A note to Insiders: Today’s ed. dives into a couple big-ticket transactions that say so much about what defines today’s market – the 🧃 nowadays is in the restructuring, rather than in the buying/selling. We look at 5 Times Square’s hero’s journey from blight on the office skyline to mega resi conversion job, which features a HoF cast of characters. We also have a 🌶 podcast interview w/ Alan Stalcup, poster child of the Sunbelt multi boom/bust. We'll likely get some heat for "platforming" a guy in the thick of investor & lender lawsuits, but it is more than worth it to better understand one of the most prolific OPM runs of this cycle. If you know someone who needs to read this and might want to become an Insider, forward it along – they can get 10% off here. - HS

“Grant me the serenity to accept the capstacks I cannot change, the courage to change the ones I can, and the wisdom to know the difference.” - anon

In Feb. 07, during the go-go days, Mort Zuckerman's Boston Properties sold the leasehold for the hulking 5 Times Square to Allan 🌹 ‘s AVR Realty (who?) for ≈ $1.3B ($1,160/ 🦶 ). The trade was as clean as they come: A tower made special for Ernst & Young in ‘02, fully occupied by the accounting giant, cash deal.

Nothing about 5 Times Square has been clean since. 👇

This week on the pod, we break routine to bring you a no-holds-barred interview with the poster child of the Sunbelt syndicator boom/bust, Alan Stalcup of GVA Management. Fueled by OPM, ZIRP, and an insatiable appetite for deals, Stalcup rode to the very top of the multifamily mountaintop, amassing 30,000 units in an acquisition spree for the ages. When rates turned, however, he became one of the highest-profile casualties, setting off a wave of defaults, investor & lender lawsuits, and explosive allegations of fraud. Hiten did a pretty spicy Q/A w/ Stalcup in Jan. on “the fall”, but we wanted to get into “the rise” in detail on the pod – how did a nonentity become one of the largest apt. owners in the country in a 2Y period?

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Reminder: Our Insiders-only chat w/ Lighstone’s Lichtenstein is on Thursday, 4/23 @ 12pm ET. We’ll talk retail money, development, special sits, & a lot more – David is really in the mix. You can sign up here. Send us any Qs you’d like us to tackle.

In ‘14, a group led by David Werner agreed to pay $1.5B for the tower, and to get the deal done took a slice of mezz from Scott Rechler’s RXR. In ‘16, RXR took a 50% interest in the leasehold. By March ‘17, the partners landed a $1.4B refi from Morgan Stanley on the tower
• $782M sr. (held by Morgan)
• $200M jr. mezz 🧒 (from the lads at SL Green) - this is the one to remember
• $400M+ in other mezz (to be syndicated out)

Later that year, we learn that E&Y is set to bail in favor of new digs at Brookfield’s Manhattan West. So RXR knows it has its work cut out for it: It signs Roku 📡 to a sizable 240K sf lease in early ‘22, and sets out to land a $1.5B refi package. But E&Y’s exit is looming, and this is a market still in pandemic PTSD, so it’ll be tough. What RXR ends up getting is a $1.3B package, from MS, AIG, Apollo (obv) - ≈ $850M at close and floating debt 🎈 blending at 4.56% over SOFR. The big nugget here is that SLG converts its mezz stake ($139M book value) into a 31.6% equity position “with no additional investment from the Company.”

By ‘24, the building is a pox on the office skyline, 80% vacant. RXR/SLG/Apollo then pull off another recap, structured quite similarly to the ‘22 one: In this case it’s Apollo that converts its mezz into equity. Corebridge (the artist fka AIG) will stay on as a sr. lender, but MS is out. The ownership group agrees to kick in another $200M in equity. SLG recognizes a $146M writedown on its books, but tbf to the firm it has done v well on other such bets (522 Fifth, for one).

In Dec. ‘24, the owners file a 942-unit conversion plan at the property, later upsized to 1,250 units (467-m incentives of c). In June ‘25, they land $575M in fresh debt (again from Corebridge) for the conversion job, and also strike a deal w/ the City of New York for the land.

By this point, what happens to RXR’s original equity investors is anyone’s guess. But the firm holds on to the property, or rather its various fee streams, and even gets to generate new ones (construction management). The game is the game 🫡

Chrysler: Tishman Speyer, which seems to be the only player that actually made bank at the Art Deco icon, is back in the mix to snap up the skyscraper from fee owner Cooper Union: It struck a deal w/ the college’s board to enter into exclusive negotiations on a 100-year+ ground lease for the tower, per Bloomberg. Recall that TS first got in in ‘97, and had a huge windfall when it brought in Abu Dhabi at an $800M+ valuation a decade later. (See “Board Man Gets Paid” for a full rundown on pricing and the potential conflicts of interest in the GFP bid). Tishman’s new PP will almost certainly be a fraction of that $800M valuation - even somewhere in the low $100s – and at that basis, they will have a lot of breathing room wrt renovations/TIs to bring the building up to snuff.

141 Willoughby: In ‘14, Savanna, run by certified bro Chris Schlank & Nick Bienstock, bought a Downtown BK site for $28M. In ‘21, it snagged a hefty debt package from AIG/PIMCO/AB Carval to build a ≈ 400K sf office tower. The tower was ready by the top of ‘23, but leasing went nowhere. By ‘24, Savanna was in default on the PIMCO debt, and the lender (too many black eyes to count in CRE tbh) began shopping the note via Eastdil. By that fall, an opportunistic buyer had emerged: Josh Zamir’s Capstone Equities, which moved to take control of the note for $107M (≈ $270/ 🦶 ). Such a deal would obv wipe out AB Carval’s mezz and Savanna’s (well, OPM obv, much of it UBS HNW clients) $148M equity. The most fascinating nugget here is that Capstone’s initial partner on the note purchase, at least per raise docs viewed by The Promote, was Savanna – after all, who knows the brick better than the guys who built it?

By Jan. ‘25, though, BH3 Management (“What the fuck do these guys think we are, baggage handlers?”) had stepped in as Capstone’s partner, and it’s unclear where Savanna ended up. BH3/Capstone moved to foreclose, and are embarking on a partial conversion to add 200 rentals.

Sittuationship @ 440: Joe Sitt’s Thor Equities bought a Soho retail building at 440 Broadway in ‘08 for $12M, and when Manhattan retail was rippin’ in ‘13, it took out a $13.3M loan on the property (some nice proceeds there). In ‘24, it lost the building in foreclosure, but it has now come back and bought it from bondholders at a girthy (45%) discount. And BTW, Sitt did pretty much the same thing at nearby 470 Broadway in ‘23. Proof that for a canny operator, losing a building can just be a temporary goodbye, rather than a SYonara 😉.