On Wednesday, we mapped out the various stakeholders working through the scare at the office-resi conversion of the Pfizer building in NYC. Nathan Berman was in triage mode trying to convince everyone that the buckled columns were merely a structural snafu, rather than a harbinger of something bigger. Later that day, Berman told Bloomberg that he would be looking to reconstruct 15 of the floors that were tacked on to the original structure. “It will be reskinned, everything will be leveled, fixed in place, and it will be brand new,” Berman said. Now, that is a BFD, and the Q becomes what it does to the project’s budget, and even more importantly, to the timeline. Does insurance come into the mix? Madison Realty Capital, which shelled out the biggest single loan ($720M) in the firm’s history for this project, declined comment to the outlet.

Berman’s been telling LPs that the project will still be wrapped on time (‘27), per the Times. Remember that Berman’s Metro Loft is self-performing as the GC here, and the construction manager is CCM, which is Metro Loft’s go-to on major projects (the hock is that Metro Loft owns a piece of the firm too). Let’s see how Berman’s partner on the conversion, David Werner, plays this: He owns the fee at 235 E. 42nd St., while the partners jointly own the leasehold at the other component of the conversion, 219 E. 42nd. St. (Note: This was the state of play at time of financing; things may have gotten shuffled around since.) Meanwhile, on top of the bricks-and-sticks stuff, Berman has to manage the narrative circus – the Times had four reporters assigned to the story, and everyone from the unions to the comptroller have said their piece.

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The story of big-ticket commercial real estate is often in essence a story of fathers & sons: In our latest video snapshot, now live on YouTube, we look at the succession planning at RFR Realty, the Manhattan-based office & retail powerhouse that took its licks during the pandemic but is back on the hunt. Drop us some 💓 on the channel, and hit subscribe, b/c we’re ramping up on the video front.

“All the money is made between the lines.” - Efraim Diveroli, War Dogs

The world of B and C multifamily is sketchy even on a good day. But there are a few edge cases that make everyone sit up, and judging by the sheer volume of inbound we’ve got on this one, Vesta Capital is one of them.

Tulsa-based Vesta, run by Marc Kulick, is being accused by a partner of looting, fraudulent capital calls, taking loan-sharky debt, making unauthorized debt sales and portfolio neglect on a nearly 10K-unit portfolio across Oklahoma, Arkansas and Kansas. The partner, John Upperman, is moving to seize control of the portfolio, which he claims was once worth $925M+, but “which upon information and belief is rapidly declining.”

The spiciest claim: “Most notably, Kulick and his entities borrowed approximately $7.338 million from YSA at interest rates alleged to have started at 100% annually and increased to 7,000% per annum, compounded daily,” the complaint states, identifying YSA as a lender controlled by Efraim Diveroli, a “former arms dealer and convicted felon.” Those loan agreements, unauthorized by Kulick’s partners on the portfolio, meant that YSA filed 2nd mortgages on the properties, which violated the portfolio’s existing loan agreements and triggered a wave of foreclosures.

(Diveroli was played by Jonah Hill in the iconic ‘16 flick “War Dogs.”)

In March, Fannie moved to foreclose on 8 Vesta properties, with the GSE alleging that not only did Vesta fail to make good on its debt payments, it failed to disclose other pending suits. Fannie said at the time that it was aware of a pattern of tenant complaints.

Insiders: Take a peek at the forensic accounting report at the end of this email 👇

Insiders: Take a peek at the bond offering docs in your section at the end of this email 👇

Also: If you know anyone fiddling around in prediction markets for CRE, get in touch.

Breaking ground: Important clarification on all the 2 WTC buzz in the ether this week given the groundbreaking. Amex is NOT a tenant; they are the sole owner-occupier and bought the leasehold. Totally different deal economics; Silverstein is now basically a for-fee developer of the tower (no GP economics). Full breakdown here for Insiders. 💳 🪏 🔒