There is something irresistible about a young dealmaker on the rise. When someone strides into a town demonstrating extreme chutzpah, off-the-charts creativity and an insatiable appetite for risk, things just seem to happen. Mentors come his way, deals bigger than he has any business doing hit his desk, and lenders bend over backwards to create novel structures for him. The kid is going places, it is ordained, and they want to be along for the ride.

And so it was for a lad from Monsey. 👇

On Friday, Promote Insiders got the rundown on a new Blackstone vehicle to vacuum up all that 1031 exchange money: BREIT is launching its debut Delaware Statutory Trust, and is courting I-sales brokers on top of the usual retail-focused channels. But the economics of DSTs are a bit of a black box for investors, our REIT expert cautions. If this sounds like your jam, you can sign up for premium on a 2 week free trial and read it here.

Moshe Silber had a massive chip on his shoulder, courtesy of a messy childhood, and a burning desire to make it big. After he graduated yeshiva in Brooklyn, he quickly established himself as the go-to guy for a major NYC landlord, running point on a 5K unit portfolio, per a seriously excellent new piece from TRD’s Keith Larsen. In his early 20s, Silber decided it was time to go into business for himself, and formed Rhodium Capital & CBRM. Covid, and the cheap rates it engendered, proved a fertile acquisition period, and Silber amassed thousands of mostly affordable-housing units. He financed these deals first through a line of credit from UBS O’Connor and then later through a private debt issuance from Piper Sandler, which was eager to expand its fixed-income book through financing smaller operators typically ignored by the bond market. In ‘22, during peak irrational multifamily exuberance, Piper Sandler privately underwrote 3 rounds of bonds for Silber affiliate Crown Capital. A range of midsize banks and lifecos snapped them up, as did Piper Sandler execs. By Dec. ‘22, per TRD, clients had picked up $200M in these bonds. Soon after the issuance, Silber took a meaty distribution: $90M 🍖

Under the surface though, things were getting messy. Silber levered up the properties w/ $450M in mortgages. W/ Silber controlling the books, both creditor types were at least partially blind: sr. lenders were unaware of the extent of bond financing, while some of the bondholders did not realize how heavily levered the properties were.

Here’s TRD: As part of the private offering, Silber offered a guarantee in Crown’s parent company, CBRM, of which Silber was the sole shareholder. If Silber defaulted, bondholders could pursue Silber or his company, but they could not immediately seize Crown’s properties.

As this was playing out, the Fed raised rates, pummeling multi values and rendering many portfolios financed by floaters untenable. The Silber empire started deteriorating, and as a result it fell out of the affordable housing programs that make such deals pencil. Default inevitably followed.

Meanwhile, investigators were circling Silber, his partner Fred Schulman and their collaborator Barry Drillman 🚬 over potential mortgage fraud. The scheme went like this: buy a property, flip it to a related party at a girthy markup, get inflated agency takeout financing based on the bigger number. The complaint includes this HoF quote from Silber: “If there is no price anywhere then it’s good. Please make sure [Madison Title] knows that one mistake kills the deal…” In ‘24, Silber pleaded guilty to conspiracy to commit wire fraud, a death blow for the future financings needed to keep the charade going. Bondholders tapped Lynd Group to oversee a whopping 11K-unit portfolio, and Silber turned to hard-money lenders and heimish pref to stay afloat. Creditors started pursuing him for PGs. 🦈

In mid-’24, a judge issued UBS O’Connor a default judgment. That judgment was acquired by an entity called Spano Investor, which then put the entity (CBRM) that controlled the brick up for auction. However, to halt the sale, the fiduciary for the bondholders threw both CBRM and Crown into bankruptcy protection. “The situation is deeply disappointing and is likely to have a negative impact on our clients and our own employees,” reps for Piper Sandler told TRD.

Meanwhile, Silber got 30 months in prison in the mortgage-fraud case, and months later filed for personal bankruptcy. This was someone who at his zenith claimed to have a $1.3B CRE portfolio, w/ a $621M equity stake, and jetted around in a G550 w/ Rolls-Royce engines. The process of restructuring his mammoth portfolio is ongoing; Lynd principal A. David Lynd, who acquired a 1,500-unit chunk of it for just $26M ($17K/ 🚪), invoked Humpty Dumpty: “It has truly taken ‘all the king’s horses and all the king’s men,’” he said, “to put this portfolio back together again.” 🥚

Two years from now, the Pied Piper of Monsey will be a free man. But for his creditors, the music has long stopped. 🎺

V cool chart from NYC-focused distressed debt investor Maverick (David Aviram, Ted Martell) looking at the change in Big Apple lender activity over the past 3Y. You can clearly see how the regionals that historically drove the 🦁 ‘s share of activity have either retreated (NYCB/Flagstar), or, in the case of Signature Bank & First Republic, collapsed entirely. Stepping into the void is an eager crop of private credit players:

Heaps more interesting nuggets in Maverick’s full report here

Blackstone & La Caisse (the artist fka Ivanhoé Cambridge) have lined up $3B in Fannie debt for their gargantuan Stuy Town rental complex in Manhattan, in what is slated to be the agency’s largest-ever debt package. Wells Fargo, which originated the ‘15 $2.7B Fannie acquisition financing for the JV’s $5.4B+ megadeal, is also originating this new debt, per CMA . The loan basis comes to abt. $270K / 🚪 The complex, which includes over 11,200 units, produced net cash flows of $260M last year, per servicer commentary cited by CMA, and occupancy in the first half of this year was 97%.

Stuy Town remains Blackstone’s largest and most politically sensitive acquisition in the New York market. Under its previous owners, Tishman Speyer & BlackRock, the complex became the epicenter of the rent-stabilization battle and a symbol of overheated CMBS markets. After their ultra-aggressive market-rate turnover plan sputtered in the face of legal challenges, Tishman & BlackRock defaulted on their $3B debt and walked away (don’t 😭 for them, but do cry for Calpers & Calstrs) from the complex in ‘10. The property then went through an odyssey of special servicing and bondholder grief before Blackstone pounced in ‘15. The deal was seen as a major coup, but a few years later came the NY rent reforms, complicating BX’s path to more market-rate units. Now, w/ Fannie willing to offer up such a huge fixed-rate refi, BX could yet have the last laugh - as pod co-host Krasne likes to say, “at the end of the day, this is all a spread game.”