Meridian’s NYCB Burden

The capital-markets bromance between New York Community Bank & Meridian Capital Group is by now well-documented. Meridian founder Ralph Herzka parlayed a tight relationship with the bank’s two top Jims, O’ Donovan and Carpenter, into a stranglehold over the bank’s multifamily book: In August, in response to an SEC query, NYCB confirmed what industry insiders had long speculated: Meridian referred the bank about 75% of its multi business in NY-NJ-PA, and brokered nearly half of its 350 biggest loan deals. By the time of that disclosure, though, NYCB was a very different bank: Fresh off a Steve Mnuchin-led capital infusion, it had cleaned house, dismissing or putting out to pasture CEO Tom Cangemi, CFO John Pinto, Carpenter and CRE prez John Adams. Mnuchin’s appointed CEO Joseph Otting, a former comptroller of the currency, made clear that going forward, the lender would be a “well-diversified regional bank,” and that not only would CRE no longer be the main event, the bank would look to cut out mortgage brokers from the action and go direct. Herzka & his soldiers, who once received red-carpet treatment at the bank, now get the cold shoulder. 

One element of the relationship, however, has remained unreported: the existence of a nine-figure corporate loan NYCB made to Meridian, around the time agency-lender NewPoint was born.

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Meridian (Cont.)

The fate of the summer ‘21 loan, which sources said is in the $100M-$130M range, is an important factor to consider in the health of Meridian going forward: Such loans typically come w/ covenants that are cash-flow based, and also usually include “bad-boy carveouts” for issues such as fraud. Now, let me be crystal clear – The Promote does not know the specific covenants associated w/ this Meridian loan. Still, given the serious hits to Meridian’s business over the last 18 months, the mass exodus of talent, and the agency investigations of potential fraud at the firm, it is worth asking if any covenants have been breached. Now, of course, banking is a r’ship business, and even if a borrower were to breach covenants, a “bank can wave a wand” 🪄 and kick the troubled can down the road, is how one capital-markets pro put it. And though Herzka no longer has juice w/ NYCB, Brian Brooks, the CEO brought in to right the Meridian ship last March, might: he worked for Mnuchin at OneWest Bank, and Mnuchin later nominated him to serve in the OCC.

Meridian declined to comment, while NYCB reps didn’t respond to multiple requests for comment. Meridian ownership is in advanced stages of shopping NewPoint to buyers, a process that had been muddied by an attempt to tack Meridian on to any sale. The current state of play, per sources, is that it’s now just NewPoint on the table, and a shortlist of buyers has emerged – the names The Promote has heard include asset managers Bayview & Rithm Capital. Who’ll get to reap the rewards of a sale is another Q being asked – a core group of Meridian rainmakers & execs had invested in NewPoint alongside Stone Point Capital, Barings & Meridian’s founders, but that core group had to agree to a stipulation that if they left the firm – voluntarily or otherwise – their interest could be bought back at the original basis. 😭 

RFR’s Recap Rabbit

What separates the titans from the footnotes is not the ability to win, but the ability to endure. We’ve seen players ratchet up trophy portfolios (see Beninati, Joseph and Toledano, Raphael) only to lose them in a whirlwind of bad debt & litigation. But legacies are made when you can fight yourself out of a corner and go another cycle. And that’s what RFR (Aby Rosen, Michael Fuchs) is trying to do.

The firm is taking portfolio-wide hellfire and has already lost the Chrysler Building. But it’s now showing its mettle w/ a series of wins: a mega $1.2B refi of the Seagram Building, a loan mod/ext. for its zaftig FiDi office tower at 17 State St., and now, per CO, a recap of 475 Fifth at Bryant Park. RFR landed a new $160M loan from existing lenders JPM & Citi - who were earlier looking to foreclose – as well as an equity infusion from new unnamed partners 💉 “It’s not just One Vanderbilts and the Seagram Buildings that are leasing well,” Rosen told the publication, re. to the class of towers The Promote has dubbed “single-malt buildings.” ™️ “It’s now finally reaching the well-located but normal Class A office market.”

A Capstack for the Ages

I don’t understand this capstack one bit. But I am mesmerized by it. This summer, Cain International, which is run by Jonathan Goldstein & majority owned by billionaire financier Todd Boehly (Eldridge, Chelsea FC ⚽️ ), started putting together a $5.25B financing package for a 17.5-acre luxe project dubbed One Beverly Hills. Cain hopes to pull in (Newmark running pt.) money from a 🍸️ of banks, debt funds, insurers & such to fund this thing – but the ask is massive relative to the plan: Just 200 Aman-branded condos and a 78-key Aman hotel (both developed by Vlad Doronin’s OKO), luxe retail and a souped-up Beverly Hilton. A developer friend cooked up a hypothetical plan (see photo inset 👆️ ) and couldn’t grok it either.

Cain’s been able to convince at least some deep pockets, though: It just announced a $300M mezz piece coming in from VICI Properties, the publicly traded REIT led by Ed Pitoniak that’s a big player in the casino business. The deal kicks off what both sides are framing as a “strategic relationship” on “experience-driven real estate.” We’ll be following this capitalization closely, both for its ambition and for its structure.

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Can Skyscraper Sales be a Boutique Game?

A year after starting her own shop w/ little to show for it, Darcy Stacom, the former CBRE I-sales powerhouse, is teaming up w/ Vornado, WeWork and New York REIT vet Wendy Silverstein on a new capital-markets brokerage. Dubbed StacomSilverstein, the boutique firm seeks to continue the sales & recap work that made Stacom such a 🐐 in the business. Is this mostly a bet on legacy, or an alternate path to the mountaintop? The leading brokerages have recently been emphasizing an infrastructure approach: debt rainmakers in lockstep w/ their equity counterparts, tapping into the full force of the firm to make shit happen. Here though, the bet seems to be on the names & track records of the principals: Will an institutional owner trust a boutique approach in this new era? We shall see – Silverstein smartly got her ex-boss Steve Roth to add his weight to the press push.

AUM Gobbling: Apollo Buys Bridge

“It ain't about pool. It ain't about sex. It ain't about love. It's about money. The best is the guy with the most.” - Fast Eddie Felson, The Color of Money 🎱 

Apollo is buying publicly traded REIT Bridge Investment Group for $1.5B in the latest instance of AUM gobbling ™️, with many of the big boys believing that ever-increasing scale is the only way to make this business work. Consider this: In ‘19, the 6 biggest money managers accounted for 20% of total fundraising, per Preqin; between Q1-Q3 of ‘24, that number jumped to 60%. M&A is a big part of the playbook: we just saw Barings snap up Artemis, and other megadeals include Ares-GLP & Blue Owl-IP. The Bridge deal will see its CEO Bob Morse become head of Apollo’s real-estate equity biz, per WSJ, and will nearly double Apollo’s real estate AUM to $110B. Some thoughts on potential impact here 🦑 

Quickies

• 🎥 Audacity’s new patron saint: Rise48

• Arbor says 💩 syndicator deals will put further pressure on balance sheet 

• SEC brings new fraud charges against Elie Schwartz (catch our recap of the whole opera here) 🎭️ 

• Lloyd Goldman inks PG to save Gurney’s Montauk 🌊 

• We have the money quote in this new deep dive on Traveling HFCs 🐎 

Unquotable Quotes