In a New York minute, Manhattan office has gone from being the pariah of the CRE investment world to being its golden child: We’ve had the strongest YTD leasing run since 2000, per Colliers. Couple that with the fever pitch at the top of the market, the sense that we’re kissing the $400/ 🦶 threshold for the best spaces, and you can see why every blue-chip developer w/ well-located dirt is plotting a ground-up office tower.

The problem is, you just cannot half-ass it. To create the kind of product you need to lure the tenants willing and able to pay those marquee numbers, you have to go the full Monty – the buildout has to be spectacular, the amenities world-class, every desire, expressed and unexpressed, has to be anticipated and met. Which means these projects keep getting more expensive to take on - BXP, for example, is budgeting $2K+/ 🦶 to build its latest. And so your equity partners have to be preternaturally deep-pocketed.

The Promote looked back at 3 recent milestone ground-up deals to get a sense of the archetypes who have the resources and will to back such capers: The sovereign, the scion, and the suit.👇

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A: The Scion: Edmond M. Safra 🍏 🌳

A member of one of private banking’s wealthiest and most revered families (if unfamiliar, start w/ this FT banger), Safra is now a principal at AVRS Partners, alongside fellow scion Patrick de Picciotto and former QIA Americas real estate head Adnane Mousannif. AVRS has backed Vanbarton Group (Richard Coles, Gary Tischler) on notable office-resi projects in New York and Seattle. And BXP just announced that AVRS bought an 11% stake in its upcoming single-malt tower ™ at 343 Madison, which is expected to cost $2B ($2,150/ 🦶) to build. The news comes a few weeks after the REIT announced $1.2B in construction financing, at which time it also reported that over half the building was already spoken for. Last summer, the REIT made the decision to go vertical even though its original equity partner, Norges, opted out.

The Safras and BXP – the artist fka Boston Properties – go way back: In ‘07, co-founder Mort Zuckerman and Joseph Safra* considered making a run at Israel’s Bank Leumi. In ‘13, Moise Safra bought into the REIT’s GM Building at a $3.4B valuation.

*Sephardic naming conventions make it incredibly convoluted to keep track of which Safra is which - one feels like Karen meeting Paulie’s clan at the wedding.

B: The Sovereign: Mohammed Bin Salman 👑

After Related Cos. paid SL Green ≈$630M for 625 Madison, a property that played an important role in Related’s early dealmaking history, the developer* drew up plans for a show-stopping mixed-use tower w/ a super-swank hotel component. When it came time to tap some pockets, it went for the very deepest: Saudi Arabia’s Public Investment Fund ($900B AUM), controlled by MBS, bought a two-thirds stake in the project, which is expected to cost north of $1B. The developer then pivoted to a pure-play office tower, given how frenzied demand for trophy space has been. That call appears to be paying off: Last month, Related announced that investment firm General Atlantic would anchor the tower (our sense is that GA’s rent is in the $250s/ 🦶), and earlier this month, the developer touted a record-setting $375/🦶deal w/ hedge fund Castle Hook Partners for the top 2 floors.

*Andrew Mathias, who was the longtime Robin to Holliday’s Batman at SLG, is Related’s co-GP here.

PIF has substantial exposure to the CRE markets, though rarely, if ever, via project-specific bets. Promote Insiders: Read on for the full rundown at the end of this newsletter 🔒 👇

Flagstar, the bank that took over the now-defunct Signature Bank’s deposits in ‘23, is being accused of aiding & abetting one of the largest CRE escrow frauds in recent memory: Hard-money lender Blueberry Funding (Abe Miller) alleges that Flagstar kept processing Mark Nussbaum’s wires, and even raised his wire limits, despite its own compliance team repeatedly flagging Nussbaum’s trust account 🚩🚩. Blueberry singles out 2 specific wires it and an affiliate sent in summer ‘23, totaling $15.5M, into Nussbaum’s IOLA account at Flagstar – the bank, Blueberry alleges, was already aware of Nussbaum’s game, but still chose to process the transactions. In total, Blueberry’s net loss on the Nussbaum scheme is nearly $59M, the lender claims. As for where the money might have gone, it cites Nussbaum’s admission that he rerouted nearly $337M to companies controlled by now-deceased CRE investor Mendy Steiner.

“This action does not seek to recover from Signature’s receivership estate or for actions in which Signature engaged as a failed bank,” the lawsuit, filed this month in US District Court in NJ, states. “It seeks to hold Flagstar liable for what Flagstar itself knew, and did, after it took over the Trust Account.” The action comes a few months after Blueberry sued title firm Riverside Abstract for allegedly engaging in 50+ fraudulent flips w/ Nussbaum & his partner Sam Lowinger *🎷. And Blueberry’s far from done: It also sued Betzalel ‘Tzoli’ Chopp and Simcha Feller, who allegedly drew on the Nussbaum trust account, plus Feller’s backer Mordechai Beitel. In at least one instance, Nussbaum was compensated by Chopp w/ a Patek Aquanaut. (“You never actually own a Patek Philippe…”)

*The Feller/Beitel suit also contains this alleged exchange between Nussbaum & Barry Drillman 🚬

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