Sunday Summary: Deeper Into the Cosmo Sale, Miami Moves and Parking Solutions
Maybe it’s the whole Ozy implosion (which, if you haven’t read about, is frickin’ crazy, and involves one top Ozy exec impersonating a YouTube executive on a conference call with Goldman Sachs) but it got us over at Commercial Observer in the mood to ask: Why do certain real estate moguls keep getting financing, long after the keys have been taken away on their flashiest, most high-profile flops?
For example, when Bruce Eichner had to give the keys back to Deutsche Bank (DB) on the Cosmopolitan in Las Vegas back in 2008, he had burned through about $4 billion, and by the time Deutsche Bank found a willing buyer (Blackstone (BX)) to take it off their hands they got a paltry $1.8 billion for the 6 million-square-foot casino.
However, Eichner has gone on to other projects. Sometimes with success. Sometimes not.
“If you are honest, if everything you do with [a lender] is honest to a fault and the bankruptcy is a result of something beyond your control … and you continue to work with them openly and honestly, you generally will live to work with that same lender again,” David Schechtman, senior executive managing director at Meridian Capital Group, explained to CO.
And, indeed, sometimes the vision is there, but the timing is off. When Blackstone finally turned around and sold the Cosmopolitan last month the firmgot a jaw-dropping $5.65 billion, making it the most profitable single asset sale in Blackstone’s history. Making what seemed like an insane spend by Eichner look kinda, sorta… about right. But the whole history is worth examining in depth. Few projects turn around quite that dramatically.
The Miami migration continues!
Granted, the editors and writers of CO have Miami on the brain thanks to our Future Forward event on Oct. 12, but we continue to see interesting people and companies coming to South Florida.
Tech moguls like Keith Rabois (the billionaire venture capitalist) or Orlando Bravo (managing partner of Thoma Bravo) are hoovering up Miami-area mansions, which is a pretty good indicator that they’re thinking of moving their companies there, too. (Indeed, a few months after Bravo bought Phil Collins’ house for $39.3 million with plans to demolish it and build something more, uh, bespoke, Thoma Bravo signed an office lease at 830 Brickell.)
Just this week we learned that Cathie Wood’s ARK Investment Management is ditching New York for St. Petersburg, Fla. And the Jordan Company, a private equity firm with offices in New York, Chicago and Stamford, Conn., announced its first South Florida lease at mixed-use development CocoWalk in Coconut Grove. Finally, Lucid Motors (a Tesla rival) is taking space at Miami Worldcenter.
Come in, New York!
Does this make Gotham nervous?
Probably not. While there has long been a fear that Florida’s tax rates and more business-friendly posture might permanently send New Yorkers to the Sunshine State, it’s not like leases haven’t been happening. Paige, the health care tech firm, expanded its presence at 11 Times Square; Charlesbank, a private equity firm, took 15,000 square feet at 575 Fifth Avenue; and asset manager TCW reupped for 44,100 square feet at 1251 Avenue of the Americas (this comes on the heels of Lowenstein Sandlers’ whopping expansion to 125,000 square feet at the same property the week before).
And that’s just office. Gucci is doing a 26,600-square-foot pop-up in the Meatpacking District to mark its 100th anniversary. Brooklyn Fare is taking 25,000 square feet at Gary Barnett’s 252 South Street. And Momoya is opening another outpost, this time in Nolita.
Plus, did we mention that things are happening in multifamily, too? Wafra is in contract to buy 720 West End Avenue for $165 million, and BRP Companies just landed a $290 million loan to build a mixed-use affordable housing development in Jamaica, Queens.
None of which is to say that retail and New York City don’t have things to sweat. Nearly 30 percent of the stores around Grand Central Terminal are vacant, according to a Real Estate Board of New York report. But retail had a very good second quarter and it’s not like the companies that have left the city have depleted the city’s tax revenue to such a point that it’s not able to pay for basic services. In fact, the city’s tax revenue has been booming thanks to the unprecedented level of residential sales.
The real question will be where to put all the cars of the people who left the city during the pandemic. (Maybe your office has the solution?)
The down side
We suspect that a lot of this activity points to higher construction costs. We’re already seeing a real shortage in skilled construction labor. According to the U.S. Chamber of Commerce, 92 percent of contractors nationwide were having trouble finding enough such workers for their respective jobs.
“In this industry, regardless of your trade affiliation, the labor shortage is the biggest thing that’s keeping you up at night,” Brian Sampson, president of the New York chapter of open-shop contractor group Associated Builders and Contractors, said in an interview with CO. “Material prices and the ability to get materials will eventually even out, but the labor shortage will continue for quite some time and prevent contractors from delivering projects on time and on budget.”
Rest in peace
Finally, on a sad note, we learned that DC Power honoree, Kurt Stout, who led Colliers (CIGI)’ government solutions team, passed away last week. Stout was based in D.C. but he did governmental deals all over the country. Rest in peace.
Enjoy the rest of your holiday weekend.