  • The global financial crisis leaves the Kushners hemorrhaging—losing $3.5 million per month.
  • With reserves dwindling, the flagship property threatened the entire family business.
  • Quote:
    • “If you get foreclosed on a building like this ... it's really hard to get debt if you've just got foreclosed on a $1.8 billion acquisition.” – Will [09:55]

• The Vornado Bailout

  • Steve Roth (Vornado Realty Trust) offers a lifeline—but at “11% interest on the money they actually invested as pref ... take it or leave it, son.” – Will & Hiten [10:24–10:51]
  • Sharp-elbowed negotiations and even attempted newsroom hit pieces on rival investors highlight the cutthroat atmosphere:
    • “Jared Kushner tried to run a hit piece in his publication ... known colloquially in the newsroom as the Big Dick Mack story.” – Hiten [12:06]

• Selling Off the Crown Jewels

  • To stay afloat, the Kushners sell off the prized ground-floor retail to Crown Acquisitions and Carlisle ($525M), then later to Vornado ($700M).
  • Amid all this, the property continues to bleed cash and can’t regain its footing post-recap.

Political Intrigue & the Art of Inscrutability

• Enter: The Trump Era

  • After Trump's 2016 win, Jared’s family standing changes overnight. The once-doomed building now belongs to the President’s son-in-law.
  • Global players—Anbang (China) and then Qatari investors—circle the asset.
  • Quote:
    • “All of a sudden, instead of just having a hemorrhaging building on 5th Ave, he has a hemorrhaging building on 5th Ave. And he's the President's son-in-law.” – Will [13:58]

• Anbang’s Wild Proposals & Downfall

  • Anbang proposes a $4B recap and envisions $7B luxury condos, with fantastical projections.
  • “You'd have to basically underwrite the condos at ... $9,000 or $10,000 a square foot.” – Hiten [15:23]
  • Anbang collapses in scandal, the CEO sentenced to 18 years in Chinese prison.
    • "If you choose to stay in rural villages, you can only meet common village girls ... If you come to Paris, you'll have the chance to lay your eyes on the Mona Lisa." – Wu Xiaohui (Anbang CEO) [16:03]

• Failed Qatari Bailout

  • Charlie Kushner’s direct negotiations with the Qatari finance minister draw scrutiny.
  • Epic Charlie Kushner interview:
    • “Are you guys going to be assholes today or are you going to give us a fair shake? ... Do you want me to throw you out of here right now? Because I will.” – Charlie Kushner (quoting from The Real Deal interview) [17:39]

Resolution: Brookfield’s Subtle Save

• Brookfield Arrives
  • Through complex ground lease structuring, Brookfield (backed in-part by Qatari money) effectively rescues the Kushners from ruin, solving massive tax problems.
  • The property is rebranded, receives major capital investment (~$400M+), and lands major tenants (Citadel, Scotiabank, Viking Global).
  • Recent $1.3B refinancing closes the story, appraising the tower at $2B—bringing values full circle.
  • Takeaway Quotes:
    • “This isn’t a real estate asset. It is a like global trading sardine.” – Will [21:30]
    • “When you play Uno or Monopoly, you have the get out of jail free card or the wild draw 4. This felt like that.” – Hiten [21:48]
    • “Yeah, it's Chinatown, Jake.” – Will [22:24]

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2. Miami Bulk Condo Buyouts: High-Wire Acts & Holdout Showdowns

[23:15] – [29:10]

Aging Buildings, New Ambitions

• Developers pursue bulk condo buyouts in Miami, aiming to redevelop aging waterfront buildings after Surfside’s collapse heightened safety concerns.
  • “If you bought a condo in 1984 ... needs the entire foundation to be retrofitted ... the assessments just creep up on you and suddenly this doesn't make any sense anymore.” – Hiten [24:00]
• Developers like Two Roads perform strategic bulk purchases, aiming to reduce required owner approval for terminating condos, then redevelop into luxury.

Legal Battles & Leverage

• In one case, Two Roads amends condo bylaws to drop termination threshold to 80%, then sues holdout owners.

  • Florida Supreme Court declines to hear the case, blocking developers' plans unless they massively sweeten buyout offers to holdouts.
  • “There's nothing else for Two Roads to do ... interest is piling up. Right. So Ozk wants their money. Fisher Brothers, once they're good, definitely wants their money.” – Hiten [27:18]

• Parallel to legendary NYC battles (“15 Central Park West holdout guys”):

  • “At the end ... the last couple of holdouts got I think sums of like $15 million to leave.” – A [26:52]

• Memorable (and shocking) quote from a Miami condo holdout:

  • “I'm happy in the way a rape victim might feel happy when the jury comes back with a guilty verdict ... you still live with the rape.” – Robert Murphy [28:46]

• Takeaway: "It's a game of people. It's not just spreadsheets... You have your right to your own property. And if someone comes in, just because the pro forma says they need these things to work doesn't mean the people are going to want to leave." – Will [27:43]

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3. Banco Santander & NYC’s Rent Regulated Reckoning

[30:00] – [35:32]

The Signature Fallout & Hardball Lending

• After Signature Bank’s collapse, Banco Santander acquires a large rent-stabilized multifamily loan book ($1.1B stake) and signals tough enforcement.
• Major institutional landlords (L+M, A&E) default; Santander refuses to accept “deed in lieu,” bucking CRE norms.
  • “It's kind of understood that if we default, you, lender, you must take it back. And Santander is like, no, it's not.” – Hiten [31:40]
• Lawsuits fly, with Santander even seeking receivership by highlighting alleged property mismanagement.
• Loans in default accrue default interest at an “involuntary rate”—as high as 24%.
  • “Interest ... shall accrue at the involuntary rate. This rate, by the way, [is] specified in loan docs at 24%.” – Hiten [34:10]

The New Normal: No More Soft Landings

• The willingness of Santander—a traditional bank—to play as hard as private credit signals a new era of lender aggression in distressed multifamily.
• “If you are not this size, you should be a little bit afraid.” – Will [35:04]
• Poignant moment: Santander served a Valentine’s Day default notice—“It's a Valentine's Day massacre.” – Will [35:24]

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Notable Quotes & Memorable Moments

• CRE as High Drama:
  • “I think if you had to pick one single skyscraper to capture both the financial and political kind of mood of the country. 666 would be my pick. It's got everything.” – Hiten [02:22]
• On The Madness of 2007:
  • “There was unlimited financing for anything ... crazy high loan to values.” – Will [06:33]
• On Betting Big:
  • “If you are buying a deal this size, you are making so many different macroeconomic bets without even really realizing it.” – Will [21:03]
• On Retail Highs:
  • “At the time, like Fifth Avenue high street retail was seen as sort of like as gold plated in asset class as you could have in New York.” – Will [12:57]
• On Law, Leverage, and Human Stakes:
  • “People are fucking with people's homes, you know, and right or wrong, like, you have your right to your own property.” – Will [27:43]

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Key Segment Timestamps

• 666 Fifth Deep-Dive: [02:09] – [22:28]
• Miami Condo Buyout Saga: [23:15] – [29:10]
• Santander’s Multifamily Maneuvers: [30:00] – [35:32]

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Takeaways

• Markets are more than numbers: At the top, every deal becomes a global power play.
• Humans drive—and disrupt—deals: Condo buyouts and landlord-lender battles hinge on both law and emotion.
• **CRE remains a game of outsized egos, risky bets, and the occasional get-out-of-jail-free-card—if your surname happens to be Kushner.

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For More

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End of Summary

Transcript

[A]

When love presents itself at first sight, it's pretty apparent.

[B]

You can see the chemistry working. You can tell it's happening. Just like when someone spots a woman across the bar.

[A]

Now, we might sound like the narrator for a softcore movie from the 80s, but in reality, that's investment sales broker Scott Latham describing Jared Kushner smitten during the walkthrough of what would become America's most controversial skyscraper.

[B]

Jared Kushner does kind of look like the main character in Body Double.

[A]

Oh, that's doing Jared dirty, man.

[B]

No, it's not.

[A]

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

[B]

And I'm Will Krasny.

[A]

Since it's the Wally. Happy Diwali to my paisan, Happy Diwali. We're bringing extra fireworks this week in the form of 666 Fifth Avenue, the Manhattan office tower that most perfectly captures both the financial and political zeitgeist of this country. Brookfield's just landed a big financing on the tower and we thought it was probably perfect time for its insane backstory.

[B]

We then get into the high wire act of bulk condo buyouts in Miami. And what happens when someone doesn't quite nail their Philippe Petit impression?

[A]

It. Yeah, it gets pretty rough. And finally, we check in on Banco Santander, which is playing rough with delinquent sponsors on its New York City rent stabilized book.

[B]

Could listen to you say Santander all day.

[A]

A shout out to our sponsor Bullpen. They're a CRA dedicated recruitment shop and we're going to tell you more about their special offer for Promote listeners in a bit.

[B]

And a reminder to check out the Promote Insider, our premium tier for paid subscribers with exclusive insider content. Founding memberships are now live at 240 bucks a year. That's 20 bucks a month. That's less than a dollar a day. You could buy term life insurance for that.

[A]

We got some spicy stuff up already and much, much more to come. Go to thepromote.com upgrade to join the fun. All right. To 666. What a life it's lived.

[B]

Man, oh man, this is. This one's been.

[A]

You know, I've been wanting to do this one for a long time.

[B]

I know you have. And it's one of the great building stories in New York and frankly in all of commercial real estate. So I'm excited that we're going to be taking in on it.

[A]

I think if you had to pick one single skyscraper to Capture both the financial and political kind of mood of the country. 666 would be my pick. It's got everything. I mean, where do we begin? Record pricing. Cocky scions buying from one another. Insane appraisals. Overheated cmbs, Market fluctuations. Hardball. Preface. Vendetta is in the press, and there's a lot more there.

[B]

Political jockeying. Deals bought as not. Not a favor, but also not a favor. Leasing hits, huge refi.

[A]

And a great comeback story.

[B]

Well, and a great comeback story, but in a great comeback story in the New York, where it's like everyone worked really hard to make like a 1, 3.

[A]

All right, so maybe our story should kick off in 2007 at Kushner Companies.

[B]

What a time.

[A]

Yeah, what a time. I mean, the markets were overheated. This is right after Stytown traded. This is Gogo days. Lehman. All kinds of crazy stuff happening in the broader financial markets. And there's a changing of the guard. What's happened is Charlie Kushner, the patriarch, the visionary really, behind Kushner Companies, he's just been released from prison. And the crime, honestly, is one of the most. I'm struggling here as a man of words. I'm struggling to find the words for what went down.

[B]

Charlie Kushner entrapped his brother in law and recorded the audio of it and sent that audio to his sister.

[A]

Entrapped with.

[B]

Entrapped with a woman of the night. Jesus.

[A]

You said it, man. Yes. So Charlie Kushner hired a prostitute to seduce his brother in law because he was mad at his sister because his sister had taken the side of his brother that he was feuding with. In revenge, he pulled off this really dark scheme and eventually went down for witness tampering.

[B]

There's been a lot of lying in.

[A]

This family and a lot of love. More lies. Incredible upheaval. We'll put a New York Magazine absolute banger of a piece in the show Notes.

[B]

Yeah, the Gabriel Sherman piece. Yeah.

[A]

Gabe Sherman's piece is amazing. Read it. So Jared's now in charge at Kushner Companies. He's a child who wants to make his mark on the skyline. New Jersey doesn't really cut it. Suburban portfolios don't really put you on the map, but a skyscraper on Fifth Avenue certainly can.

[B]

Absolutely. I mean, think of it this way. How many people listening to this podcast have heard of Mitch Morgan? That guy's probably the second richest person in real estate in the United States. But, yeah, like another striver from the outer boroughs who wanted to make his mark on Fifth Avenue. Jared came in in the overheated market of 2007 and tried to buy something before this. I forget exactly what building it was.

[A]

They were basically runners up on a couple of bids is what is the story.

[B]

So when 666 came out, Tishman owned it. They said, we're not going to miss this one.

[A]

Tishman Speyer had bought it with the Germans in 2000 for just north of 500 million, so roughly 400 a foot. There was whispers that it was coming back to market or that Tishman Speyer would be willing to part with it at the right price. And that price was pretty damn high.

[B]

Yeah. Oh my gosh. So Jared tours it where the quote at the top of the podcast came out from, from the sales broker, which is just fantastic.

[A]

And we've been hearing that like this was a pretty damn giddy tour. They showed up with 20 people and there was a lot of excitement from the Kushner camp, let's say, for this.

[B]

Property, which I don't get. Like the location is obviously fantastic, but it's a low ceilinged column factory. You know, it was kind of was what it was.

[A]

So they decide that they're not going to get beat on this one. So they just go balls out. They sent Scott Latham, the Cushman and Wakefield broker who was running point on the process, sent him a one page offer and it had a number on it. What was the number?

[B]

1.8 billion.

[A]

That is massive. Absolutely gargantuan sum for this property. I think that's north of what, 1300 a foot, which is unreal at the time. It's completely crazy.

[B]

It's absolutely nuts.

[A]

No one else is willing to pay that number. They buy this thing for $1.8 billion. Jared gets his headlines right. Like scion comes in, makes his mark, picks up this Fifth Avenue tower, and now what's the plan again? This was 2007. Will, maybe you want to set the stage on what 2007 was. It's a little bit before our time, but we've studied that era because it was really quite an era.

[B]

There was unlimited financing for anything.

[A]

Yeah, whatever you wanted to do.

[B]

You had money, crazy high loan to values. And so they financed this with 50 million of equity and 1.75 billion in financing from UBS and Barclays. So 50 million, sort of like the real, you know, 2007 equity to buy a huge chunk of stuff because Harry Macklow put up 50 million to buy equity office, his portfolio in midtown.

[A]

I think Tishman Speyer put up roughly 60 million bucks to buy fricking Stuytown, which is like five and a half billion dollars.

[B]

This is like the going rate of equity contribution.

[A]

Can we talk about the appraisal?

[B]

That's where I was going to go. So whenever you see on LinkedIn a syndicator or multifamily guru saying our appraisal was above the purchase price, so we create. Created instant equity, like, that's because we're the best. Like, fucking nonsense. And this is a great example of it, because two months after the acquisition, the office hadn't signed a lease, probably still, like, hadn't totally switched over all the email accounts for the property management company. The office portion alone was valued at 2 billion.

[A]

This is on 5th Avenue, so the retail, presumably, is super valuable as well. And so remove the retail. Take it out of the equation. We're talking about just. The office is now valued at more than what the Kushners paid for the entire building.

[B]

Exactly.

[A]

And what has changed except the passage of time? Nothing.

[B]

They hadn't even the passage of time. It was two months.

[A]

Exactly. How do you get an appraisal like this? What the hell is going on?

[B]

When the ducks are quacking, you gotta feed them. Everyone's incentivized to have these deals close. Everyone eats. And that includes the appraisers.

[A]

So they securitized the senior. I think it was like a $1.2 billion senior loan that was put through via CMBS. And then they had 500 million or so in mezzanine financing to pay off the mezz. Kushner goes and does something pretty intriguing at the time.

[B]

Yeah, they sold a controlling stake in that very valuable retail to Carlisle. And then the Chair family's crown acquisitions.

[A]

Just for anyone who, not as familiar with New York Cheras, are like the Syrian Jewish retail royalty. So the Suttons, the Siths, the Nakashas, the Cheras, the Kerrys, the Gindies, the Sephardic Jewish families that run New York retail, high street retail. So they came in, this is their business, and they paid, I think about 525 million that summer to buy the retail.

[B]

And as we move forward, let's think about what happens if they had been able to execute that literally three minutes before the world explodes.

[A]

You could argue there's no affinity partners. There's no.

[B]

No, there's definitely no affinity partners. And that family is wiped.

[A]

Right. So they have this building. They've sold off one of the most valuable chunks of it, the retail. And then we had 2009, 2010. The market turns you're absolutely hemorrhaging debt service.

[B]

I think the math was that they were losing three and a half million dollars a month. And so, again, a lot of this was funded in a lender reserve. When you get this appraisal and you get this high leverage loan, everyone's not totally insane. They're like, you're not going to be able to cover debt service, but we got to reserve a bunch of money to pay ourselves. So it's basically just crunching your cash or grinding your cash. They had, at one point, $10 million left in that account that was supposed to, like, fund all of their, like, renovations releasing and all the negative cash from that. And they were just not doing that and not getting cash. So this was very, very dire straits.

[A]

And this is their, Again, their flagship property. They've basically banked their reputation on this building. I don't know if they had any PG's or anything, but this is the kind of deal that, if it goes wrong, can really, really cause a lot of damage in the empire overall.

[B]

Oh, 100% if you get foreclosed on a building like this. And at this point, Kushner wasn't what they are now. Kushner now is an institutional powerhouse private equity shop. But back then, they weren't like this was a family. It's really hard to get debt if you just got foreclosed on a $1.8 billion acquisition.

[A]

So they're in the midst of trying to figure this out, and then one of my favorite characters in all of New York real estate comes in and makes them a deal.

[B]

Oh, yeah.

[A]

Steve E. Roth of Ornado Realty Trust. What happened here? What did he offer? I mean, the specifics of this are so good.

[B]

What does Voldemort do to split his soul into horcruxes? And they're like, you'll never get put back together. That's kind of the money that Steve was giving these guys. It was, what, 11% interest on the money they actually invested as praf, and then a 3% return on any money that they could potentially invest in the future.

[A]

It's like a take it or leave it, son. And I can even imagine Steve Roth telling Jared exactly that. Take it or leave it, son. Like, this is what I've got.

[B]

That's exactly right. It's like, there's no negotiation. We're not countering this. This is the thing.

[A]

And so Jared had no choice. He had to take it. In the midst of all this restructuring, there was another character that we've brought up. Before Richard Mack of Area Property Partners.

[B]

At the time, another one of the leading lights of New York real estate, he was trying to elbow in on buying a piece of the debt and potentially foreclosing on this thing. Because, again, a lot of these folks, Vornado Area, Starwood Capital, this was a valuable Property, wasn't worth 1.8 billion. So if you could get in at a last dollar basis, that made sense. Like, hey, may come out to the coast. We'll get together, have a few laughs. So everyone's circling this thing because everyone knows it's hemorrhaging money. Everyone knows that they are bleeding.

[A]

And you can imagine the TRD and Commercial observer visuals at the time for this building, you got the tower, and then you've got a bunch of sharks. And Steve Roth is one of the sharks.

[B]

Well, it wouldn't be the Commercial observer, because it was owned by Jared Kushner.

[A]

Very true, very true. Good point.

[B]

So we brought up Richard Mack because there's a great aside here, which is he was being so sharp, elbowed in the negotiations, and trying to buy part of this debt, that Jared Kushner went to another part of the empire, the Observer.

[A]

One thing we've learned about the Kushner family over the years is that they do not forget sleights.

[B]

Definitely not.

[A]

So in this case. According to an account in Vanity Fair, Jared Kushner tried to run a hit piece in his publication, Commercial observer on Richard Mac, and it was known colloquially in the newsroom as the Big Dick Mack story.

[B]

And the best part about this is, so again, according to published reports, he offered a tip and said it would check out on Richard Mack, and it.

[A]

Did not check out.

[B]

The observer staff reported it out and did not check out.

[A]

It didn't take, and they never ended up publishing the story. But the news about the impending story or the attempted story certainly came out.

[B]

After a great example of the Streisand effect.

[A]

Steve Roth comes in in 2011, and the following year, he buys the retail, which is seen as the most valuable part of the building at this point, from Crown and Carlisle for about $700 million. So they did very well on this transaction.

[B]

Yeah, and someone made a lot of money at the time. Like Fifth Avenue high street retail was seen as sort of like as gold plated in asset class as you could have in New York. Retail rents were going to the moon. Like, 2012 was still early, but they peaked to, what, 20, 15, 16, 17, something like that? Yeah, but seen as a great investment on Steve's part. And Crown And Carlisle did well, and I think he did really well. When they ended up getting bought out.

[A]

I think he did very well as well. So this is all happening. Jared Kushner's in the middle of this thing. He's trying to rescue this building. Even though they did the recap, this wasn't the end of the pain. Right. This building still. Still couldn't make it work for a long time.

[B]

Yeah, it's still losing money.

[A]

I'm really rich. I'll show you that in a second. And by the way, I'm not even saying that in a bragging. That's the kind of mindset, that's the kind of thinking that you need for this country. Summer of 2015, Donald Trump descends a golden elevator at Trump Tower and kicks off what becomes probably the most improbable political win in the modern era. November 2016, he wins the election, he beats Hillary Clinton, and suddenly Jared has options.

[B]

All of a sudden, instead of just having a hemorrhaging building on 5th Ave, he has a hemorrhaging building on 5th Ave. And he's the President's son in law.

[A]

He's the president's son in law. And he's seen as a kind of a quiet force behind Trump's rise. So it's a pretty extraordinary situation to be in. And what's amazing is the timing right after that. Right. So right after the election, Jared is seen dining with a certain Chinese business person, Wu Xiao.

[B]

We.

[A]

Yeah, so Anbang chairman Wu Xiaoyi. Now, Anbang is a very interesting company. It's a giant insurance company out of China. It's just like a black box conglomerate of the best way to think about it.

[B]

We've talked about them before in relation to the Waldorf Astoria and things like that.

[A]

Yeah. The Chinese came to refer to these companies as great Rhinos, which are these, like, fast growing conglomerates that were just kind of gobbling up everything in sight. And at some point, the Chinese government said, all right, party's over, and we'll get to that in a second. But at this point, the party was very much still on. And so Anbang comes in, they buy the Waldorf astoria for nearly $2 billion from Blackstone. They buy strategic hotels and resorts for like, what, $5 billion plus.

[B]

Yep.

[A]

Crazy spending spree. And then they come in and they look at this tower called 666 Fifth Avenue. Now, right around the time that President Trump is supposed to have a sit down with Xi Jinping of China, there's a talk of a deal in the works between Anbang and Kushner Companies for 6665th.

[B]

Right. So what, they were going to put in 400 million at a $4 billion valuation.

[A]

They were going to redevelop this thing as luxury condos fru fruit, retail, et cetera. And Charlie Kushner estimated that this project, all said and done, would be worth north of $7 billion. I remember at the time I was like, this doesn't math with anything I know about the market. So I started calling around, start calling everyone I know, and they say, yeah, you would have to basically underwrite the condos at, on an average sales price of 9,000 or $10,000 a square foot. This was not a realistic number back then. There were maybe a couple of condos in the history of Manhattan that had traded for those per foot prices.

[B]

And when you say condos, you mean individual units?

[A]

Correct.

[B]

Buildings.

[A]

So these were fantastical numbers.

[B]

Wu has this amazing quote. If you choose to stay in rural villages, you can only meet common village girls.

[A]

Yet if you come to Paris, you'll have the chance to lay your eyes on the Mona Lisa. This is the stuff.

[B]

Shocking that a guy who said that and ran a financial institution ended up in prison.

[A]

He did. So at some point, the Chinese came for him. I think he was sentenced to 18 years in prison. And we have no idea where he is now. Oh, poorly.

[B]

Won't see him no more.

[A]

So anyway, Anbang's out of the picture at this point. The next deep pocketed source that the Kushners look at is the Qataris.

[B]

Kushner starts working these guys to do sort of the same type of plan. And in the middle of this, Charlie gives some pretty good interviews.

[A]

Oh, my God, it's such an incredible interview. So what happened was Charlie met with the Qatari finance minister. Apparently they discussed this tower generally would be considered a massive conflict of interest. But again, the political landscape is shifting very, very quickly. What was unfathomable maybe five years ago, not so much anymore during all this. Sometime in 2018, my old shop, the Real Deal, does an interview with Charlie Kushner. And, man, you want to give me a sense of how you felt when you read that interview? Because I think it's pretty special.

[B]

The facade you would have in polite society is just gone. And the ID is there. And the ID is the thing that makes men like Charlie Kushner great. It's what allows them to build huge businesses and take the risks you have to take and deal with the stress you have to handle to build that. But there's Always sort of the. The thing that you have to hide it.

[A]

I think in Mario Puzzo's. This is in the book, not in the movie. The guy's name was Jack Waltz, the director, the Godfather asked Tom Hagen. He's trying to gauge how far this guy will go. And he asked Tom Hagen, is he Sicilian? Like, will he go to the ends of the earth to fight this war?

[B]

Yeah.

[A]

And I think Charlie Kushner is Sicilian honorarily. So the real deal reporter is I remember this because I was editing the story. It was an incredible time. They walk into his office and he goes straight fire and brimstone. He says the following. Are you guys going to be assholes today or are you going to give us a fair shake? Because you've been assholes in the past? Do you want me to throw you out of here right now? Because I will. Then you can write whatever the fuck you want about me. Just like, ugh. Absolutely amazing. So at this time, they're negotiating with the Qataris as well to invest in the tower. That didn't take either. So kind of running out of options here. And then come your boys, Brookfield.

[B]

So it's not a direct deal, but QIA is a big investor in Brookfield.

[A]

QIA being the pension arm for the Cuthberries.

[B]

Yes, exactly. And it's one of these deals which they had them over the Kohl's. Like, there weren't a lot of options for the Kushners here. They also now had the same thing Macklow had when he gave back his portfolio. They had a huge tax problem. Yeah. Because they fully depreciated the this thing. Whatever price they get, they're going to owe a gargantuan sum in capital gains tax even though they don't get a ton of cash back. And the way to structure around that is a ground lease. Really nice to find a friendly buyer who will structure a ground lease to pay all of the hundred year rent or 9 million year rent up front to avoid that pesky capital gains tax.

[A]

Pretty good situation for the Kushners. Very, very, very close call. But seems like they're good for now.

[B]

And this is also one of the situations. Like, I knew some folks at Brookfield, we worked on the steel, and it's one of those things where you can put a big check into a building on Fifth Avenue and it's going to take a long time to redevelop. So, like no one ever kind of knows if it's good or not. Which kind of works.

[A]

Like, they can just hide this behind a bunch of other deals for a bit until things work out or don't. And so they announce of what, a $400 million CapEx project?

[B]

Yeah, I'd be stunned if it wasn't significantly more than that. But they rebranded the building and they've actually had really good leasing success. They've gotten Citadel, Macquarie, Viking Global. They're getting rents.

[A]

Scotiabank.

[B]

Yeah, rents north of 130 a foot. Quite a good execution by the Brookfield guys. And the reason we're talking about this is because it was back in the news because it got a new refi.

[A]

So they got a $1.3 billion refi. So loan basis of just around $1,000 a foot. I think it's going to be, what, 1.2 billion odd in CMBS and then about 90 million in MEZ. And the building was appraised during the whole loan process at about $2 billion.

[B]

What I think is funny is that the appraisal at 2 billion, we've just come completely full circle because they did all this work to appraise what it was appraised for in 2007.

[A]

We cannot stress enough how scrutinized this tower was during the whole Trump won situation the first couple years of his administration. 666The Kushner's Fifth Avenue. Every major newspaper in America had some angle in on 666 because it seemed to be an emblem of, like, shady deals happening. All the elements of it came through. There was an EB5 component. There was an angle about is this, like, political pressure to get this deal done? So much of what we now in this administration kind of is pretty standard. One thing I should say from the TRD interview I mentioned that Charlie Kushner, because the Anbang deal had collapsed by this time over a lot of this pressure that I'm talking about. And Charlie described ethics watchdogs as jerks who couldn't get a real job.

[B]

Tremendous.

[A]

So what are your takeaways?

[B]

My big takeaway really is that you really have to know what game you're playing. Because if you're buying smaller deals, whatever you're doing real estate, if you are buying a deal this size, you are making so many different macroeconomic bets without even really realizing it. So we talk about how the big private equity firms are just really trying to get into the where capital is flowing. This is an example of this, an asset this size. Not just the size, but the address.

[A]

Prestige of it, I think. Yeah.

[B]

The prestige of it. Yeah. This isn't a real estate asset. It is a like global trading sardine.

[A]

The list of suitors, typically for buildings like this, the Chrysler, etc. You'll see Abu Dhabi come in Qatar, like the big pension funds, the big sovereign wealth funds. It means something beyond the brick.

[B]

Yeah, exactly.

[A]

What's interesting here to me is that by any normal metric, if this was a normal family in the business, I don't know if this deal would have got rescued the way it did. But this was not a normal family in the business. And an improbable turn of events in the White House completely changed the dynamic, warped the dynamic on this. When you play Uno or Monopoly, you have the get out of jail free card or the wild draw 4. This felt like that. I mean, this is one of those things you could never predict. And it completely changed the leverage and negotiating power that the family had. Brookfield's going to make a decent amount of money on this. Kushner's got away with it. Just one of those things that happens.

[B]

Yeah, it's Chinatown, Jake.

[A]

Forget it, Jake. It's Chinatown.

[B]

So we talk a lot in the show about how CRE is such a specific, weird world unto itself. So when you're talent hunting in the space, you have to partner with a recruiter who lives and breathes it.

[A]

Like you really need to know commercial real estate. You can't just be a rando.

[B]

No, definitely not. That's where Bullpen comes in. They're a talent shop solely dedicated to the commercial real estate industry. They can fill both fractional and full time positions and they can hook you up from all levels from analysts to the C suite.

[A]

Check them [e-mail] to get started. That's bullpenre.com exclusive. For promote listeners, Bullpen is offering $1,000 off your first search. When you mention that we sent you, that's the promote. So let them know. Bullpenre.com It's a pretty good deal. Pretty, pretty good.

[B]

Pretty, pretty good. So seems like a pretty good plan. You have an old building, great location, right on the water. Only problem is you got a bunch of old people who live there. But that's okay. You'll just buy all their units and then terminate the condo and redevelop it.

[A]

What developers have been doing is a pretty interesting strategy. They've been going in, getting financing to do these bulk buyouts of these older condo units and then hoping you can go build a shiny new tower and sell it at 20, 25 prices.

[B]

So related's doing it at a bunch of different projects. Crescent Heights Handful of others.

[A]

PH group. Yeah, A bunch of the biggest names in that market are doing this.

[B]

This is a hot trade right now.

[A]

There's enough dislocation in the market from what happened at Surfside that there's interest to sell these condos and maybe move on with their lives.

[B]

The reason why Surfside collapsed is because it was old. There were structural problems and those things are all age related. And I think one thing we don't really reckon with a lot is that our built environment, especially in markets that have more climate issues like Florida, Vegas, Southern California, what have you, we don't reckon exactly with like how long these buildings are going to last. And the post war building boom, we're kind of coming up on like the first real round of buildings hitting obsolescence and then being dangerous. And so if you bought a condo in 1984 for $200,000 and the building needs the entire foundation to be retrofitted and every unit's going to have to pay $200,000, the assessments just creep up.

[A]

On you and suddenly this doesn't make any sense anymore.

[B]

It's not really any different than a New York co op building on a ground lease.

[A]

Isn't that happening with I think a Ruby Schroan joint right now?

[B]

Yeah, they bought. Yeah, Ruby Schrone and David Warner bought the ground with like seven years of term left.

[A]

And they're like, price of the brick going up.

[B]

Yeah, you can buy a two bedroom in that, one of those buildings for like $300,000 because they're either going to jack the ground run up or just like take the building back.

[A]

Right.

[B]

And it's not dissimilar here. There's a little bit more mechanics involved because depending on the association you have to get control of the hoa, then you have to have enough votes to be able to terminate the HOA and sell and basically redevelop the building.

[A]

That's exactly what's happening here. So we're talking about a building on Bayshore Drive and there was a company called Two Roads Development. And what they did is they went and picked up a bunch of money from Ozk and Fisher Brothers. Oh yeah. So they picked up a senior from Ozk and Mez from Fisher Brothers. And the plan was to go buy out all these condos and develop an addition residences on the site.

[B]

And so essentially what these people would do is you buy enough units to get control of the HOA and then you change the laws in the HOA to drop the number of percentage of votes needed to Terminate it.

[A]

You've bought enough units that you now control the association.

[B]

Yeah. So then you change the laws.

[A]

Reminds me bizarrely of Bloomberg's third term.

[B]

Oh, God. Yeah. So anyway, Two Roads bought this site. Beautiful, like, great location, right on the water.

[A]

They paid about $150 million for it, by the way, to do the bulk purchase.

[B]

Yeah, yeah. And did just this. They made an amendment to the condo declaration to lower the requirement for condo termination to 80% of the owners versus 100% because they already owned more than 80%. And a couple of the holdout owners sued them in 2023 and they just got a pretty good ruling.

[A]

Yeah. So basically they had won a lower court judgment and said, hey, you couldn't actually do this. You don't have the right to change the termination thresholds. So the developers, Two Roads went to the Supreme Court, the Florida Supreme Court, and the Florida Supreme Court declined to hear the case. So now they're shit out of luck. That's it. That's the end of the road for them. Unless they can convince these condo holders by again, maybe paying them a hefty sum to get out, they don't really have any legal recourse anymore. And you know what that reminds me of is the 15 Central Park west holdout guys.

[B]

Oh, yeah.

[A]

Where the rent stabilized. Owners, I believe at the end, the last couple of holdouts got I think sums of like $15 million to leave.

[B]

Tremendous. It was like the most expensive one bedroom apartment purchase in the history of Manhattan.

[A]

Ridiculous aside, but David Rosenhoek, who was the tenant lawyer who got those things, had an amazing quote. He said, if you fuck with me, I'll fuck with you for sport. We should say that Zeckendorf's probably don't even care about that because they made so much money on that project.

[B]

Yeah. Now this, though, these holders, they have tons of leverage. There's nothing else for Two Roads to do.

[A]

This is pretty sensitive stuff because as you can imagine, the interest is piling up. Right. So Ozk wants their money. Fisher Brothers, once they're good, definitely wants their money.

[B]

Actually, Fisher Brothers may just want the asset, maybe.

[A]

So it's like a lot of interest is piling up. They've already launched sales. I think their first phase is live on this project. And generally in Miami you kind of use the presale.

[B]

Florida has a different law than New York where, yeah, you can use deposits to help fund construction itself on condos. One thing I want to reiterate though is just that again, at the end of the day, like People are fucking with people's homes, you know, and right or wrong, like, you have your right to your own property. And if someone comes in, just. Just because the pro forma says that they need these things to work doesn't mean that the people are going to want to leave.

[A]

We see this from day to day examples all across our cities to really high profile examples like Stuytown in New York, right where the rent stabilized units had to turn over at such an aggressive rate to make the numbers work on that record purchase. It didn't happen. And so they walked away.

[B]

It's a game of people. It's not just spreadsheets. I don't know what two roads did to talk to these holdouts, but clearly didn't work. And now they might be up a creek without a paddle.

[A]

And still some pretty salty feelings left among the holdouts, even the ones that scored a pretty substantial victory. One of the more bizarre quotes I've ever read in all my years covering this industry, trigger warning. We're going to read it, but it's pretty bizarre, so please be advised.

[B]

Yeah. And oh, boy. So one of the holdouts delivered a quote after this decision was made is a guy named Robert Murphy. I'm happy in the way a rape victim might feel happy when the jury comes back with a guilty verdict. There's a measure of satisfaction that justice has been done. But you still live with the rape.

[A]

I don't really have much to add after that. Should we end it there?

[B]

Yeah. Robert, it's just your condo, man. Yeah.

[A]

We want to tell you about the Promote Insider. That is our new premium tier that's now live and packed with exclusive content.

[B]

Think behind the Deals, Spotlights on the Money, behind the Money, and bonus episodes of this year podcast.

[A]

Founding memberships start at $240 annually. That's 20 bucks a month. And you can go to promote.com upgrade to get started. That's thepromote.com upgrade. And listen, if you're curious about the bizarro industry of residential mortgage, the Promote's sister publication, the Mortgage Scoop, is doing some really, really cool stuff. I learned about this guy Shant. Did you. Did you hear about Shant, Will?

[B]

I know Shant.

[A]

He's like Madonna. Just needs a first name. It's amazing. He's closed 40,000 deals. It's madness. Imagine that level of productivity. It's crazy. Anyway, it's a super intriguing market. It has. Its whole cast of characters is very similar to the Promote in that sense. And if you want to check it out, and you're interested in that world, check out themortgagescoop.com all right, we've talked quite a bit in the promote about the Signature loan book. Right. So there was the office and retail loan book and then there was a rent regulated multifamily loan book. We've talked on this podcast quite a bit about how the rent regulated industry is kind of in shambles. Right. For a variety of reasons. And what is happening now is that lenders are playing hardball in this market. The FDIC took over Signature bank collapsed, regional bank, massive, massive player in New York real estate. They took it over and then they started selling out these loans to other banks and private investors. So Banco Santander, which you'd like to hear me say for whatever reason.

[B]

There you go again.

[A]

Santander came in, paid 1.1 billion for a 20% stake in this loan book. And we were curious to see how they would kind of play this. Right. We've talked a lot about Rialto and kind of going scorched earth on borers and stuff. But I was really curious to see how these banks would navigate the distress that's seeping through the market.

[B]

These guys have been pretty sharp, elbowed themselves. They especially coming really hard after a couple of big shops.

[A]

Yeah, like really big sharks. Yeah.

[B]

L and M, who we talked about recently sold a piece of themselves to 6th Street. L& M defaulted on a building and tried to give the keys back. And Santander just said, no.

[A]

Santander just said, and L and M sued. This is really hilarious. So L and M sued them basically for what they didn't do, which is they didn't want to accept a deed in lieu. And L and M said it's an amazing legal argument. I'll drop something in the show notes, but they basically said it's kind of understood that if we default, this is America, you lender, you must take it back. And Santander is like, no, it's not. The contract is the contract. You can assume whatever you want, but we're not going to necessarily just take this back. And then L and M was also a little bit butthurt about some references to recourse and whatnot and bad boy guarantees, et cetera. Santander said, we're not even making any specific claims about recourse right now. We're just saying that we have pathways to recourse. That's so fucking honest.

[B]

And now they're coming hard after A and E, which is Arriaga and Eisenberg. And for those who don't Remember one of the largest rent stabilized owners in New York. One of the partners, the A is John Arriaga son. John Arriaga, one of the fathers of Silicon Valley, Marc Andreessen's father in law, all sorts of things. So they, they bought 10,000 plus not more rent sales.

[A]

They're bigger than that. They're bigger than that, but we'll see for how long. So any had a couple of signature loans out there. One was on 58th street and Santander is coming after them. They filed a pre foreclosure action and I thought for the promote listeners a little nugget that would be interesting. Guess who's running point on that for Santander?

[B]

Chris Setter.

[A]

Chris Setter name wouldn't mean anything to most people, but he has some pedigree.

[B]

He's from one of the other sharp elbow guys. Fortress.

[A]

He's from Fortress. So he's running point for Santander on this. The legal argument that Santander is making is that AE is mismanaging the property. So in the lawsuits they've included exhibits about HPD violations, et cetera. The picture they're trying to paint is that negligent landlord and we need a receiver for this property. That's the whole play here, which is.

[B]

Kind of interesting considering that this is their entire business and they're incredibly well capitalized. It's not as if this is a mom and pop operator who's leasing units out of a Gmail account.

[A]

Santander is pursuing a very similar strategy again run by Chris Setter at a big Queens portfolio. Now this is about 1300 plus units in Queens in Kew Gardens. And AE claims that they were blindsided by this. They're like, we've been in discussions with the lender, we've offered to kick in more equity, not only kick in more equity in one case, but also pay the loan off at par. However, Santander has been bringing up our. There's a really funny term in here, involuntary rate.

[B]

It's a higher interest rate applied to a loan that's in default or otherwise.

[A]

Non compliant interest on the entire unpaid principal sum and any other amounts due under the loan documents shall accrue at the involuntary rate. This rate, by the way, will is specified in loan docs at 24%.

[B]

And this isn't just about the loan proceeds. They have a couple million dollars in like water, sewer bills, they've got electric bills, a bunch of other stuff tax, property tax escrows that have been made. So all of that is occurring at the aforementioned involuntary rate.

[A]

The reason we think this is interesting because we've talked a lot about private credit playing hardball. Like if Maverick buys a note or Rialto buys a note, you kind of expect fireworks again for everyone. Happy Diwali. You kind of expect fireworks on this kind of thing, right? But when a bank goes and buys a book like Santander did with signature, you might think that they would play it another way. But I guess maybe the problem is, like, there's no end in sight to this distress and rent stabilized.

[B]

We don't see the light at the end of the tunnel. And these are some of the biggest guys in this industry doing it. And if they're facing troubles like this and banks are treating them like this, if you are not this size, you should be a little bit afraid.

[A]

When Santander served AE a notice of default and demanded an immediate payoff of the loan plus the default interest, it was Valentine's Day.

[B]

It's a Valentine's Day massacre.

[A]

That's it for the promote podcast this week. The most controversial office tower in America is now just another boring old office tower. But boy, what a journey it was to get there. Bulk condo buyouts are the most fun a developer can have without terminating the condo docks. And Banco Santander is putting a little bit of fuego on some of New York's biggest multifamily players. We'll be back next week with more CRE Insider goodness. A shout out again to our sponsor, Bullpen. Promote. Listeners get $1,000 off their first search when you hit up bullpenre.com and mention that the promote sent you.

[B]

As always, reach [e-mail] for feedback on this podcast [e-mail] if you'd like to advertise. We love to hear from you. The audience engagement here is one of the things that makes it so fun. So please reach out.

[A]

It's so fun. It's such a good time. I really, really enjoy this podcast, man. I really do, sincerely. And check out the promote [e-mail] upgrade. That's our premium tier that starts at 20 bucks a month.

[B]

And make sure, most importantly, that you've got the support of 100% of the votes at your next condo conversion.

[A]

Absolutely. You specially, you've been through enough. I'll see you next week, dude. Thanks so much.

[B]

Happy Diwali.

[A]

Happy Diwali. Ciao.