“To get in my office, it takes a key. To get into my head, it takes two years.” - Yitzchak Tessler

Yitzchak Tessler has just lost 172 Madison Avenue, his prized Manhattan boutique condo project that once boasted New York’s priciest listing. ArcPe, which held the NPL, seized the 10 remaining condos and 2 commercial units after a judge confirmed a re-org. The ruling puts an end to a telenovela between Tessler and his lenders, but the story of the site is so much bigger than just that dispute – it’s a case study of everything that can go wrong when attempting a high-stakes ground-up project in New York. And its problems even predate Tessler. 

We reckon it warrants a signature breakdown from The Promote. So let’s fire up the braai 🥩 (Note: Much of this account is based on news reports, lawsuits and bankruptcy filings – so take this w/ many pinches of salt and caveats – it’s not unbiased gospel.) And this is long - so stay tuned for Pt. II Friday  

I: The Russian 🪆

In ‘07, Natalia Pirogova’s NMP Group acquires the site at 33rd/Madison, paying $33M for the 3 properties (at least one sold by the Eshaghoff family outta Great Neck) that made up the site. NMP draws up plans for a 100-key hotel and a 69-unit condo. The target pricing? $2,000/ 🦶

To fund the deal, NMP lands a $29M loan from UBS. In ‘10, however, the lender files to foreclose on the property after NMP defaults on the debt. It then moves to sell the note to distressed debt investor Garrison Investment Group, a shop founded by Fortress (of c!) alum Joseph Tansey. Garrison rolls ahead w/ the foreclosure action. 👇

“I would say it's a very high beta position. If it goes well, it can go really well. And if it goes bad, it can go really bad.” 💀

This week on The Promote Podcast, we break down the puzzling $2.7B take-private of Soho House – what do Apollo, MCR, Ron Burkle and Ashton Kutcher think they can pull off by vivifying the famed member's club? We touch on everything from select-service hotels to Tyler Morse's start as "Barry's guy ™ ." We then dive into the capstacks on two closely watched Manhattan megadeals: RXR's purchase of 590 Madison Ave and Miki Naftali's ultra-luxury condo play at 800 Fifth Ave. Finally, we talk Yieldstreet's latest debacle and ask: Is real estate crowdfunding doomed by design?

Listen on Spotify here, YouTube here or Apple Podcasts here. Brands – to get in front of our devoted audience of CRE insiders, reach out here.

II: CIM City 🪂

In an attempt to save the site, Pirogova goes searching for deeper pockets. Through Platinum Properties, the Khashy Eyn-led brokerage, she’s hooked up w/ CIM (Avi Shemesh, Shaul Kuba, Richard Ressler), the equity on many of Manhattan’s marquee condos (432 Park, 100 Barclay, 305 East 51st St). Pirogova provides the heavy-hitter an inside look at the deal, per a lawsuit she later files against CIM. The shop was going to JV w/ her, Pirogova’s lawsuit states, but then went rogue and bought the NPL from Garrison. This maneuver puts CIM in a position to take over the site if Pirogova doesn’t find the money.

III: Enter Tessler 🚬

Before he was a rotund, cigar-chomping developer, Tessler was a diamond polisher, learning the craft in his teens in Israel and eventually becoming a trader who’d fly from South Africa into war-torn Angola to trade gemstones. After making contacts across the hubs of the diamond trade – Antwerp, Moscow, London, Manhattan – he transitioned into condo development. 

The 2 professions have more in common than one might think. You start w/ an acquisition of the rough stone, sourced through brokers. You might syndicate the purchase w/ other investors, use leverage in some cases, and then decide how to bring the stone to market. Sound familiar?  💎

“In the mind,” Tessler said of the development game in ‘18, “it’s not such a big jump.”

To stave off the CIM foreclosure, NMP had thrown the holdco into bankruptcy. In comes Tessler to form a JV w/ NMP. He agrees to pay off CIM, who by then says they’re owed $55M.

“CIM will do very well in this transaction,” NMP’s attorney John Stewart says at the time. Tessler’s now running the show.

IV: Lender Bender And Snail Sales  🐌

‘14: Tessler lands $141M in financing for the $160M project, at a whopping 85% LTC. (Fun nugget: the debt broker on the deal is Adi Chugh, then a principal at Maverick CP and today a major lender in his own right through Elliott-backed Tyko Capital, which is funding what feels like half the South Florida skyline.)   

‘16: Tessler throws a lavish, boozy launch party in the sky. I was there, and remember feeling awed by the scene – taking a construction elevator into the glitzy gathering at the semi-finished project w/ the Manhattan sunset and live music hitting just right. Also spotted: Ryan Serhant (you’ll understand why this matters in a bit) 

‘17: Tessler lands a $164M condo inventory loan on the project from TPG and Deutsche Bank. NY AG docs show a projected sellout of $308M on the 72 condo units. A TCO is imminent, and Compass, now handling sales, says that 60% of the units are under contract. The remaining listings are asking on avg. $2,200/ 🦶 

‘18 : With sluggish sales, Tessler turns again to DB, scoring a $95M refi. By now, Compass has broken up w/ the developer, who reportedly didn’t heed its suggestion to cut prices.

‘19: One penthouse to rule them all – and cure all ills. Tessler lists a nearly 20K sf spread dubbed “Le Penthouse” for $98M, or just under $5K/ 🦶 “If this is how you love to live, this is your call to action,” reads the listing for the unfinished white-box pad, being marketed by Efi Tessler (Yitzchak’s son) at Keller Williams. By the following year, it and several of the other unsold units slash prices. Le sigh.

To be continued: That’s Pt. I of the saga. For Pt. II, be sure to check out Friday’s ed.

He somehow dodged prison time in the mortgage fraud scandal earlier this summer. Now, Barry Drillman has another reason to celebrate. The prolific CRE investor has closed on the $55M sale of his nursing-home portfolio, The Promote has learned. Operating through an entity called MICH NH LLC, Drillman sold the properties – 15 in Kansas, 1 in Georgia – to Nathan Treitel, principal at Recover-Care Healthcare. Treitel bought the portfolio under a charming LLC: Sweet Sixteen 🎂 Records show that he landed $57M in Deutsche Bank financing for the deal. Sources said there’s a possibility that Drillman is staying involved in some capacity, as a minority partner 🚬

Skilled-nursing home facilities (the shorthand in the biz is SNFs, pronounced “sniffs”) is a little-understood but lot-lucrative corner of CRE. There are only about 15K SNFs in the US, and the 🦁 ‘s share are Medicare & Medicaid certified. Players are often able to get super high-leverage HUD financing for deals – “you’re borrowing money from the govt. against old people,” is how one insider memorably put it 👵 (BTW, for the good juice in that world, I recommend getting your hands on a copy of the SNF Shmooze) The space has come to be dominated by Orthodox machers, from Daryl Hagler to Joel (Yoely) Landau (See The Promote’s power roster here), and given the end-users, has attracted a good deal of political heat. The big deal everyone’s waiting for is Chuny Herzka’s in-the-works acquisition of the Centers portfolio 👀

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