(Editor’s note: Co-host Krasne, filled w/ righteous anger over a flurry of recent blustery GP announcements, pitched me an unfiltered look into the delta between the heavy claims and the light wallets of dealmakers. We’ve previously written, “A real estate developer is the wealthiest person you’ll meet who’s perpetually broke,” so putting numbers to the vibe felt right up The Promote’s alley. Enjoy! - HS)

By Will Krasne

There’s no business with more daylight between headline numbers and actual cash in your pocket than being a real estate GP. Peek behind the LinkedIn post touting a $100M programmatic JV with the big insurer, and you’ll find an agreement that generates less in annual fees than a Blackstone striver at 345 Park makes just in cash comp. The Green Street hit about the PE-backed $200M portfolio purchase elides the fact that institutions generally won’t let GP’s charge an acquisition fee for a marketed deal. And for the privilege of closing that transaction, the GP must co-invest roughly $6M, assuming 70% LTV and a 90/10 LP/GP split. And not only do they need to raise the LP capital, often the GP has to syndicate the co-invest out because they have meaningful co-invests in their other deals. The annual fees won’t make them rich either: Assuming an AM fee of 1% of EGI, and $20M of EGI on a $200M portfolio, the GP is taking home $200K per year.

(Read the first installment in this series: Confessions of a Battle-Scarred GP)

The real estate investment management business is hard. It’s hard to find deals, it’s hard to buy deals, it’s hard to operate deals. But most of all, it’s hard to build a sustainable business, because the scale necessary to generate the fees sufficient to cover reasonable overhead is much larger than you’d think. Let’s dive in. (Promote Insiders: read on at the end of this email 👇)

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Will admit we’d gotten nervous about this one… In early Dec., when we broke the news that Gary Barnett’s Extell was finalizing a deal for a rare fee simple offering on Park Ave., we wrote: “This is a live deal, Corem specifies it just has an LOI (i.e. not a contract), and things could certainly change 🛀” But Barnett has seen it through: He is now in contract for the spread, per TRD, and is also buying air rights from Central Synagogue (If you’re an out-of-towner and are wondering WTH air rights are, start here). As we reported, he’s also in talks to take Parkoff’s 110 E 55th St. – for Gary, a listed property (405-417 hit the market via Newmark in an unusual joint listing last summer) is just the starting point for an assemblage 🧩

Anduril, the Palmer Luckey (excellent profile of him here)-led defense tech startup that 🚀 to a $30.5B valuation last summer, is poised to invest $1B in a new Long Beach campus. The 1.8M sf, 6-building spread at Douglas Park will include 750K sf of office and 400K+ sf of industrial R&D space, per the LAT. Anduril has leased 1M+ sf from Sares Regis Group, which will develop the campus for the firm. It’s a short ways away from Anduril’s Costa Mesa HQ, where it’s also been swallowing up space.

Long Beach has made a big push to lure the next gen of space and so-called “hard tech” startups, w/ Mayor Rex Richardson (a name right outta Michael Crichton) embracing the “Space Beach” moniker. In general, this industry has been one of the few bright spots on SoCal’s leasing landscape – re-upping this excellent report from JLL’s Owen Fileti 👇