RXR’s Billion-Dollar Baby

Manhattan just doesn’t feel right without a billion-dollar office deal. And now, after a couple years of pining, we’re finally on the cusp of one: Scott Rechler’s RXR has signed an LOI to buy 590 Madison, a 41-story, 1M sf skyscraper, for north of that number. The price is “closer to $1.1 billion than it is to $1 billion,” one insider told TRD – you could almost hear them lips being licked. 💄 At $1K+/ 🦶, this is majorly good news for NYC office, where single-malt buildings ™️ have been enjoying a renaissance of premium rents and clamoring tenants, even as lesser stock is getting gobbled by bottom feeders.

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590 Madison (Cont.)

A note on the buyer, a household name in these parts: RXR has been hella active, buying into Murdoch HQ (interesting backstory here) at a nice discount in Jan. and then snagging an ext. on that tower’s $1B debt. It also brought in Sagehall to recap 530 Fifth, worked out the troubled debt at One Worldwide Plaza, and is trying to save its Helmsley Building. Oh, and it also reeled in Ares on a distressed NYC office JV. (This is all happening against the backdrop of “Project Kodak,” 🎞️ , Rechler’s attempt to grapple w/ which buildings in his portfolio are no longer ready for primetime – I sat down w/ him in ‘23 to talk through it in detail.)

Big relief here for the seller, STRS. The Ohio pension has mostly been in the headlines for the wrong reasons – infighting, hostile takeover attempts – and had reportedly even considered allowing a buyer to pay in installments to get this off their books. (RXR, though, is doing this clean.) And a big coup here for Eastdil, whose Will Silverman & Gary Phillips had the listing, notably alongside top 🐕️ Roy March 💇‍♂️; we had flagged at the time that March’s r’ship w/ the building dates back nearly 3 decades – fmr. owner Odyssey Partners had tapped Eastdil to sell the property in ‘98 amid an ownership face-off. 

NYC Developer Ponzinomics

“Add in elder fraud and you get a free coffee.” ☕️ 
“There's this illusion that you're a successful person that is necessary. ‘Fake it till you make it’ is really a thing.”
“I’d wager that these guys had every ⁓ private wealth manager in America begging to lend them money against their stake in Tides, against all their promote, all their fees, whatever. And that's where this stuff also gets really slippery.”

Starwood’s winning its crusade against the mad lads of Tides Equities – and things have gotten personal. Former golden boy Josh Schuster has been indicted for fraud, but in many ways his story isn’t dissimilar from so many other developers. We break down both tales in our signature way on the latest ep. of The Promote Podcast. Listen on Spotify here or tune in via Apple Podcasts here. If you’re interested in advertising, hit us up here. And show us 💌 via ratings & reviews. 🙏 

Harbor’s Fun in the Sun

Jordan Slone’s Harbor Group International is set to add nearly 5K units to its multifamily empire in a two-month acquisition whirlwind. After first picking up a 1K+ unit Florida spread for $300M ($285K/ 🚪 ), Harbor is now paying $625M ($174K / 🚪 ) for a 3,600-unit Sun Belt package, per REA.

The sellers on this latest package are the Cohens, the family that founded Duane Reade, dealmaking 🐐 David Werner and Jeremy Rieder’s Onyx Partners. The Cohens & Werner paid $510M ($142K / 🚪) for the package in summer ‘17, then brought in Rieder, who per sources was also in the mix at some point on Werner & SJP’s acquisition of a Hoboken office property at 111 River St. CBRE, which has topped Green Street’s multi broker ranking for 2 decades straight, did the deal.

7 Years a Knave

“Keeping time, one watch at a time.” - Elie Schwartz ⌚️ 

It happened. Elie Schwartz, the Nightingale Properties principal who orchestrated what is thought to be CRE’s biggest-ever crowdfunding scam, was sentenced to eighty-seven months in prison. “Schwartz’s greed was boundless,” U.S. Attorney Theodore Hertzberg said Tuesday. “He callously abused the trust of hundreds of investors to line his own bank accounts, purchase expensive watches, and buy additional luxury items.” Post his slammer time, Schwartz will have 3Y of supervised release and was also ordered to pay $45M in restitution.

Schwartz had tapped the Eli Puretz playbook when pushing for a lighter sentencing, expressing contrition and saying he’d removed himself from any OPM temptations. U.S. District Judge Steven Grimberg did NOT buy it. When handing down his verdict, Grimberg opted for a lil’ CRE jargon. “You need to flip the ROI,” he said, per Bisnow, “because otherwise, rational people can make the decision it's worth the risk if the consequences are going to be modest.” No space in these pages to flesh out all the insane stuff that’s happened in this case over the past 2Y+, but will leave you w/ 3 things:

1) The Promote’s running (incomplete) bulletin board of the case
2) Bisnow’s excellent new piece on the civilians impacted
3) Our highlight reel of the juiciest stuff 🎞️ 

A Lender Shops on LinkedIn

Benefit Street Partners, saddled w/ a Sunbelt multi loan gone bad, is boldly going where no lender has gone before: The CRE CLO player is opting to run an REO sales process on LinkedIn, rather than the trad route of selling via a broker. The deal in Q, per the parameters BSP prez Michael Comparato outlined, looks to be the Avenues on Carrollton, a 268-unit property in Greater Dallas currently owned by Lenny Licht’s Noel Management; BSP gave Noel a 3Y, $60M floater on the property in Dec. ’21, per RCA data. Foreclosure is set for early next month, w/ pricing guidance at $58-$63M.

“We will provide full transparency throughout the process,” Comparato wrote. “How many CAs were signed, how many offers received, the range of those offers, and the same details if we go a second round and/or best and final.” One broker already warned the exec that eschewing his breed may lead to BSP leaving some money on the table, and if this practice were to catch on more widely, “deals will get lost in the shuffle.” Can tell you that if someone were to try this w/ Manhattan trophy towers, the alpha brokerages would have a thing or 3 to say about it – broker blacklists are a real thing.

Quickies

• 📽️ 90s on the wildest property-tax loophole known to man/beast

• Go-to CRE attorney Mark Nussbaum arrested – follow arraignment here

• Icon CEO says firm is now printing reinforced concrete homes 🖨️

• S3 lends $112M on Florida condo tower 

• Real estate’s Rasputin heads back to Rikers (more on Nir Meir here)

• More on this Friday coz it’s huge but no room today: Josh Harris’ 26North in talks to buy Marc Ganzi’s DigitalBridge (See also: Dons of Data Centers)

• So, you want to be a Sec 8 landlord in Chicago? 🥷

Unquotable Quotes