We knew the doomsday proclamations would come in the wake of Zohran Mamdani’s improbable victory in the NYC Democratic mayoral primary this week. His agenda – socialism, rent freeze, etc. – is anathema to business interests in the city, and some of the industry’s bigger names (John Cats 🍗 , Danny Fishman) promised to head for the swampier but more business-friendly climes of South Florida. Talk is cheap.

What we were taken aback by, though, was the speed & ferocity of the tangible response. A hybrid “retreat & resist” strategy is shaping up: industry bigwigs are lining up behind the scandal-scarred sitting mayor Eric Adams, and also prepping for a broader influence campaign in Albany to neutralize whatever Mamdani may throw at them. That’s the “resist” bit. And then there’s the “retreat:” Benefit Street Partners pulled out of a $300M+ Manhattan hotel acquisition, w/ prez Mike Comparato explicitly citing the Mamdani factor.

“The city that never sleeps, the zenith of capitalism, the financial capital of the world could be in the hands of a socialist,” wrote Comparato. “Hard to fathom.”

He did not ID the portfolio, but The Promote has since learned that it’s a 7-hotel package controlled by Claros Mortgage Trust, the Richard Mack-controlled REIT that took back the package from Hersha & Cindat in ‘21. This appears to be the first significant live deal to be torpedoed by this high-stakes mayoral race. But if CRE players are to be believed, it’s far from the last one. 🔱

BSP declined to comment. It was slated to be the equity partner for hospitality investor Waramaug (Paul Nussbaum), deal insiders confirmed to The Promote. The transaction was penciling out to $275/ 🔑, and would give BSP/Waramaug control of 1,100-ish 🗝 in Times Square, Chelsea, FiDi and Herald Sq. flying the Hampton Inn, Candlewood Suites & Holiday Inn flags. The assets have a convoluted history: They were owned & operated by hotel REIT Hersha, which in ‘16 (an era of peak Chinese appetite for US CRE) sold a 70% stake to Chinese investor Cindat at a fat $570M ($526/ 🔑) valuation. In ‘18, the partners refi’d via a $300M CMBS (UBS, China Merchants) plus $85M in mezz from Mack’s credit division. That debt went sour early in Covid, and Mack seized the portfolio in early ‘21 via a UCC foreclosure. It refi’d via a $235M Wells loan earlier this month.

“How do you underwrite this risk?” one deal insider said of the aborted BSP-Waramaug transaction. Mamdani has so far explicitly called for rent freezes in NYC’s long-suffering rent-stabilized stock, but the dealmaker said his ascension to City Hall could throw up other wildcards: new taxes, let’s say, or blanket unionization ✊. “He makes Bill de Blasio look like a conservative,” the dealmaker remarked, re. to NYC’s 2-term mayor who once famously said: “Look, if I had my druthers, the city government would determine every single plot of land, how development would proceed.”

Others are considering a pause, too, w/ Paul Rahimian of lender Parkview Financial telling WSJ that “we might think twice” about certain deals if regulations changed. NYC-exposed REITs (AVB, EQR, VNO) took a hit after the primary, as did NYCB/Flagstar, a key lender in NYC’s rent-stab market. Pragmatic combatants are also looking for an advantage in the state capitol. RXR’s Scott Rechler – who’s looking to close a $1B+ deal for 590 Madison in partnership w/ Elliott Investment Management as we speak – said “we would actively work to make sure the state was muscular in protecting the long-term values and vitality of the city.” 💪 He’s also pledged to back Adams, saying that the “capital of capitalism” needs “leadership that speaks to what New York is.” 🗽

Bonus: If you want to understand the sway state pols have over core NYC CRE policy, highly recommend this banger

He’s known for being an ultra-aggressive dealmaker and a heated adversary, but you can’t accuse Ralph Herzka of not having a sense of humor. In a sit-down w/ 🐐 Ruby Schron earlier this month, the 2 riffed on some of the more interesting transactions they’d done together, incl. the 6K-unit purchase in ‘03 of the Trump family’s outer-borough multifamily empire (price paid varies in reports between $600M - $706M). Per the Cammeby’s boss’s telling, Donald Trump pushed for a higher price w/ other bidders at the 11th hour, and Schron scrambled to meet it. “The other guy is coming in the afternoon,” Schron recalled Herzka telling him, per a new account of the talk in frum-focused Ami Magazine, a copy of which was shared w/ The Promote. “If you show up tomorrow between 9 and 12 and sign, it’s yours.”

So Schron did: “I wasn’t guaranteed a mortgage, I wasn’t guaranteed anything. I signed the papers with a big deposit. I looked at the papers and said, ‘Oy vey.’ And chasdei Hashem, it worked out.” 🖋

Herzka was in fine spirits during the talk. He made one reference to Meridian Capital Group’s recent troubles, remarking that it had “gone through a challenging 18 months” but was emerging out (Freddie clearance, NewPoint sale) the other side. And he closed the chat w/ a perfect CRE dad joke/benediction. "And the Eibershter should give [Schron] arichus yamim, gezunt, nachas, hatzlachah [health/long life/joy/success], and many mortgages that are coming due over the next few years." 🤣 🛀

The Promote earlier this week spoke of a syndicator tragicomedy in 4 acts: I: grandiose claims on the podcast circuit II: behind-the-scenes wrangling to save a portfolio through tax loopholes III: receivership IV: investor lawsuits . It turns out, we spoke too soon: there is a 5th act, and it involves the FBI: The bureau confirmed that it is investigating Devin Elder’s DJE for alleged money laundering & fraud, per the San Antonio BJ (really good work from the outlet on this whole matter), and the US Attorney for the Southern District of Texas filed a warrant this month to take control of DJE’s vast land holdings in Texas, about 1K acres. Elder isn’t explicitly named in the court docs, but he is the sole owner of DJE, and we’ll see how things shake out for him. Lenders & investors are trying to recover their money, but there’s little hope of that happening.

Meanwhile, one high-profile alum of Elder’s shop is going to comical lengths to distance himself from the scandal. Justin Liggitt, who ran investor relations at DJE and says he raised over $175M in capital for the firm, is now masking his 5Y tenure there – his LinkedIn just says “Confidential RE company,” while his bio at his new place of work, the Lucky Group, just says he worked at a “premier Management Group.” Ostrich, meet sand.

Bonus: Here’s Liggitt repping DJE on Whitney Sewell’s “Real Estate Syndication Show,” which is like the Good Morning America for syndicators who’ve since fallen.

This week, someone who described themself as an LP of syndicator Rise48 (Zach Haptonstall, Bikran Sandhu) hit up BiggerPockets, the popular CRE investing community (Chernin recently bought a controlling stake). “Two of my investments are now experiencing capital calls ☎ ,” the user wrote, seeking guidance about Rise48’s underwriting and whether or not others had met the capital calls. He shared comms from Rise48 in which it said “we funded the debt service shortfalls and did distributions to investors out of cash reserves as we thought we had plenty of runway for rates to come down. We thought we could outrun the market by renovating the interiors and pushing NOI.” Things moved fast & furious, w/ Haptonstall (or at least someone w/ his username) stepping in to respond to a flurry of commenters and warning them that false statements would be met w/ legal action 💼 The thread was unavailable for a time yesterday, but looks like it’s now back. (The Promote has reported on Rise48’s push to raise a $39M pref fund to rescue some of its own deals.)

In other syndicator news: Scott Everett’s S2 is facing foreclosure at a 290-unit Arlington complex, per a Roddy’s alert flagged by TRD. S2 had indicated to investors that this was imminent: In comms reviewed by The Promote, S2 flagged that the lender had denied a request for a loan ext. and so S2 had written the asset down to $0. The Arlington deal was bought through a fund that amassed 6,600 units across 21 assets in ‘22; S2 noted that it had scored loan mods in summer ‘24 on 8 of those assets w/ cheaper debt, as well as a $450M 3Y refi on 11 assets this past March.