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You can’t walk 10 steps in CRE nowadays without tripping over a capstack loaded w/ C-PACE debt. It’s evolved from a way to fund a building’s energy/efficiency upgrades into a full-blown financing solution, w/ records being set and broken on the regular –Nuveen’s C-PACE arm dished out $290M last month for a hospitality deal in Tampa.

Sponsors love the mechanism for its relatively cheaper debt, and also for its lack of muscle – compared to trad lenders, the ability for C-PACE lenders to step into a project when a sponsor defaults is quite limited. They don’t have a direct pathway to foreclosure outside of a lengthy and onerous tax lien sale. Moreover, they generally need the sr. lender to play ball – unlike mezz, C-PACE can’t go rogue.

Which is why we’re seeing lenders who feel they may have to someday crack skulls take both pieces of the action. As is happening at a historic hotel in Long Beach.

“Behind every successful man, there's a great woman. And behind every big purchase of defaulted debt, there's Brookfield.”

Ballast buys Veritas’ defaulted debt in partnership w/ Brookfield, landing Apollo financing for the heist. Amid all this, Ballast loses a major portfolio it co-owned w/ Goldman Sachs. And as is often the case, the Canadians (RBC here) find themselves among the casualties. The multifamily monopoly in SF gets the treatment on this week’s episode of The Promote Podcast. We then dive into the singular career of Paul Prager, a self-described “sixtysomething short, fat Jewish guy” who’s both building data centers for Google and remaking the Eastern Shore of Maryland as the new Hamptons. Finally, we explore why investors see alpha between the low-thread-count bedsheets, looking at the CMBS markets for extended-stays.

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Pacific6, a consortium of Long Beach businessmen headed by healthcare entrepreneur John Molina, has thrown the Fairmont Breakers Hotel into bankruptcy. The Ch. 11 filing on Oct. 2 comes hot on the heels of a UCC foreclosure filing by sr. lender X-Caliber, which had set an auction for Sept. 26. The troubles stem from a $122M refi in Feb. ‘24, which saw X-Caliber (Chris Callahan, who bought its predecessor HUD lender in ‘17) kick in $65M of bridge debt and CastleGreen Finance (Sal Tarsia) put in $58M via C-PACE. Molina et. al, who purchased the hotel for $40M in ‘17, hoped to transform the century-old joint into a 185- 🔑 boutique flying the Fairmont flag. They first brought X-Caliber and CastleGreen in as lenders in ‘22, when the duo kicked in a $55M sr+CPACE loan.

“CastleGreen understood the game-changing potential of C-PACE when others didn’t,” Molina said at the time of the ‘24 financing. “They’re not just lenders; they’re essential partners in our success.”

Now, CastleGreen would’ve indeed been the perfect partner, a total beta in the capstack, were it not for the fact that it’s an X-Caliber affiliate also controlled by Callahan. So when things went south, both lenders could work in cahoots to squeeze the sponsor. X-Caliber is also the lender on this doozy of a project on Lake of the Ozarks, pledging $234M w/ an eye on securitizing part of it. CastleGreen is in the mix there, too, w/ a $65M C-PACE loan.

This is why you’ll observe that some of the most active C-PACE players often have some existing r’ship w/ senior lenders - another one that comes to mind is CounterpointeSRE, which in partnership w/ Barings has been tearing it up - see here & here. Both firms are owned by MassMutual.

As C-PACE grows in prominence, it’ll be interesting to see how sponsors and their investors navigate the capstack reshuffles it’ll catalyze. One we’ve been watching closely is the mammoth Rio casino-hotel in Vegas, where Dreamscape (Eric Birnbaum) landed $177M in C-PACE debt this summer from Peachtree (Greg Friedman). The C-PACE loan allowed Dreamscape to pay down the sr. loan, and followed on the heels of an $850M recap of the hotel in ‘23, in which Wells led the debt syndicate and Raymond James brought the equity - would love to know what the status of those RJ equity holders is…

“Boy was always a disappointment.” - Proposition Joe

The elements of this story are almost boilerplate in the sordid history of real estate scams: wining & dining investors in bougie locales to create the aura of success; conjuring up visions of an ultra-exclusive social club; name-dropping business titans and star athletes as collaborators. But what makes this tale pop is that the man at the center of it is the son (well, TBD) of Donald Bren.

The LA Times has a ripper of a yarn on David Bren, the 33 YO kid of Irvine overlord Donald (read our snapshot of the sr. Bren here). David was promoting an exclusive SoCal project dubbed “The Bunker,” which for $14,500/month would give members access to the high life: curated dining, cigars, fine 🍷 ( 🤞 Nir Meir was pitched), and a fleet of Ferraris & Bugattis. HQ would be the site of Mr. C’s Beverly Hills Hotel, which David planned to acquire, and some investors say they bought in on the strength of the Bren name.

“He presented like he could have picked up the phone and called his father right away,” said Chris Rising, himself a CRE scion and someone who David pitched to come in on the project – Rising recalled that David showed up in a purple Lambo for the walkthrough. “Anytime I questioned what his relationship was like with his dad, he was always like, ‘It’s really good and they’re tight,’ and blah, blah, blah.” Rising eventually didn’t invest, but others, such as Bay Area entrepreneur Tony Chen, did. Some investors are now suing David, per the LAT, claiming that the entire project was a sham. (Chen committed suicide in ‘22.)

“There is no ultra-high end automotive club. There are no members. The business is a mirage,” one suit states. Judgments against David total $2.6M, and both the cops & FBI have been alerted, though David has never been charged w/ a crime. The LAT reached out to Donald Bren for comment. Via his rep, he responded w/ just 12 words.

“We do not have a personal or business relationship with this individual.” 🎤

Related: How Miami CRE scion Jeff Soffer was scammed by a fake Saudi prince