With private credit racing to finance Manhattan office-resi conversions, dropping one nine-figure loan after another, are we asking enough questions about the depth of this asset class and the ability for deals to ✏ out?

Billions of simoleons have been put out by lenders in the last 18 months to fund such projects, which hit the perfect narrative notes: solving the housing crisis ✅ , solving the Class B office glut ✅ , vivifying parts of Manhattan in sore need of it ✅ tapping into tax incentives such as 467-m ✅

But there have been cases of wipeouts by even the most seasoned operatives in the space that warrant a closer look. 👇

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The latest casualty is 20 Broad Street, the 470K sf property that was converted into 533 rentals by Nathan Berman’s Metro Loft Management. Berman’s equity has been wiped, and the mezz lender has taken control of the tower, per Morningstar DBRS. When asked who the lender was, Berman told Crain’s that “I’ve put it out of my head.”

But unless there’s been some behind-the-scenes shuffle, it is most likely Athene, the lifeco subsidiary Apollo has been juicing to become one of CRE’s most voracious lenders. In ‘19, Athene provided $250M in takeout financing ($470K / 🚪 loan basis) on the property, which per PincusCo retired a $187M construction loan from Bank OZK and $83M in mezz from Brookfield. The new owner has paid down $25M of the sr. debt and extended the loan to ‘27 at a higher rate, per Morningstar DBRS – if the mezz is indeed Athene, it is one of those fun cases of a lender negotiating w/ itself. (It also added another $70M of mezz, b/c why not.)

Berman blamed the capstack (“It was over-leveraged, that’s all”) for the building’s woes. You’ll recall that at nearby 180 Water, Berman is hangin’ on by a hope note and a prayer: In May, Kevin Chisholm’s 60 Guilders & the Brothers Mamrout (Alen & Joe) of Sentry Realty came into the troubled 573-unit building at a sharply discounted valuation of ≈ $335M, after Berman defaulted on a $265M loan; such a recap deal would’ve likely nuked Berman’s equity.

It’s important to stress that Berman isn’t a noob at this. Rather, he’s the poster boy for this kind of project and in the thick of some mega-undertakings. He and David Werner landed $720M (loan basis: $550/ 🦶 ) from Madison Realty Capital in the spring for the record-breaking Pfizer HQ conversion. In late ‘22, Berman, Jeff Gural & Rockwood Capital landed $536M (loan basis: $490/ 🦶 ) from BDT & MSD Partners + an Apollo REIT for 25 Water St. The grand dynasties of NYC real estate, such as the Rudins, have stayed close to Berman to understand how to execute on such projects, as they expect that it’ll be a key strategy for much of their portfolio in the years to come.

Vanbarton (Richard Coles, Gary Tischler) is the other big 🐶 in this space (“We’re swinging hammers!”), w/ over 2K units in the pipeline and a flurry of financing deals. It just landed $280M (loan basis: $475K / 🚪 ) from AllianceBernstein (sr.) and Brookfield (mezz) for the completed 160 Water. We found it interesting that a Brookfield rep emphasized that this was a “cash-neutral refinancing” 🇨🇭; Brookfield is also bankrolling Vanbarton’s office-resi play at the Emigrant Savings Bank in Midtown to the tune of $300M (loan basis here is steep, at $750/ 🦶 ). Meanwhile, on First Ave, where Vanbarton’s converting the fmr. Archdiocese digs into 420 rentals, Todd Boehly’s Eldridge stepped up w/ the $250M loan (loan basis: $625/ 🦶)

We’re not Cassandras here at The Promote, and office-resi is clearly a much-needed thing in NYC (Even as we write this, Bloomberg just dropped a splashy new feature on the trend). Just think that with all this capital hankerin’ for action, it’s worth detailing the numbers at which they’re coming in, and whether those numbers work. GPs earn fees along the way; lenders, however, like to be in the business of getting paid back.

Note: We’re using the heuristic here of calculating loan basis on a psf basis going in, and on a per/unit basis on refis for completed jobs; all numbers est. based on published reports

No sector of CRE allows for such efficient AUM gobbling ™ as data centers do rn. So makes sense that the M&A activity in the space is at a fever pitch. The latest: BlackRock’s Global Infrastructure Partners (the division is already a fairly new addition to the BlackRock family) is in talks to buy Aligned Data Centers, per Bloomberg, potentially at a $40B valuation. HQ’d in Plano, TX, Aligned has 50 campuses and 78 data centers (incl. pipeline). Its existing backers include Macquarie.

MGX, the Emirati vehicle established by SWF Mubadala and chaired by Sheikh Tahnoon Bin Zayed Al Nahyan, is in talks to invest as well. This world is incredibly intertwined btw – BlackRock & MGX already have a JV w/ Microsoft + Nvidia + Elon Musk’s xAI; in March, The Promote highlighted a few of the need-to-know players in it 👇

Speaking of xAI: Musk is going full Musk in Memphis, w/ his firm working on a GW power plant (remember that in data centers, the alpha constraint is POWER) to support his data centers, known as Colossus and Colossus 2. Projects like these completely transform a community – “In one year, xAI has become the second largest taxpayer in the city and county after FedEx,” Memphis businessman Bill Dunavant III told WSJ – and spark fears of pollution, spiking electricity costs and uncertain job creation. Financing them requires extreme creativity – here, Musk tapped another of his cos, SpaceX, to kick in $2B, per WSJ 🚀, and it’s also worth reading the tick-tock of the Pimco-Blue Owl $29B deal to fund Meta’s Louisiana megaproject.

The stakes here are both professional and personal. As semiconductor/AI analyst Dylan Patel put it: “Elon will do everything he can to not lose to Sam Altman.”

A bit late to this b/c of where it was published, but seems like most of the US media missed it too: The Pakistani govt., the uneasy steward of Manhattan’s Roosevelt Hotel, is considering bids for new advisors on the 1K+- 🔑 asset. You’ll recall that longtime advisor JLL resigned from its role in July, citing conflicts of interest - we should note that JLL is a longtime advisor for JPMorgan, which The Promote reported this summer was among the advanced bidders for the property.

As expected, rather than an outright sale, the Pakistanis prefer a JV (likely to avoid a hefty tax bill) and have released the names of 7 consortia that’ve bid to win the advisory assignment, per Arab News. The consortia are a combo of law firm/brokerage/consultant/Pakistani wildcard – some fun names in here!