A note to Insiders: I’ve just returned from a week in New York, where the vibes are immaculate. This is anecdotal, but every restaurant, boardroom, and even POPS was thrumming. I’ve come to think of New York the way Charles Erwin Wilson thought of his beloved General Motors ("what was good for our country was good for General Motors, and vice versa"), and I left hopeful about where we’re heading.

It was lovely to see so many of you in the flesh. I’m planning to make this a far more regular pilgrimage in coming months, so please reach out if you’d like to meet up. We’ll also be doing some interesting events in the near future in the city, and Insiders get dibs on those too. Today, we dive into a deal that’s emblematic of how the New York market is playing out, a capstack-sniping scenario that I’d bet we’re also seeing in other regions where the OG lenders have diverging motivations and are on the hook for transfer taxes. Enjoy, and if you know someone who’d benefit from reading this and might want to become an Insider, forward it along – they can get 10% off here. - HS

Even though we are finally seeing a flurry of outright trades in the market, much of the spiciest stuff in New York is still happening in the nethers of the capstack, with small fortunes being made and lost, and reputations being forged. One of the key reasons for this is the pesky matter of transfer taxes: In New York, deeds-in-lieu 📝 and foreclosures aren’t exempt (in contrast w/ California, where there are broad exemptions in many cases) from paying the tax, which means that if a lender wanted to take back the keys on a distressed property, they’d be subjected to the indignity of coughing up even more money on an already-sour bet. Another reason is that in a loan done by a consortium, all groups may not have the same stomachs for a fight. This dynamic has created some serious opportunities for credit investors who don’t mind a little jostling with sponsors. And 63 Madison provides a great case study.

This week on the pod, we look at Texas billionaire Tilman Fertitta’s $18B megadeal for the Caesars 🎲 entertainment empire - really an excuse for us to talk Tilman, one of the industries "C"haracters. Next, we dive into CoStar’s $800M acquisition of home-data firm Zonda – part of Andy Florance’s quest to control every piece of data in the real estate 🌎 . And finally, it might be curtains for prominent multifamily developer ZOM Living, who we’re told is prepping a bankruptcy filing. Plus, our Punch List rundown of the newsiest industry news: NYC rips, S2's special servicing, Fisher Island fracas, Brookfield bombs again, and banks are back!

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The 870K sf (remember that buildings grow considerably over time b/c loss factor) property at 63 Madison (alt address 28 E 28th St.) was developed in the early ‘60s as an annex for New York Life, which had its HQ x the street. In the mid-90s, a JV between Loeb Partners Realty & George Comfort & Sons bought the property for $65M. In ‘10, they landed a ≈$150M refi from Bank of China. In ‘16, the JV sold a 49% stake to Jamestown, as part of a 2-tower stake sale (200 Madison the other) that collectively valued the properties at $1.15B ($700/ 🦶). Soon after, the now-trio went back to Bank of China for a fresh $314M (loan basis: $360/ 🦶) refi. And in late ‘19, they again upsized that debt through a $410M ((loan basis: $470/ 🦶) refi from a Wells Fargo-led consortium.

The building landed serious tenants in ‘24, most notably American Eagle, which signed up for 338K sf (later expanded to ≈393K sf) , and CUNY, which took 124K sf for a Baruch College expansion. Big-boy tenants, however, come with big-boy demands, which means significant TI obligations for the landlord. The owners needed serious dollars to fund, and so in late ‘24/early ‘25 went shopping for pref: According to dealmakers who considered an investment at the time, a transaction would have entailed the Wells consortium subordinating some of the debt. That spring, a front-runner emerged: the lads at Brookfield, who’d be putting in pref at a ≈$400M ($460/ 🦶) valuation.

Now, this is where things get proper interesting. At some point during this process, a few months ago, Brookfield got cold feet. This is when SL Green, according to sources familiar w/ the matter, saw an opportunity: Within days, the REIT bought a ≈ 40% but controlling interest in the debt (which is ≈ $440M all-in) from multiple groups in the consortium (Wells stayed in) at a sizable haircut. 💇‍♂

Now instead of dealing with a consortium swimming in different directions, you’re dealing with a player more than happy to enforce its rights, which changes things. The ownership group went out to market via Newmark to seek ≈ $540M in fresh financing, both to pay off SLG and to recap the asset.

SLG has been buying, selling, and developing a ton – it just announced the $312M sale of 10 E 53rd St. to Meadow Partners (will pocket a tidy $100M on it) and brought in that sweet Japanese money to JV on a ground-up office tower at 346 Madison. But it’s seeing some of its ripest opportunities in distress: On the Q2 call, Marc Holliday described its play at 522 Fifth ($130M investment, ≈$220M payout in a few months) as “perhaps one of the best trades of the cycle,” and it’s set to hold Hyundai’s hand at 15 Laight. If SLG, which did the 63 Madison deal through its nascent credit fund, gets paid off in the v near future (at par, plus presumably default interest?), that’d be a hella tidy IRR for a few months of work.

On Thursday, 6/18 at 12pm ET, we’ll be hosting the 3rd installment of “In Conversation,” our Insiders-only series of unplugged discussions w/ CRE industry leaders (Highlights from our first 2 chats, w/ Lightstone’s David Lichtenstein here, and Naftali’s David Hochfelder here). Hiten will be speaking with Ran Eliasaf, the Founder of Northwind Group. Northwind is one of the most prolific debt funds out there, with action in office-resi, new dev, and one of our growing obsessions: SNFs. He’ll get in-depth about the Northwind playbook and what sponsors, lenders and brokers should be thinking about. Register here, and please hit us with any Qs you’d like Hiten ask Ran by replying to this email.