Publisher’s Note: Been on the road this week for the WC ⚽ , but had to give you at least 1 ed. to fill the void. Plenty of juice for you below, and back to regular programming next week - HS

After Texas legislators nuked the mother of all property-tax loopholes last May, the market was left to grapple w/ what would become of the hundreds of multifamily properties that had looked to use the loophole – known as the Traveling HFC – as an escape hatch. (If you’re new to these pages or need a refresher, start here, then here, then here, and finally here, and def. check out the deep dive in the pod here.)

A year-plus out, let’s take stock of how these properties are faring. 👇

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When Traveling HFCs went away, sponsors – we did a rundown of some of the more prolific ones here 🔒 – had until Jan. ‘27 to get the blessing of in-jurisdiction authorities to keep the tax break, and also had to prove that at least 50% of the tax savings were being used to keep rents under market-rate. But most of the properties in Q do not meet this bar – it is truly difficult to explain how much of a gimme this program was.

“It’s not one or two of them,” Newmark’s Brock Cannon told REA. “It’s every single one that falls under the definition of out-of jurisdiction HFC.” Texas Rep. Gary Gates, who sponsored the HFC killer bill, estimates that there are 339 properties w/ over 100K units at stake here, and they’re collectively valued by local tax authorities at ≈$12.4B. Some have traded at deep discounts, others are being peddled now. Here’s a temp check c/o REA:
• Borel Hill (Dan McDonough, Mike Maffia) bought a 312-unit complex in NW Austin in a short sale (OG sponsor was Travis Pacoe & Ron Abta’s Polaris, lender here was Michael Mazzei’s BrightSpire Capital 😢 )
• Northmarq is marketing a 247-unit property bought by Scott Everett’s S2 Capital and financed by Starwood Property Trust. The Dallas property known as the Evaline received its property-tax absolution from our guys in Pecos County (population ≈15K), one of the jurisdictions that invested heavily in upping its HFC game in late ‘24. 🤠
• Voya, which provided a $120M loan on a 1,478-unit complex known as BX5, has taken back the complex – the joint was the scene of a spicy dispute between co-GPs WindMass Capital (Mitchell Voss) & Fundamental Advisors (Laurence Gottlieb)
• Greater Dallas is the epicenter of the Traveling HFC mess, w/ 160+ properties on Gates’ list in the area. They’re collectively valued by tax assessors at $6B+, but who knows what they actually trade at.

The fat lady is yet to sing, tho: A cabal of sponsors, incl. Jason Post’s Post Investment Group, have been mounting legal challenges to the Traveling HFC repeal, arguing that its retroactivity is unconstitutional – more deets for Insiders here 🔒 . The Promote has heard various appeals * from GPs and lenders to the effect of: “This is Murrca, you can’t just take back incentives like that!”

* CRE hardo David Lilley’s rant remains our favorite

Been a busy month in the Chicago trophy/ex-trophy office market. Some highlights

• 601W Cos. (Mark Karasick, Harry Skydell) defaulted on the debt at One South Wacker Drive, per Bloomberg. The firm bought the 1.2M sf joint for $310M (≈$260/ 🦶 ), and in ‘18 took out a $343M (loan basis: $286/ 🦶) loan from Blackstone’s mortgage REIT, about $159M of which was securitized. BX’s response on the soured loan was a twist on one of its classics: “This loan represents less than 2% of BXMT’s portfolio,” the firm said. Despite these hits, 601W has become one of the more formidable bargain-shoppers in today’s market.
• Anagram Real Estate (Max Meyers, Jason Trailov) is in talks to buy the hulking 350 N. Orleans St. at a massive discount to the loan value, per Crain’s. Former owner BX defaulted on its $310M CMBS loan (loan basis: $240/ 🦶) last year, and Eastdil has been fielding bids of between $90M-$100M – that’s ≈$77/ 🦶. KeyBank is the special servicer here, while Trigild is the court-appointed receiver. The property has some name-brand tenants, incl. Stripe & GGP, and is ≈60% occupied. Anagram is looking to buy the property in a JV w/ Glendon Capital Management.
• And on the healthier side of things, Inditex centibillionaire Amancio Ortega is making a play for Donald Bren’s 51-story trophy tower at 1 North Wacker, per CoStar. Ortega’s Pontegadea – don’t miss our snapshot of Ortega’s grand vizier on that quest – would look to assume the existing $353M CMBS as part of a $500M+ deal (so north of $360/ 🦶 ). The 1.4M sf spread is 92% leased, per CoStar, w/ tenants such as PwC, Fitch and UBS. 🌬

What does it take to be an elite broker trusted advisor middleman in this business? The quality bar to entry (and in our business, too, tbh) is nonexistent, yet a handful of dealmakers end up w/ an overwhelming share of the action. As we’ve riffed before, there’s no one personality type that seems to work – the leaderboard is stacked w/ gentlemen & tyrants both. But two attributes repeatedly pop up: information arbitrage & narrative mastery. Can you be the person who consistently has access to better intel/analysis/hock on market goings-on? And can you also be the person who can use that information edge to spin the most compelling tale?

Thought of this when listening to Eastdil’s Will Silverman on the Declarations pod (hosted by the guy who places D-Rub’s CRE bets). Silverman, one of New York’s top I-sales guys, illustrates these traits nicely through a number of vivid examples.