Mega-Marriage of Convenience and Miami’s Abuelagate

[Music] There's a trope in Old Bollywood movies. The patriarch of a dynasty is on their deathbed. A city slicker comes to visit, and through false pretenses, charm, or threats. Or a combination of all three. He convinces them to sign away their most valuable holdings to him. Well, it sounds like Old Bollywood has found new life in Miami Beach. [Music] Welcome back to the Promote Podcast, or Insighted Guides, the money and mania of the CRE markets. I'm Hintan Zomtati. And I'm Bill Crasney. A shot at tourist sponsors, Pence Fert, the only interest rate advisory firm, focused exclusively on CRE. Bravo Capital, a leading hide and bridge lender that lives in Breeze Capstacks. And cohorts, a private, vetted peer group of GPs that are going through the same challenges as you. This week, we discuss multifamily's mega marriage of convenience. After getting no love from the street for being merely huge, multifamily rates, equity, residential, and avalan Bay are considering a merger. Now, Will overuses the word "tectonic" on this pod, but I think it really does apply here. The first time I really saw the word "tectonic" used in a new story was when Eric Schneider and got me to, he was the former New York Attorney General. I think that qualifies. So we're going to dive in as deep as we can. We then leave the public markets behind for a tele novella playing out at an old school Miami real estate family. Major developer, Tara Group's David Martin, is being accused of playing the part of a Bollywood villain. This is the exact kind of story line up. We love it the promote, a little meat, a little masala. It's going to be hoot, and we have a big announcement. Ooh, huge. Our swag store is now live. I'm using swag colloquially because the quality is much higher. It's not swag. I love them, but it's not Daniel Riccardo's merch, which when you wear it, it wants it like disintegrates. It's very high quality. Look at this. It's pretty good. We're calling it CRE's Merchant Bank, because we're not like that. It's live now through thepromote.com or directly at thepromote.store. That's the Promote.store. Hat, hoodies, t-shirts, and more. The perfect gift for the CRE junkie in your life. [MUSIC PLAYING] Let's get started with the punch list our signature rundown of the news news in CRE. This week's punch list is brought to you by DealNav, a map for a CRM and Deal Tracking tool. Built by acquisition fiends, four acquisition fiends, DealNav helps deal makers keep their pipeline tidy without the bloat or price tag of legacy sass. Our listeners get 50% off their first year. Go to DealHiphoneNav.com and use code of their promote at checkout. All right, let's go. The hotel, KaBeFornia. [LAUGHS] I wrote this one for anyone wondering. What's going on at 11 Howard? So we had a court case. Commerce bank or commerce real estate, a-- It's a subsidiary of the German lender. A subsidiary of the German lender in Abe. Damn it. AB. I doubt I don't know if it's a bit or it's just what you believe. That one was completely unaccident. So AB, who is known for having a lot of German equity and as well as German debt, is in risk of losing 11 Howard, which is Ann Adelby's favorite hotel. What's her claim to fame again for those unfamiliar? She was a famous grifter who story went viral. Can I round a muck on the New York high scene for a couple of years before she got caught? Try to buy 281 Park Avenue South. So this was where she stayed and ran up a gigantic bill that she couldn't pay. I think it was a holiday in when AB bought it in 2014 and spent a ton of money converted it to this boutique super high end. But when I think of this hotel, I think of Frederick Eklendon, like circa 2017, a million dollar listing New York being like, "So, the deal that they struck after delivering this hotel was really interesting." They sold the hotel to Commerce Bank, but leased it back for 10 years with an option for both a further 10-year extension and the option to buy it back over time. So basically, they locked in a certain profit but then got like schmuck insurance in the form of being able to still operate the hotel so they blew it out of the water. And what is Commerce alleging now? So one of the things is when you're leasing something you generally have to pay rent. Yes, they sort of stop doing that. There's a great quote, and you normally don't hear this from a lawyer for German bank. It's DLA Piper's Anthony Coles said something like, they stiffed us and it's time for that to end. One of the big takeaways from me from this case, a lot of local players are able to strike these unusually creative deals with the dumb lender sitting somewhere in Europe, right? And it's interesting when they unravel. What I keep thinking of is water boys. Like, the chickens are coming home to Roos Bobby Poussie. That's kind of what I think's happening to. 80 years in right now. All right, next one, Newmark's leasing fees rose 20% to an all-time first quarter high. And they attributed this to marketly higher office volumes. We talked recently about CBRE having a monster quarter as well in large part by the AI boom in their data center practice. But here, Newmark is saying basically, leasing has been on a tear. First of all, I'm following up on this because one thing about me is I will follow up until you die and we're closing the loop. And we said we would follow up with what Newmark did and Goddamn, we're doing it. So net absorption, everyone's been banding about New York, which essentially means that people are taking more office space than it is being delivered. That said, a 25 year high at the moment. And so office is really tight. We've talked previously about the record price per foot in New York and set twice in the first quarter as well. But this is not just a handful of 5,000 square foot family offices from Mexico coming in trying to impress Hermione Granger. It's like depth of demand across quite a lot of space. And there's one we're going to talk about right after this, which isn't in fact, or didn't, that's statistic. All right, so this one, the biggie, on Theropic is coming in and taking the entire building at 330 Hudson. That's an AEW capital joint. And this is a 465,000 square foot property. And they're like, we'll take it all. And they've done this before. We just talked about an SF. They ran the same playbook at the property that is owned by Blackstone and-- - Diff go west. - Just a major shot in the arm for the office market when you have a tenant like this that has insatiable appetite for space. And that kind of revenue run rate is just-- Have you seen that chart? - Yeah. - It's ludicrous. - Finance insurance, real estate, and legal. Those have traditionally been the big drivers of the New York market. - But now it's tech. And within tech specifically AI, this is massively. So you have to hear about like, oh, it's clearly got leaptaking 500,000 square feet at whatever-- - Fuddley enough. They also just sighed for I think 470. - That's why they were in my-- I saw it somewhere. It just speaks to-- If you need space for Theropic, they need it yesterday. 'Cause to that revenue chart, you talked about what I loved is I think they had 16,000 square feet before this. Generally, you sort of go up the escalator. The move here is that AEW as soon as that ink is dry, this needs to be on the market. - This is moving. What am I big takeaways is actually on the brokerage responsible for this? This is a JLL deal. JLL also wrapped up Theropic on the SF building that we just talked about. The reason JLL is in the mix here is that they bought a company called Raise Commercial Real Estate a couple of years ago. Now JLL has played around, larping in prop tech for a long time, and done really pretty much nothing. But this M&A actually moved the needle because a couple of those guys at Raise have become the go-to tech brokers for the AI boom, open AI and Theropic companies like this. And so they're making it a raid, and JLL is benefiting as a result. Whereas JLL Spark, look at the investments. There's nothing much going on there. - Let's just prop tech writ large. The stuff that matters is the old school, bricks and sticks, and having these folks out there. 'Cause again, the I sales, that's the sexy part of this business, but it's the financing, it's the leasing. Those are really what drives revenues and drives earnings overall, Theropic. Their growth rate remains exponential. So too do the tenant rep commissions paid to JLL for this. - They haven't yet gone into the construction of data centers, which brings us to our next one. What's going on here with KKR? - They say what the wise man does at the beginning, the fool does the end. And we've just talked about blacks down a couple weeks ago, launching their public data center vehicle, related as a data center vehicle. So KKR is getting on the action, they've raised already more than $10 billion to launch a company to develop and operate infrastructure. 'Cause as you might have heard, this is somewhat of a hot topic. - How do you not get into this? When all your peers are raising billions of dollars and showing up that AUM, you kind of are compelled to do it. If you're left out and you're wrong, you'd rather lose a bit of money down the road and no one knows, but you're getting left out right now. Phomo is such a powerful force and investing as we've talked about. - Right, and if you're publicly traded, the carry doesn't matter. Balance your investments don't matter. What matters? What is your FRE? What is the fee stream? How long is it locked in for? And how full freight is it? When the ducks are clacking, you got a freedom. If you're gonna raise this $10 billion and you don't do it, that's $10 billion, it's gonna go to Blackstone's vehicle. It's gonna go to related's vehicle. It's gonna go to any number of other firms that are gonna do this. Might as well figure it out. - Next one, we had Alan Stalkup of GVO on a couple of weeks ago. Pretty controversial interview. We got quite a bit of feedback on that one. What did he say to us? He said, "I wanna do interesting things with interesting people with no obligations." - But guess what? Starwood is just stuck in with a pretty fat responsibility. They have won summary judgment in three cases against GVA. One of our favorite phrases, bad boy carve outs. Saying he personally, Alan Stalkup personally, is on the hook for tens of millions of dollars. - Phomo's got a baker's dozen worth of tens of millions of dollars. $110 million that they're asking multi-family financing is generally non-recourse, but for if you do bad stuff, which is the aforementioned bad boy carveouts. So these were non-recourse loans that become recourse because of the alleged behavior by the sponsor. With so many of these multifamily syndicator loans gone to shit, vendors are taking a very, very close look at their documents and seeing if there was any chance that sponsors have tripped up covenants and then going after them on these bad boy carveouts. Right. Because what happens is a lot of these properties have gotten capital starved and so it can't just let it sit, extending and pretending on something where the value is not just the value, but like there are overall earnings power of the asset is declining. That's where you really get in trouble. And I want to differentiate between value and earnings power because the value is dependent on a lot of different factors. What's capital doing in that market? What are interest rates? Very much both macro and vibe-stripping. Right. So earnings power, can you generate more NLI tomorrow than you can today? And that's really what you can control as a sponsor. And so what happens is if the property is struggling and you end up in this doom cycle where there's not a lot of cash, you start not doing the RNA you need to do. You don't staff at the way you need to do it to try to prop up cash flow. More stuff breaks. Occupancy goes down. Bad deck goes up. You don't have much cash. You end up in a little bit of a spiral. And that's I think what a lot of these lenders, Sarwood and Benefit Street are worried about. And those two groups are very capable of taking this over and running these things. And that's always the issue is the old saying, if you owe the bank a million dollars, it's your problem. But if you owe the bank a hundred million dollars, if you own the bank, yeah, but these guys are our banks. They're happy to take it over. They're happy to take it over and they're happy to squeeze as far as they need to squeeze. Indeed. That is it for the punch list. When we come back, we'll be discussing a marriage of equals and multifamily. Highway is jammed with broken heroes on a sofa fueled last chance power drive. Everybody's looking for protection and Pentsford's the place to hide. In a world full of macro hot takes in LinkedIn fed gurus, Pentsford cuts the noise so you know what actually matters when it comes to interest rates. Whether you're crunching the numbers on a single deal or you've got a portfolio to figure out, Pentsford's got over 10,000 rate caps under their belt. They know their stuff cold. And their forward curve is the slickest rate tool in the business. Interactive, updated daily and the finger capital markets team probably has opened on 10 tabs. Check out the good stuff at Pentsford.com. That's Pentsford.com and tell them the promotes in check. Speaking of capstucks, one of our ion-cresponsors Bravo Capital lives in them. In just five years, they've become a leading-hotted bridge lender. They've got a stacked-hut operation and also a bridge to hud solution so they can do balance sheet senior loans until the hud takeout. And they're immersed in a space that we've been increasingly obsessed with, skilled nursing facilities or sniffs. Sniffs, sniffs are a total labor in the policies and procedures that vary state by state. So it's easy for sponsors to go stray if it lenders not deep in the mix. Bravo is. And they put out good content about this as well. Totally, their white paper will drop it in the show notes is a clutch primer to understand the investment gap in healthcare real estate. And overall, I think Aaron and his team are thoughtful and pretty sharp. Check out their platform at bravocapital.com and tell them the promotes in you. We talk a lot about this podcast about AUM gobbling, but there's not really AUM here. It's more like renovated backsplash gobbling. I feel like this is the natural culmination of everything we've been talking about on this podcast for the last few months. I know. This is like when Bill Sims turns to end the rewatchables. This is where we are. This is it. So reeds aren't getting enough love, multi-families getting hammered for many reasons. Only the biggest of the big will survive this next phase, et cetera, et cetera, et cetera. It has all come to this avalan Bay and equity residential. The number four and number six multifamily owners in the country are considering a murder according to Bloomberg. That's huge news. It is. Each of their market caps are around 25 billion. So that obviously excludes debt, but they are the top apartment reeds in the US when measured by market cap. And so this is creating an absolute behemoth or wood combined. We're talking about 174,000 units give or take in massive massive amounts of units. And New York and California or EQR or huge. And then of course, and sun belts and a lot of the markets. They have a pretty big concentration in Boston too. In fact, these two companies when they combine Boston might be a sticking point because they're going to control quite a bit of inventory despite what Jay Parsons and some other people say. Let's get into that first. So Jay Parsons brings up sort of the amount of apartments nationally and then in each of their target markets, this combined, perform a company would own. I think it's telling that one of the first things that comes up here is antitrust. Yes. Because these companies have gotten waxed. There's real threat that this merger would go in antitrust review, even though both of them, the reason they're merging is because they're doing badly. Getting rocked. So why is this happening? Housing as we've talked about is the most politically fraught issue in the country. Both the Biden administration and the Trump administration, funnily enough, have made big real estate their pinnitus. On the campaign trail and otherwise, they've talked about too much power concentrated in the hands of Wall Street, home ownership is the American dream. It's being threatened by these large behemoths, et cetera. We're also talking in the wake of the massive real page antitrust lawsuit where a lot of these companies were hit with class action lawsuits were actually named by the DOJ and the crusade against real page as well. Yeah. The reason this is happening is because the companies aren't working as public companies. And this has been one of the most challenging environments. It's funny because you look around and we don't have an employment at 9.5 percent. Like you would in the great recession. You have this burgeoning industry in the US, which like threatens to change how the entire global economy works. And you wouldn't think all of these apartments are just kidding annihilated. These big companies, you think they're insulated, they're not. EQR stock is down 12 percent over five years. Avalan Bay down five. These guys own the best apartments. The best of the best, there's been an oversupply for a long time as well, right? That's impacted rent growth quite a bit. That's been a big part of it, but it's also just been again, valuations. We talked about the difference between value and earnings power. What's happened is the value of these is just lower because if your cap rate goes from five to six, that's a lot of NOI growth. You need to hit just to keep your head above water. There's a difference between private real estate and public real estate, which is not just that one is a public reporting vehicle and the other doesn't have to deliver daily liquidity or daily marks. The difference is the asset level financing. EQR and Avalan Bay, a publicly traded rate, cannot take the amount of leverage that a blackstone can, like a GDA could. They can't really use bridge debt. All of the ways that as the market has gotten more efficient, you have to finance your return and create it through financialization. They can't really participate in that. If all they're trying to do is buy good products and good markets, you just have eliminated this entire swath of return, which is the crucial part of the real estate business. And in the meantime, you have this incredibly massive overhead labor cost of gone up raw materials cost of gone up. Your cost side of the equation keeps creeping up and you're not able to find the alpha in the capital markets. These guys are big enough to where being public from a cost standpoint makes sense. If you're $1 billion or whatever you are below a certain threshold, the SG&A drags, just the public reporting cost are two. These guys are past that, but your point remains owning a multifamily business has gotten worse. You have to do it with one hand tied behind your back, Ken, then just did a unsecured note at like 4.8, I think. I'm like, I got a freaking fanny quote at like four nine. Would typically expect it at three, five or something. Yeah. The cost of capital having this massive balance sheet supposed to drive it down and just not there. There's no way that the co-host of the promote podcast should be able to finance his apartment acquisitions, the same as in America. Don't sell yourself short. It is so stark here is that a lot of the AUM gobbling that we've been talking about on this podcast has been let's take that and made C50 list again has been the lower depths of that list. We talked about bell partners putting itself up for sale and then eventually being bought up by BGA Apollo with bridge investment group. There's been so many of these, but now we're talking about the very, very top of this list. Besides the antitrust, which is going to be quite a significant hurdle for them to overcome, there's also the political heat that they're going to get at the local level because as we said, state senators, mayors, etc. have had no qualms bashing a lot of these landlords. I can't wait for some of the hearings where they talk about how private equity control a huge chunk of the market went. Of course, not there. These are private nor are they equity. And that's a great point because they're going to have a lot of really affluent tenants who vote. Yes. And Rens are going to be going up. Ideally, even though they haven't really been over the last couple of years, what is the alpha here? So let's say we have a company that's got 175,000 apartments, which is what the EQR AVB merger would look like. Where are we finding advantages if you recall our multifamily insider at one of these big institutions wrote a piece for the promote insider and he said, it's the difference between controlling your cost structure and being at the mercy of it, procurement, centralized leasing, staffing, ratios, tech deployment, etc. None of it works at 25K units. It starts to work at 50K units and at 150K, it becomes a genuine vote. Well, it would be the only company in the United States that owns more than 150,000 units. Yeah. Yeah. So that should tell you something. It's the same thing as an manufacturing where how Amazon turns all of their costs into revenue centers. Yes. Because they have such scale. They can do stuff for pennies that make sense for them that you just can't match as a smaller person. There's not a lot of people who can sell enough age vax. - Yes. - This is service to all these people. It's hard to find enough ranges and enough stovs. If you're able to do full HR placements at like $5,500 and other people being nine, it means you can buy more. The market does have so much more efficient. That's how you have to eek out these little edges. That's not matters. I talked to a guy about a deal. They're like, yeah, we bought it like 70s vintage, low five cat, basically neutral leverage, but we know we're gonna be able to do this one certain thing that we've been able to do at other properties that's gonna increase top line, regardless of what happens to market rents. What is Pichino say in any given Sunday? Inches. - The inches we need are everywhere around us. - I coach high school basketball in the off seasons when I play professional baseball. - There would be okay to just say you coached high school basketball. - Oh, what do you need for an extra profession baseball thing? - Always. - And I gave the inches speech 'cause I just assumed no one had ever heard it. And like afterwards one of the kids came up and was like, that was the greatest speech I've ever heard in my life. - Inch by inch. - Okay. - I clearly see the advantages or the perks of going and making this happen. What about from a Wall Street investor standpoint? Why would a investor look at the combined company and say, this is a better prospect? - It's the same reason you'd see in other industries where people do horizontal integration. Look at coal, not a similarly challenged business because coal is like a depleting asset over time and multifamily apartments are not. But something that has sort of struggled and people are looking to get bigger reduced costs, reduce overhead and generate returns that way. That's the same type of thing you're seeing here. - The sentiment among REIT eye bankers is that this is the biggest push towards getting bigger that they've seen since the GFC. Everyone is either looking to find growth capital or gobble up entire portfolios. The most telling quote is what Jonathan Morgan said. When the enemy had seen came out, I think there were number two, Jonathan Morgan who recently took over from dad said, one spot to go. - Yeah. - So we're seeing this fetishization, if you will, of size and just getting bigger and bigger and hitting those economies of scale. It's gonna be super interesting, but then there's still room for as we've talked about. Hopefully the sharpshooters, the people with a very, very defined niche strategy who could figure this out. - That's actually why this is such an interesting potential transaction because that's how these companies started. (upbeat music) - Let's get right into it. So one of our obsessions on the promote podcast is this transition of CRE from the Cowboys to the Suits. And Matt, the progenitors of these two companies are the ultimate cowboys. We're talking about Sam fucking Zell and Tramble fucking Crow. (laughs) These are the two biggest Gs in the industry. - Two of the Godfathers. - Can you name the CEOs of EQR and AVB right now? Quick, shit, I don't. - I didn't think so. Exactly, 'cause they're faceless people, this is the point we're trying to make. We went from Sam Zell who, for real, rode motorbikes in the UAE at midnight with the now ruler of Abu Dhabi and Tramble Crow. Legend has it, he would stand up from his desk, take his shoes off and say, "I think better lying down and he would just lie down and the meeting would continue around him." - We lament for the loss of kings like the East. - The country. - We used to be a country. - It's that transition from a personality-driven business to an institutional suits-driven, structured, finance kind of business. - Let's talk about how these companies have evolved over time. They've been in the car, was founded by Zell, as part of that equity group, 'cause he had equity office properties. - Famously went to Blackstone. - And they had the Mobile Home Park Company too, but this started with vintage garden apartments at scale. Famously, Barry, Starwood Capital Group's first fund was almost exclusively apartments, post savings loan crisis. - This is the one where the legend is of going to the auctions with a bag of cash kind of thing. - Right, and then Ethan Penner, a finance them with a CNBS loan. - Yeah. - One of the earliest CNBS loans, legend has it here too, is that when you went to Celta Zell, Zell tried to retread the deal in the office and Barry with a young Bob Faith by a side left. - Bob Faith of Grey Star. - Yeah, and left the meeting was like no deal, and got a call that afternoon from Zell, like all right, we're good. And that was an effort to be found, so I think Starwood owned something like a third of EQR when they went public and the shares were distributed. - These are still the guys who are calling the shots in the industry. Bob Faith now runs the number one landlord in the country and Grey Star, and by far the biggest property manager as well. It's amazing when we think about the PayPal Mafia of Real Estate. It's these companies that trample Crow, Starwood. They've spalled. - Well, it wasn't Starwood. - It was J&B. J&B is a real one. - Yes. - Oh, we should probably do an episode on this whole thing. - Yeah. - It's a J&B episode. But the point being, he started with scrappy entrepreneurial Com City Garden Apartments in the Colorado Springs. And now EQR are the most high-end coastal markets, super high barrier to entry, Avalon Bay kind of the same thing. This is all an offshoot, Tramil Crow residential, which is one of the most legendary multi-family development shops. And you had Lincoln, Hamilton, Avalon Bay, Transwestern, Vantage, Speaker, offshoot of Tramil Crow, the baby bells, like when they split and then they all kind of come back together. (bells ringing) And we've solved this type of activity before, as you said in the Great Recession, Lehman took Archstone, private, Blackstone took EOP, private, famously almost lost their shirts. But then turned it into the legendary deal, if that's cycle. - So that's the last time we saw this type of activity. And this is kind of what it's gonna take. We talked about the NBA being a maker of Miss League. Being a reed's a maker of Miss League, you're above or below your NAV. And if you're a trained below your NAV, it's not a great place to be. And you gotta figure something out. (upbeat music) Ever been sued by an LP, brought property management in-house and instantly regretted it. Worked with a lender who then goes to you? - Not an LP, yes. Also yes. So I've had all three. You've written some great stuff for us about how lonely the life of a GP can be. You have questions and fears about stuff that you can't really post on LinkedIn. And that's where cohort comes in. The pain points of being a GP are so specific. And it really helps to have a peer group of people going through the same thing. Imagine getting on call tomorrow with six of their people building real estate companies that have been through it, you've been through. And get help with the most personal questions that you have. Hearing it from someone who's been in your shoes is always more impactful. - For sure. And the messier personal stuff too, like building a company while raising young kids, that one is too real. It's incredibly easy, I don't know what you're talking about. - Your son sleeps through the night, so it's different. - Apply at joincovorts.com, that's joincovorts.com. - And tell him the promote set you. How do you wanna get into it? - Oh man, should we just start with the obuela? - Poor, poor obuela. - What is going on? So David Martin, who's the CEO of Tera Group, huge in Miami, $5 million on square feet, $8 billion worth of product, one of the headline names on the Miami condo scene. - A man of the moment. We're recording on the day of the Miami F1. - Did it get going? I thought it was raining. - No it did. - It did, it did. - Okay. - What is happening here is that a lot of developers we've talked about more broadly are finding a lot of the classic land or sites for redevelopment are all spoken for. So there are a couple of things you can do. Go into a property that has fallen on harder times, or you can go and do a condo by out, which we've seen all over Surfside, et cetera, as well. This one is particularly interesting. This is a massive resort property, the Doville Beach Resort. - Former resort property, so it was owned by the Marillo family, unbelievable real estate, but it fallen on such disrepair that I think it had to be torn down. And this is as good a dev site. - Miami Beach prime, prime, prime, it's pretty damn good. This is almost four acres. It's serious real estate. - So Steve Ross apparently had tied it up and tried to buy it for $500 million. Do you want to just run through the particulars of a lawsuit a little bit? - The land was owned, I think, 50, 50, by a couple Marillo family members. And underneath that, 25% was owned by a Boila. - A Boila, so Belinda, Marillo, 88 year old, matriarch of the family owned a 25% stake, and apparently she sold her stake to David Martin for just $12.5 million. There are always these misprice deals and striking one or two of them can change the destiny for your career. - So, 10, I think we're like bearing a little bit. Under what circumstances did she sign the seal? - It was at her 88th birthday party. - No way. - Yeah, the lawsuit alleges that at her own 88th birthday party, she was lured into a closed-door meeting and then, quote, "manipulated, intrigued, "and deciding a way in interest in the oceanfront property, "which the family has fought to keep in the family for years." That's always the question mark is if you're 88 years old and you're signing a deal like this, are you compasmentous? That's a fair question. When you're selling something for 10 acts less than its worth, potentially. - David Martin, who was his Trojan horse here? He was a Richard Marillo, it's always those closest to you. - Martin is accused of enlisting Richard to get access to the family's inter-circle a couple years ago. And then Martin learned about Richard's efforts to take over this property and said, "I want in." - And why is Berger once told me, though, "I'm just gives a guess, I can never make anybody sell, "but I can make him sell with me." And David Martin can't go convince these guys to sell, but he can find someone who wants to sell or wants something different and allow himself. That's what you do and that's what the best do. - You find the little leverage point in any negotiation and you press there. - And that's when he did. He found somebody who wanted to take board control and he's like, "You're right, that your family's been "not listening to you. "You need to do this. "I think you're totally smart." And are gonna have, like Logan Roy said about a Mattson to Kendall and Roman. He rates you. - And David Martin, who is a guy who's dealt with really tricky things. He just got two huge amendments done in North Beach and a dev agreement and a settlement agreement that resolve. between the city and the property owners. This is a guy who can roll up his shirt sleeves and in there, that's what he's done here. - Did you read the texts in this lawsuit that we should read it out for the tape? - Can you see my screen? - Yep. Kenny talk, Kenny talk, Kenny talk. Hope you're well. Let me know if you want to connect. Just drive yourself calling when you can. Kenny talk. - We have to convince Abuela to go to her memory doctor. She has repeated herself a hundred times to this broker. - Repeating does not mean her memory is bad. - Short term yes, because she forgets she just said it. - Stop telling her. - Pretty intense stuff. - It's like when you go to the doctor, you're like doctor, my shoulder hurts when I do this and they just say don't do that. - It illustrates this broader thing of family feuds. Can rest on these things that happened behind closed doors, one family member said to another. Do you remember the massive lawsuit that has taken over New York's sole Goldman's empire? - It's not dissimilar because you have holding companies onto holding companies and who controls what and who's the manager and who's the member. - One of the linch pins of that lawsuit, the sole Goldman lawsuit is apparently way back in the day when sole Goldman wanted his wife back. She was threatening to divorce him. - You're not gonna get a divorce. We're not on your mind. - To winner back, he took a yellow notepad and he just scribbled your entitled to one third of my fortune when I die. And apparently this contradict that his official will so a lot of the battle, which is billions of dollars at stake is over this note that was on this yellow legal notepads. That's how thin the line can be. - It's hard to because this is a site where, yes, it's a sensibly worth tons and tons of money, but for the Morello family to develop it themselves and they're gonna need billions of dollars. - It's impossible for them to do it. No one's gonna give them the financing. They don't have the know-how to turn it into what it needs to be. - So someone like this has to get brought in because the other thing about a landslide is that it ain't generating any money. These guys are really wealthy. They're really house rich. - The other twist about this is this might be a rogue lawsuit. One of the attorneys who claims to represent Belinda and the Dovel associates that filed a lawsuit said that it was filed by two granddaughters who went rogue. And this has shades of the incredible Donald Brent statement is what the lawyer said. She was very disappointed in her granddaughters. - She's not mad. She's just disappointed. We just talked about how the Cowboys have turned into the suits over at Avalon Day and Equator Residential. David Martin, still a bit of a cowboy because this is how it's done. - Remember when we talked about Ray Washburn and how he heard that this potentially a lot of changing transaction would happen at the restaurant. How does someone like David Martin get the intel that there is some dissension within the family rights? (laughing) You've gotta put yourself in position to be able to act on these kind of things. So how do you suppose he heard about this in the first place? Did he have molds in the Dovel Resort or something? - Real estate. Again, what's great about it is you can do anything. You can get the other guy to agree to it. And you can insider trade. If you're really trying to be successful, especially in this because he's competing against Steve Ross. He's competing against the biggest guy. You have to be ruthless. You have as big an network as possible. You get as much information as possible 'cause you never know what one piece of information can mean. If you click into place with the rest of the mosaic you've created, all of these guys too, they know the sights. It's like how and when are they gonna become available? And so when it's on, it's a feeding frenzy. You try always try to be first by having more information than next guy. As distasteful, potentially and hippy taking advantage of an old lady who may or may not be able to remember things. This is how high stakes development goes, especially when you've got legacy sites with families that have owned them forever and then have real potential skeletons in those closets. - This is the business we've chosen. (upbeat music) - That's it for the Promote Podcast this week. Two mighty multi-family reads are weighing a marriage for the ages. Will the antitrust folks and politicians speak now or forever hold their silence? And an explosive lawsuit in Miami Beach highlights how family feuds can shape the fate of real estate empires. We'll be back next week with more CRM inside our goodness. Thank you again to our sponsors. - Pentsford, the interest rate people who you can find at pensford.com. - Provo Capital, a leading HUD and Burjelunder. Find them at bravocapital.com. - Cohorts, your go-to peer group of GPs. You can check them out at joincohoarts.com. - And DealNav, a map for CRM and Deal Tracking tool. DealHeithinNav.com. Our swag stores at thepromote.store. Hoodies, hats, teas, upper grabs. We're selling pictures of my feet, you never know. (laughing) - With ExtraCRED StreetCred Guarantee. - Honestly, when we started this podcast, I couldn't imagine having one sponsor and then having to read off of that many, including our own merch store, dream come true. - Pretty great. I'll see you next week, Will. Thank you. - Thank you. - Ciao. (upbeat music) (upbeat music)