WEBVTT - Lots More on the Two Troubled NYC Office Buildings Everyone's Talking About 0:00:03.120 --> 0:00:11.119 Bloomberg Audio Studios, podcasts, Radio news. Joe, do you know 0:00:11.160 --> 0:00:12.440 that song money Money? 0:00:13.119 --> 0:00:14.800 I remember it money? 0:00:14.920 --> 0:00:17.800 Yeah, yeah, Okay, I didn't know this. Apparently it was 0:00:17.880 --> 0:00:20.680 inspired by a building here in New York. 0:00:20.840 --> 0:00:22.120 Really, I didn't know that at all. 0:00:22.239 --> 0:00:22.759 Yeah, I don't know. 0:00:22.800 --> 0:00:23.720 I'm going to. 0:00:23.640 --> 0:00:26.520 Wikipedia why we would actually know this. But apparently there 0:00:26.680 --> 0:00:30.000 used to be a sign that said money but m 0:00:30.040 --> 0:00:33.680 O and why on top of this building at seventeen 0:00:33.800 --> 0:00:37.839 forty Broadway, and the m O and Y money was 0:00:37.880 --> 0:00:41.279 supposed to be Mutual of New York, I guess, and 0:00:41.320 --> 0:00:43.360 then it got like compressed, and then it was on 0:00:43.400 --> 0:00:45.479 top of this building for a really long time. And 0:00:45.520 --> 0:00:47.800 then I guess the band what were they called? 0:00:48.000 --> 0:00:52.680 I'm looking on Wikipedia. Is this the one Tonysdell? 0:00:52.960 --> 0:00:53.160 Yes? 0:00:53.760 --> 0:00:54.760 Yeah, there it is. 0:00:54.920 --> 0:00:57.880 Tommy James and the Schondell's. So they were like staying 0:00:58.080 --> 0:01:00.960 around that area looking for in spiration for a song 0:01:01.040 --> 0:01:03.760 and they saw the sign and they were like, that's it. 0:01:03.640 --> 0:01:04.640 And they got a hit out of it. 0:01:04.680 --> 0:01:06.720 Oh yeah, here it is atop the Mutual New York 0:01:06.720 --> 0:01:07.839 building in Manhattan. 0:01:10.680 --> 0:01:11.800 I did a deadlift one. 0:01:13.680 --> 0:01:17.760 Okay, uh barges. 0:01:17.880 --> 0:01:19.920 This isn't After School Special except. 0:01:19.680 --> 0:01:22.200 I've decided I'm going to base my entire personality going 0:01:22.240 --> 0:01:25.480 forward on campaigning for a strategic pork reserve in the US. 0:01:25.560 --> 0:01:27.319 Where's the best with imposta? 0:01:27.480 --> 0:01:30.039 These are the important question? Is that robots taking over 0:01:30.080 --> 0:01:30.440 the world. 0:01:30.520 --> 0:01:33.360 No, I think that like in a couple of years, 0:01:33.520 --> 0:01:35.839 the AI will do a really good job of making 0:01:35.840 --> 0:01:39.200 the odd launch podcast. And people say, I don't really 0:01:39.200 --> 0:01:41.080 need to listen to Joe and Tracy anymore. 0:01:41.280 --> 0:01:45.000 We do haveing perfect. 0:01:45.680 --> 0:01:47.880 Welcome to lots more. Will we catch up with friends 0:01:47.880 --> 0:01:49.840 about what's going on right now. 0:01:49.960 --> 0:01:53.720 Because even when Odd Lots is over, there's always lots more. 0:01:54.120 --> 0:01:56.800 And we really do have the perfect guest. 0:01:58.880 --> 0:02:01.840 You might have heard then we are speaking with Hitten 0:02:01.960 --> 0:02:05.120 some Tani, the founder of ten thirty one Media, which 0:02:05.240 --> 0:02:08.560 is a newsletter focusing on real estate and hit ten 0:02:08.600 --> 0:02:11.600 has been on the show before, but we had to 0:02:11.639 --> 0:02:14.120 bring you back on because there's a lot going on 0:02:14.400 --> 0:02:17.440 in office buildings in New York, it seems, and particularly 0:02:17.480 --> 0:02:19.240 on One Street on Broadway. 0:02:19.840 --> 0:02:22.480 Yeah, it's been quite the carnage season for a bit, 0:02:22.520 --> 0:02:25.040 but I think what happened with reference to this building 0:02:25.600 --> 0:02:27.760 is even more alarming because wait, just to be. 0:02:27.760 --> 0:02:30.440 Clear, just to be clear, when you say this building, 0:02:30.440 --> 0:02:33.560 we are talking about the mutual of New York building. 0:02:33.400 --> 0:02:35.880 Seventeen forty Broadway, the Money Build. 0:02:36.000 --> 0:02:38.000 Keep going, tell me about seventeen forty Broadway. 0:02:38.720 --> 0:02:43.640 So seventeen forty Broadway was your prototypical class A office building, 0:02:43.720 --> 0:02:48.280 sort of tower of power, Manhattan credit tenants, that whole jazz. 0:02:48.360 --> 0:02:52.240 And what's happened just last week for this month was 0:02:52.280 --> 0:02:55.919 that the Triple A transholders. So basically, the people who 0:02:56.520 --> 0:02:59.880 hold what is considered the safest part of the CMBs 0:03:00.120 --> 0:03:04.440 stash lost a big chunk of money when this building's 0:03:04.440 --> 0:03:07.679 debt was sold. So that doesn't happen very often. In fact, 0:03:07.720 --> 0:03:10.480 the last time it happened was the GFC. So now 0:03:10.520 --> 0:03:12.600 people are looking at this and saying, okay, so if 0:03:12.680 --> 0:03:17.000 Triple A bondholders aren't safe, then god, how how bad 0:03:17.080 --> 0:03:19.120 is this thing? Because we've talked about CI distressed for 0:03:19.160 --> 0:03:21.840 about a year and a half now this one is 0:03:21.880 --> 0:03:23.040 particularly alarming. 0:03:23.360 --> 0:03:26.720 The Money building stopped making money. I guess sorry, you 0:03:26.800 --> 0:03:30.280 knew that was coming eventually, But okay. The one saving 0:03:30.680 --> 0:03:35.400 grace in this seems to be that this particular CMBs 0:03:35.440 --> 0:03:39.720 deal commercial mortgage backed security, it was a single property deal, right, 0:03:39.800 --> 0:03:42.800 So the risk was trenched up, so you had that 0:03:42.880 --> 0:03:46.560 AAA slice the triple A bit, but there was only 0:03:46.600 --> 0:03:50.640 one property, so you didn't necessarily have the diversification benefits 0:03:50.680 --> 0:03:54.680 that you would see in a normal CMBs conduit type deal. 0:03:55.600 --> 0:03:57.840 Correct. And this is something that people have been asking, 0:03:57.920 --> 0:04:00.280 is is there any point where it's justified to give 0:04:00.320 --> 0:04:03.080 a single asset transaction like this at triple A rating? 0:04:03.160 --> 0:04:05.840 Because yes, it is a diverse group of what you 0:04:05.840 --> 0:04:08.720 would call credit worthy tenants. But as we've seen with 0:04:08.800 --> 0:04:10.560 this building and another that we're going to talk about, 0:04:10.800 --> 0:04:13.520 things can go wrong pretty quickly. So is it as 0:04:13.560 --> 0:04:16.800 diversified as it should be? Probably not, because if you're 0:04:16.839 --> 0:04:20.360 comparing it with like a pool of residential securities, you'd need, 0:04:20.480 --> 0:04:22.160 you know, six thousand of them to go bad at 0:04:22.160 --> 0:04:25.279 once for bondholders to suffer a loss. Now, that did 0:04:25.360 --> 0:04:28.280 happen at one point, but again, theoretically that is a 0:04:28.320 --> 0:04:30.000 little safer than what we're talking about here. 0:04:30.800 --> 0:04:32.880 Can I just say, Tracy, I don't know I've may 0:04:32.880 --> 0:04:35.640 have talked about this in the office recently, but I've 0:04:35.680 --> 0:04:39.800 been watching the New York documentary by Rick Burns, which 0:04:39.839 --> 0:04:42.719 is Tim Burns's brother, it is so good and like 0:04:42.720 --> 0:04:43.880 I've always liked living. 0:04:43.640 --> 0:04:44.040 In New York. 0:04:44.080 --> 0:04:46.200 It's fine, but now I'm like, really like New York 0:04:46.240 --> 0:04:48.560 build It's a seventeen and a half hour documentary. I 0:04:48.600 --> 0:04:51.520 think you'd really like it. And it's all this like 0:04:51.600 --> 0:04:53.279 has this whole period of like when all these office 0:04:53.279 --> 0:04:56.400 buildings have gone up, and now particularly Park Avenue, I 0:04:56.440 --> 0:04:58.479 know we're talking about a Broadway building. Now I've become 0:04:58.600 --> 0:05:01.320 like I look at the buildings, I will I'm a 0:05:01.360 --> 0:05:03.400 New York City office buildings appreciator. 0:05:03.480 --> 0:05:06.599 Now, Joe, this is actually true because we were in 0:05:06.680 --> 0:05:10.080 an office building recently and you were so excited to 0:05:10.120 --> 0:05:12.640 be there. For me, it was really yeah. Yeah, I 0:05:12.680 --> 0:05:16.000 thought it was really non descript and not that impressive, 0:05:16.279 --> 0:05:18.760 but you were genuinely excited and kept wandering around. 0:05:18.800 --> 0:05:22.080 The office building was a corner, so again, I know 0:05:22.120 --> 0:05:25.039 a little said version fifty third in Park I sort 0:05:25.080 --> 0:05:27.400 of conclude it is like my favorite corner of all 0:05:27.440 --> 0:05:29.000 of New York City. It's like the sort of like 0:05:29.080 --> 0:05:33.800 mid century vibes and fountains and green tinted glass and 0:05:33.839 --> 0:05:34.400 stuff like that. 0:05:34.440 --> 0:05:36.800 Anyway, we can get back to the you know. 0:05:36.800 --> 0:05:41.200 Jody, Yeah, that's a pretty well shared sentiment. There is 0:05:41.200 --> 0:05:45.159 a famous quote by an architecture archegecture critic friends. It says, 0:05:45.400 --> 0:05:47.160 I'm going to quote it is the ambition of the 0:05:47.160 --> 0:05:49.400 New Yorker to live upon the fifth, to take his 0:05:49.600 --> 0:05:52.280 errands in the park, to sleep with his fathers in Greenwood. 0:05:52.320 --> 0:05:54.240 So it's it's a sentiment that's been shared for a 0:05:54.240 --> 0:05:54.880 few generations. 0:05:54.880 --> 0:05:58.000 It finally after twenty years, So this may is twenty 0:05:58.040 --> 0:05:59.839 years of me living in New York. It's finally like 0:06:00.080 --> 0:06:01.600 all like clicked, and now I don't think I'm going. 0:06:01.600 --> 0:06:05.000 To leave, okay, but just to go back to Let's 0:06:05.040 --> 0:06:07.320 move away from Park Avenue and go back to seventeen 0:06:07.440 --> 0:06:10.520 forty Broadway. But what's the deal with the tenants there? 0:06:10.880 --> 0:06:14.000 So this is in This is a pretty decent office 0:06:14.000 --> 0:06:16.480 building as far as I can tell, in a prime 0:06:16.680 --> 0:06:20.120 midtown location. Maybe it's not as shiny and new as 0:06:20.120 --> 0:06:23.480 some other things, but I would have thought that someone 0:06:23.640 --> 0:06:25.200 would be renting it out. 0:06:25.440 --> 0:06:28.159 Well, it's a tricky time, right, So L Brands anchored 0:06:28.200 --> 0:06:30.720 the building. Fact, this is the problem with exposure to 0:06:30.800 --> 0:06:33.120 one even if it's a great tenant like L Brands, 0:06:33.120 --> 0:06:36.920 which was the former parent of Victoria's Secret They occupied 0:06:36.920 --> 0:06:39.479 I believe it was close to almost eighty percent of 0:06:39.520 --> 0:06:41.240 the space. Oh wow, And they said they were going 0:06:41.279 --> 0:06:44.680 to exit the tower. Now that comes in twenty twenty one, 0:06:45.440 --> 0:06:48.320 when your return to office is very much up in 0:06:48.360 --> 0:06:50.640 the air. It's going to be very hard to find 0:06:50.680 --> 0:06:53.960 a tenant that would fill that kind of space. And 0:06:54.000 --> 0:06:55.599 it's going to be very hard to find a group 0:06:55.640 --> 0:06:57.359 of tenants that would want to fill that kind of space. 0:06:57.400 --> 0:07:00.800 So even if Blackstone had been able to fill that 0:07:01.080 --> 0:07:04.320 massive void left by L Brands, they would probably have 0:07:04.400 --> 0:07:06.719 to do it at a much lower rent. Right, So 0:07:06.760 --> 0:07:09.600 that's going to make a serious dent on their NOI. 0:07:09.960 --> 0:07:13.600 It's going to affect their ability to pay their debt service. 0:07:14.080 --> 0:07:16.360 And so what they did is they decided to walk away. 0:07:16.440 --> 0:07:18.920 They walked away in twenty twenty two, they defaulted on 0:07:19.000 --> 0:07:21.160 the loan and they just said go with God. And 0:07:21.160 --> 0:07:23.520 that's kind of what happened. And what's funny, Tracy, is 0:07:23.560 --> 0:07:26.440 they're very salty about this one. So if you look 0:07:26.440 --> 0:07:28.960 at their press statements, starting maybe in the summer of 0:07:29.000 --> 0:07:32.200 twenty three, maybe a little earlier, they make it a 0:07:32.240 --> 0:07:36.520 huge point to say that traditional US office represents less 0:07:36.520 --> 0:07:39.720 than two percent of our entire holdings. So now they're 0:07:39.800 --> 0:07:42.520 using the scale argument, Hey we're so big, And Brookfield 0:07:42.520 --> 0:07:45.120 has used this argument as well, Hey we're so massive. 0:07:45.200 --> 0:07:48.280 These are little blips on a very successful track record. 0:07:48.920 --> 0:07:52.679 All right, let's take our tour a little bit further south, 0:07:52.880 --> 0:07:56.920 still on Broadway, let's head over to fourteen forty Broadway. Now, 0:07:57.000 --> 0:08:00.800 this is a building that caught my eye recently because 0:08:00.840 --> 0:08:06.480 it went into delinquency and I think it was responsible 0:08:06.520 --> 0:08:10.520 for a big portion of the uptick in the serious 0:08:10.560 --> 0:08:13.640 delinquency rate that we saw in the most recent month, 0:08:14.120 --> 0:08:18.160 which is now at its highest level since early twenty seventeen. 0:08:18.560 --> 0:08:21.800 This is a four hundred million dollar loan backing fourteen 0:08:21.960 --> 0:08:26.080 forty Broadway now seems to be in serious trouble. What's 0:08:26.120 --> 0:08:26.720 going on there? 0:08:27.480 --> 0:08:29.400 Well, so there's been a little bit of news since 0:08:29.440 --> 0:08:32.960 you wrote your piece. In fact, you just received a 0:08:33.000 --> 0:08:35.600 refi and this was predicted. I believe I knew it. Yeah, 0:08:36.080 --> 0:08:39.760 your story. They received a refin. Now it's a Faustian 0:08:39.800 --> 0:08:43.160 bargain type of refit. It's a very problematic refit because 0:08:43.520 --> 0:08:47.040 the appraised value of the property is just under it's 0:08:47.040 --> 0:08:49.840 about forty six they took a forty six percent haircut 0:08:49.880 --> 0:08:52.320 on the value of the building, but they did receive 0:08:52.320 --> 0:08:56.240 the loan. They did receive an extension until twenty twenty five. 0:08:56.559 --> 0:08:58.480 Yeah, Joe, This to me is why I was so 0:08:58.600 --> 0:09:01.040 interested in the building, because it seems like a little 0:09:01.080 --> 0:09:04.400 microcosm of what's going on in office real estate at 0:09:04.400 --> 0:09:07.719 the moment. So you have higher benchmark interest rates obviously, 0:09:08.080 --> 0:09:12.080 you have tenants like we Work. They used to be 0:09:12.160 --> 0:09:14.920 in there and are not there anymore. You have Macy's, 0:09:15.040 --> 0:09:18.760 which is another sort of thematic ted Better Days company. Yeah, 0:09:18.800 --> 0:09:21.319 there we go. I was trying to be polite with thematic. 0:09:21.480 --> 0:09:24.400 But death of retail and all of that, and yet 0:09:25.040 --> 0:09:27.520 and yet it still gets refinanced. 0:09:27.880 --> 0:09:29.760 Yeah, they find a way. Wait, can I ask one 0:09:29.760 --> 0:09:33.680 more seventeen forty question. I know we moved on, but 0:09:33.880 --> 0:09:37.040 just one last thing. When there's one big tenant and 0:09:37.080 --> 0:09:39.480 so this other building, Okay, they have a few tenants 0:09:39.480 --> 0:09:42.640 and they're all maybe shaky or you know, to some extent. 0:09:42.679 --> 0:09:44.160 How do you get like a triple e? 0:09:44.440 --> 0:09:46.880 I mean, it just seems like inherently when you have 0:09:47.000 --> 0:09:51.520 eighty percent of the space rented to one company, that's 0:09:51.559 --> 0:09:54.079 no matter how strong the company or everything else that's 0:09:54.080 --> 0:09:55.960 got to be like a huge source of concern for 0:09:56.000 --> 0:09:56.440 the lender. 0:09:57.040 --> 0:09:59.400 I would assume this is the this is the right 0:09:59.480 --> 0:10:02.160 question to ask. Unfortunately, a lot of the people at 0:10:02.160 --> 0:10:04.920 the ratings agencies don't seem to ask themselves that question. 0:10:05.280 --> 0:10:07.520 There are a lot of concerns about why something like 0:10:07.600 --> 0:10:10.719 DBRs or morning Star or there was one more I 0:10:10.760 --> 0:10:13.640 believe on this building, SMP, why are they providing triple 0:10:13.679 --> 0:10:16.560 A ratings to something with so much exposure to one tenant? 0:10:16.600 --> 0:10:19.480 And the answer is, well, I think it's their business 0:10:19.520 --> 0:10:23.320 to keep the market going. I think if you speak 0:10:23.360 --> 0:10:26.560 to anyone who's steeped in this space, it's far from 0:10:26.600 --> 0:10:31.080 a purely objective, dispassionate game, the ratings game. So that's 0:10:31.080 --> 0:10:32.440 the answer to that, got it. 0:10:32.760 --> 0:10:36.280 So for fourteen forty Broadway, when a REFI like this 0:10:36.400 --> 0:10:39.600 comes through and it's on ownerous terms where the value 0:10:39.640 --> 0:10:43.840 of the property has been massively downgraded, who actually takes 0:10:43.880 --> 0:10:45.040 the loss on that? 0:10:45.040 --> 0:10:47.960 That's a great question. So in general, just stepping back 0:10:48.000 --> 0:10:50.559 for a minute, a lot of these Manhattan trophy towers 0:10:50.640 --> 0:10:52.880 have an owner and name right, So in this case, 0:10:52.880 --> 0:10:55.920 it was CIM, which is a massive money manager based 0:10:55.960 --> 0:10:58.280 out of LA But then they have an owner in 0:10:58.640 --> 0:11:01.000 skin in the game, let's say call it. And in 0:11:01.040 --> 0:11:04.320 this case, the pension fund that was backing CIM on 0:11:04.360 --> 0:11:07.160 the property is called q Super, so it's a Queensland 0:11:07.160 --> 0:11:10.400 base so Queensland Australia based pension fund. So they're the 0:11:10.400 --> 0:11:12.920 ones who had most of their equity in this transaction. 0:11:13.320 --> 0:11:16.160 CIM essentially serves as the operating partner and has a 0:11:16.160 --> 0:11:18.120 little piece. So the ones who end up taking a 0:11:18.120 --> 0:11:21.320 bath on these things tend to be the sorry pension 0:11:21.320 --> 0:11:21.760 funds and. 0:11:21.760 --> 0:11:23.600 The Australian pensioners. 0:11:23.840 --> 0:11:28.520 Australian pensioners Canadian pensioners in many cases. So CPP has 0:11:28.600 --> 0:11:31.600 taken a bath on several properties in Manhattan recently. In fact, 0:11:32.000 --> 0:11:34.120 the one that cut a lot of headlines recently was 0:11:34.200 --> 0:11:37.520 they walked away. I think they took one dollar for 0:11:37.559 --> 0:11:40.200 their stake in a property and released themselves from certain 0:11:40.240 --> 0:11:43.160 debt obligations and walked away. And that's happening time and 0:11:43.200 --> 0:11:46.000 time again. So if you notice the chatter on the 0:11:46.040 --> 0:11:48.520 sovereign wealth side, a lot of people are saying, ah, 0:11:48.960 --> 0:11:51.080 office may not be where I need to be anymore. 0:11:51.120 --> 0:11:53.800 And that's been super interesting. So yeah, in this case 0:11:53.840 --> 0:11:57.800 on fourteen forty, just a slight clarification, we Worke didn't 0:11:57.800 --> 0:11:59.959 in fact walk away. We work has walked away from 0:12:00.080 --> 0:12:02.720 a ton of leases all over the country, but in 0:12:02.760 --> 0:12:05.439 fact it decided to stay put at this building. Now, 0:12:05.480 --> 0:12:07.400 what change, though, is that it's doing it at a 0:12:07.440 --> 0:12:09.880 way reduced rent. So I think it was paying something 0:12:09.880 --> 0:12:12.560 in the seventies back in the day, and then you know, 0:12:12.640 --> 0:12:15.000 it's not Adam Newman's company anymore, but it still has 0:12:15.040 --> 0:12:19.000 his kind of chutzba and it decided to work out 0:12:19.000 --> 0:12:20.840 a much better deal, so I think it's paying now 0:12:20.880 --> 0:12:24.240 in the forties a foot. Macy's, however, has walked away 0:12:24.320 --> 0:12:27.040 as of January, it kind of exited its lease. So 0:12:27.120 --> 0:12:30.480 the building is only fifty eight percent occupied, and it's 0:12:30.559 --> 0:12:33.320 not in a very you know, I wouldn't call that 0:12:33.440 --> 0:12:35.160 like the most glamorous part of Manhattan. 0:12:35.160 --> 0:12:37.959 So no, it's close to Penn Station, which is a 0:12:38.000 --> 0:12:39.120 place I go to a lot. 0:12:39.360 --> 0:12:42.040 So yes, right, you're unlikely to get your hedge funds 0:12:42.080 --> 0:12:45.440 or blue chip financial tenants to step it. So you 0:12:45.480 --> 0:12:49.720 have a fifty eight percent occupied it's no park, correct, 0:12:49.920 --> 0:13:05.439 That's right? Are you guys? Cool with me at kind 0:13:05.440 --> 0:13:07.160 of indulging you in the numbers on this building. 0:13:07.200 --> 0:13:09.360 Please, yeah, pratty please Okay. 0:13:09.400 --> 0:13:13.520 Awesome. So the way that Manhattan Trophy Towers used to 0:13:13.559 --> 0:13:15.600 work is that it was a great way to announce 0:13:15.640 --> 0:13:18.599 your presence as a serious investor. So I'm going to 0:13:18.679 --> 0:13:21.880 run you through the brief twenty year journey of this building. Awesome. 0:13:21.920 --> 0:13:25.320 In two thousand and two, this Virginia real estate scion 0:13:25.840 --> 0:13:29.120 that started a company called Monday Properties came in bought 0:13:29.120 --> 0:13:32.400 this property for two hundred and thirty million. Okay, did 0:13:32.480 --> 0:13:34.240 very well with it, and in the kind of the 0:13:34.240 --> 0:13:37.360 CMBs go Go days of seven, was able to bring 0:13:37.400 --> 0:13:40.719 in a big institutional investor, Prudential, and the tower was 0:13:40.840 --> 0:13:43.520 valued at four hundred and thirty four million, so pretty 0:13:43.600 --> 0:13:47.200 much double what Monday had bought in for. Then, obviously, 0:13:47.280 --> 0:13:52.199 the crash happened, and in twenty thirteen, another private equity firm, Rockpoint, 0:13:52.280 --> 0:13:55.360 came in paid three fifty million. That's what the tower 0:13:55.400 --> 0:13:58.480 is valued at when they bought in. Then in twenty fourteen, 0:13:58.559 --> 0:14:00.960 it got super interesting in this have bled into your 0:14:01.040 --> 0:14:04.600 broader financial world. There was a company called American Realty 0:14:04.640 --> 0:14:06.400 Capital or either of you familiar with that. 0:14:06.600 --> 0:14:09.160 Oh yeah, this was well, yeah, not here. 0:14:09.440 --> 0:14:13.240 So Nicolas Shorsch went on sort of the acquisition tear 0:14:13.400 --> 0:14:17.199 of a lifetime and just bought up basically a tenth 0:14:17.200 --> 0:14:20.680 of Manhattan and had these weird non traded reed vehicles 0:14:20.720 --> 0:14:23.760 that he was using to fund all these purchases. Predictably, 0:14:23.880 --> 0:14:26.920 there was a major accounting scandal that company imploded in 0:14:26.960 --> 0:14:30.480 twenty fourteen, and that is when CIM bought in. So 0:14:30.560 --> 0:14:32.760 CIM bought in at about a five hundred and twenty 0:14:32.760 --> 0:14:36.400 million valuation, and today the valuation is at three hundred 0:14:36.440 --> 0:14:39.640 and twenty million. And so this tower is fascinating, I think, Tracy, 0:14:39.680 --> 0:14:42.120 the reason I caught your attention, as did mine, is 0:14:42.160 --> 0:14:44.640 it has every character you can think of in New 0:14:44.720 --> 0:14:48.320 York real estate, from Adam Newman to Jeff Bezos, to 0:14:48.520 --> 0:14:52.960 these mutual funds to these Virginia scions. They've all played 0:14:53.000 --> 0:14:55.200 some kind of role in this tower. 0:14:55.480 --> 0:14:59.080 And it's basically gone sideways now evaluation wise for twenty years. 0:15:00.160 --> 0:15:03.440 Uh no, So Rockpoint did terrifically well. Rockpoint bought it 0:15:03.520 --> 0:15:06.880 at three fifty sold at five nine million nine or 0:15:06.880 --> 0:15:08.120 ten months later, so they. 0:15:07.960 --> 0:15:09.600 Made like the current valuation is what. 0:15:10.800 --> 0:15:13.000 The current valuation is three hundred and twenty million. 0:15:13.080 --> 0:15:15.920 Okay, So like, yeah, that's what I mean if you 0:15:16.040 --> 0:15:18.920 just sort of looked at the starting valuation, the first 0:15:19.000 --> 0:15:22.360 number that you mentioned, and now that has not been 0:15:22.360 --> 0:15:23.720 a particularly great run for it. 0:15:24.480 --> 0:15:26.680 Correct, it's been, that's been a rough go. But again, 0:15:26.920 --> 0:15:29.760 this thing about these markets is like a year and 0:15:29.800 --> 0:15:31.760 a half ago, we could point to this and say, wow, 0:15:31.800 --> 0:15:34.640 this building was appraised at five hundred and ninety five million, 0:15:34.800 --> 0:15:37.960 So it's really changed quite dramatically over these last eighteen 0:15:38.000 --> 0:15:38.440 months or so. 0:15:38.720 --> 0:15:42.240 But to me, like the symbolism here is that even 0:15:42.400 --> 0:15:47.320 with the much much lower valuation, it's still getting refinanced 0:15:47.360 --> 0:15:50.520 and it's still kind of hanging on, and therefore is 0:15:50.600 --> 0:15:53.320 sort of a microcosm of what's going on with a 0:15:53.320 --> 0:15:55.640 lot of commercial real estate at the moment, which is, 0:15:55.680 --> 0:15:59.280 even though there is all this concern, so far, a 0:15:59.280 --> 0:16:01.280 lot of this has been able to be you know, 0:16:01.440 --> 0:16:07.400 refined or extended and pretended, whatever your preferred term might be. 0:16:07.600 --> 0:16:10.000 And I guess the big question is for how long? 0:16:11.200 --> 0:16:13.320 Right? And I think this is a point that someone 0:16:13.320 --> 0:16:16.600 you had on earlier, Rich Hill, made very eloquently, and 0:16:16.920 --> 0:16:19.280 my way of putting it less eloquently, is this whole 0:16:19.600 --> 0:16:23.080 debate about wall of maturities is kind of a fugazi debate. 0:16:23.240 --> 0:16:26.360 It's sort of like if you guys remember this whole 0:16:26.360 --> 0:16:28.800 thing about TAM total addressable marketing. 0:16:29.040 --> 0:16:33.240 Yeah, that's a Steve Eisman's favorite term, right right, it is. 0:16:33.200 --> 0:16:34.960 Such a I mean, when the VCS were coming and 0:16:35.040 --> 0:16:38.240 let's say, okay, this company has smart locks. There are 0:16:38.280 --> 0:16:42.200 two million locks owned by institutional investors. Hence my TAM 0:16:42.280 --> 0:16:45.760 is gajillian trillion dollars. Right, it's just a complete I 0:16:45.800 --> 0:16:48.440 think if the debt clock has maybe another metaphor, it's 0:16:48.480 --> 0:16:50.800 a number that keeps going up or down based on 0:16:50.920 --> 0:16:54.320 what the deliver of the message wants. So I've heard 0:16:54.320 --> 0:16:57.200 a thing from Bloomberg had an article about one point 0:16:57.240 --> 0:17:00.240 five trillion wall of maturities recently aries, which is a 0:17:00.280 --> 0:17:03.160 big debt fund throughout a two point five trillion number. 0:17:03.200 --> 0:17:06.000 But it's all meaningless because to your point, Tracy, these 0:17:06.119 --> 0:17:09.120 loans are getting reworked all the time. They're often getting extended, 0:17:09.119 --> 0:17:12.160 maybe at more painful terms. But this whole looming wall 0:17:12.280 --> 0:17:13.480 is just nonsense. 0:17:14.040 --> 0:17:16.240 This might be a random question, but when a building 0:17:16.359 --> 0:17:19.920 has significant vacancies. Okay, I imagine that's a good time 0:17:19.960 --> 0:17:22.439 for a new tenant to come in because maybe they 0:17:22.440 --> 0:17:24.560 can get a good deal on rent. But on the 0:17:24.600 --> 0:17:29.040 other hand, do tenants express concern or have like, you know, 0:17:29.080 --> 0:17:31.679 if it's too empty, Like do they want their employees 0:17:31.720 --> 0:17:34.480 coming to work in such like an empty sort of 0:17:34.520 --> 0:17:37.320 ghost building? I mean, maybe this isn't quite a ghost building, 0:17:37.359 --> 0:17:39.840 but does it become a sort of self fulfilling prophecy 0:17:39.880 --> 0:17:42.080 where as vacancy gets lower, it. 0:17:42.080 --> 0:17:45.000 Becomes less appealing to potential tenants. Is that a thing? 0:17:45.200 --> 0:17:47.040 It's sort of like if you've been single for a 0:17:47.080 --> 0:17:47.600 very long time. 0:17:47.680 --> 0:17:48.920 Oh, that's like a big red flag. 0:17:49.760 --> 0:17:52.720 Right. It's a really tricky thing. So if we're talking 0:17:52.720 --> 0:17:56.520 about companies making a big push for rto return of office, yeah, 0:17:56.800 --> 0:18:01.200 and about vibes and collaboration, tim Tower doesn't really give 0:18:01.240 --> 0:18:04.119 off the vibes that you need. So, yes, vacancye rates 0:18:04.119 --> 0:18:07.240 of whatever it's I think it's eighteen percent. We've seen 0:18:07.280 --> 0:18:10.520 some rates hit eighteen percent. This building is what forty 0:18:10.840 --> 0:18:13.960 two percent. That's not a good sign for a perspective tenant. 0:18:14.040 --> 0:18:18.520 So either they come in and extract incredibly generous concessions 0:18:18.520 --> 0:18:21.240 from the landlord, or they just stay put or they 0:18:21.280 --> 0:18:22.719 don't show up. That's what happens. 0:18:22.920 --> 0:18:24.520 You know what I think we should do. And this 0:18:24.640 --> 0:18:27.880 is not a well thought out plan, so please take 0:18:27.880 --> 0:18:29.320 it with a grain of salt. But I was just 0:18:29.359 --> 0:18:32.080 thinking these types of office buildings. There's been so much 0:18:32.119 --> 0:18:35.440 focus on office to residential conversion, but there are a 0:18:35.480 --> 0:18:39.960 lot of office building esque type things in Asia, like 0:18:40.040 --> 0:18:43.480 in Tokyo and Hong Kong that are filled with little 0:18:43.520 --> 0:18:44.880 independent shops. 0:18:45.200 --> 0:18:45.480 Oh. 0:18:45.600 --> 0:18:49.439 Like, you go into one, it's twenty stories. There's like 0:18:49.640 --> 0:18:52.720 a cat cafe and maybe a board game and. 0:18:52.800 --> 0:18:55.080 Like a really cool like a food course. 0:18:55.280 --> 0:18:57.840 Yeah, and you just kind of go through this war 0:18:57.960 --> 0:19:00.560 in of shops and you're never quite sure what's going 0:19:00.600 --> 0:19:02.879 to be around the next corner. But it's really fun. 0:19:03.119 --> 0:19:04.919 They should do something like that in New York. That's 0:19:04.960 --> 0:19:05.800 my idea. 0:19:05.880 --> 0:19:08.000 Well, it totally could work for a couple of buildings 0:19:08.000 --> 0:19:11.480 we have had. Some there are in fact specialty cracy 0:19:11.560 --> 0:19:13.080 and Joe, you might want to talk to these people, 0:19:13.119 --> 0:19:17.520 but there are some specialty companies that essentially reimagine these 0:19:17.560 --> 0:19:21.680 dead buildings as beautiful events bass or pop up retail 0:19:22.359 --> 0:19:26.480 or even little restaurants and stuff like that. But how 0:19:26.520 --> 0:19:28.040 deep is that market? I mean, you could do that 0:19:28.080 --> 0:19:30.520 with five buildings. Maybe could you do it with all 0:19:30.560 --> 0:19:35.240 the buildings around the hulking Pen Station? Probably not, you know, 0:19:35.600 --> 0:19:38.560 And how do you value those buildings if you're an investor, 0:19:39.119 --> 0:19:43.280 if you're sitting in Queensland, Australia and looking looking at 0:19:43.320 --> 0:19:47.479 your massive Manhattan investment, just tanking and value, you know, 0:19:47.520 --> 0:19:49.160 how do you take solid someone says. 0:19:48.960 --> 0:19:52.719