When news surfaced early last year that One Beverly Hills was looking for a $5B+ financing package, we described it as a “capstack for the ages,” both for its size and for how massive the ask was relative to the plans – just 200 condos and a boutique hotel were planned at the time. Since then, the Cain International/Eldridge project has gone from a $5B project to a “$10 billion luxury development,” has landed the largest non-data-center private construction loan of the past decade, and has commitments for over $1B in condo sales. But it’s somehow even more confusing now. 👇

A message from Pensford’s JP Conklin: Can we take a moment to appreciate how far afoul Trump had gotten with spending that a blue wave caused rates to go down because the Dems will be more fiscally responsible?

One of the most respected economists in the industry, Torsten Slok, made some headlines last week. “The Fed would need to raise the Fed funds rate by about 275 basis points, from roughly 4% today to 6.75% by the end of 2027, to bring CPI back to its 2% target. Allow me to retort…

Here’s where things appear to stand:

• $4.3B in construction financing: $2.8B sr. from JPM, plus $1.5B in mezz 😲 from gaming REIT VICI
• $350M so far in so-called “Founder Bonds,” a novel workaround to California’s ban on using buyer deposits for construction – here, buyers have offered to throw in an extra 30% of the sales price in the form of a loan w/ a promised 5% return. The developers hope to raise $1.3B through the mechanism, which would allow them to pull out their own equity
• Up to $550M in a muni bond raise, which they laid the groundwork for by scoring approval for a special taxing district
• More than $3B from Security Benefit, an insurer controlled by Eldridge, in effect making Eldridge boss Todd Boehly both lender and borrower 🤝 . Last week, the FT reported on an Eldridge disclosure showing Security Benefit has $1.6B in O/S loans to Eldridge entities “supported by their holdings” in the project, as well as $1.4B in project debt. That exposure equates to about 4.5% of the insurer’s total assets.

Andrew Granato, an insurance & securities law prof, told the publication it was notable that Security Benefit was investing in “an affiliated entity that also needs a vast amount of debt in order to conduct its own operations”. A rep for the insurer said it was complying w/ regulatory limitations on affiliated transactions. Sources told the FT that doing the lending via 5 different trusts may have helped the insurer avoid triggering a regulatory review.

PS: For more on the site’s fantastical backstory and cast of characters, we did a deep dive on the pod last year

WSJ and Bloomberg both dropped new reads on the high-level departures from Blackstone’s storied CRE unit, where nearly a third of the unit’s SMDs (unlike in brokerage, this means something at BX) have left in the last 3Y. Morale had gotten so low in the unit that Blackstone overlord Steve Schwarzman had top leaders over to his Manhattan pad in June, per Bloomberg, and tried to give them a pep talk: Nadeem Meghji, who became sole head of the division after Kathleen McCarthy’s exit, would lead them back into the light, and the group would raise $30B in fresh funds.

By Sept., however, Meghji was gone. The firm appointed David Levine and Giovanni Cutaia in his stead, and the duo will have to prove Wall Street they’re the right team to be entrusted w/ billions in fresh funding. And then there’s the central question of carry, or more precisely the lack of it: With CRE not generating the fat returns it used to for Blackstone, sr. execs who could long count on tens of millions of dollars in carry comp are now facing far leaner paydays, and even the prospect of leaving the lair. PE has taken back bragging rights as the company’s most profitable business.

Here’s Bloomberg: For now, Blackstone’s real estate funds are saddled with expensive assets that are hard to sell. The flagship fund known as BREP IX, which began investing in 2019, has generated annualized net returns of 3%. The group is running a secondary process for Blackstone Property Partners, an effort to return cash to restless investors; it has also cut its management fees for some of those who remain. And BREIT’s annualized returns have fallen short of the 11.5% that Meghji promised the fund would deliver for the University of California system.

Don’t miss: We published a guest post for Insiders 🔒 last month from CRE Analyst, which traced the evolution of BX’s CRE unit and the accompanying talent shuffles.

When a JV between Presidio Bay and Prado Group backed out of a deal* to acquire the shuttered 1.2M sf San Francisco Centre Mall, bondholders had to scramble for a new suitor. A relative unknown – Ray Falack’s Seven Equity Group – jumped into the ring w/ a $133M deal: Now, Falack is not a guy w/ an extensive track record, but he’s been backed on prev deals by SY royalty including the Nakash family. He’s on the board of Ohel Yaacob, a Deal, NJ synagogue that is stacked w/ CRE bigwigs. The SF Standard got its hands on materials Falack’s sending around to potential lenders, which show that he plans to tear down the hulking structure and start over on the 6-acre site. Falack hopes to kick off a ground-up, mixed-use development, and said his firm could potentially entitle up to 2.4M sf. He’s out to market via CBRE for a $99M bridge loan. A teardown & redev of something this massive, situated on land leased from the school district, is one of those 11/10 complexity jobs that normally warrant a team w/ a few more battle scars. We’ll see where this goes – Falack has yet to close.

*In a conversation w/ The Promote about the aborted deal, Presidio Bay’s Cyrus Sanandaji described the special servicer’s conduct thus: “They shot the bondholders in the face.”

Equity God: If somehow you’re not a Promote pod devotee yet, now’s a good time to start. On Wednesday, we’re dropping a special episode on Whitehall, the famed Goldman CRE unit that lit up our skylines in the ‘90s and ‘00s. Subscribe now (Apple, Spotify, YouTube) so you get it right when it drops. 🎙

We’ve been chronicling Jonathan Landau’s quest to fund his Brooklyn Heights condo moonshot at 205 Montague for about a year now, as it’s a revealing portrait of just how messy ground-up capstacks can get. First, the formidable Joe Cayre of Midtown Equities had to fight back against what he described as a “sinister pocket veto scheme” by Rialto, which had inherited the OG Signature Bank loan on the site. With that out of the way, Cayre rolled his money from the sale of the site to Landau into an equity stake in the project. (Landau’s other equity partner on the project is the Mizrachi family, which operates under Third Millenium Group.) Landau had Bank OZK committed to provide the sr. loan, but when the lads from the prairies bailed at the 11th hour, he rushed to find a replacement. In came Ran Eliasaf’s Northwind Group, which kicked in $113M in a land & predev loan, w/ Atlas Capital kicking in ≈$25M in pref. That bought Landau more time to complete his capstack. And he’s now right at the finish line. (Insiders: Read on 👇 🔒 )