Paydirt: Palace intrigue at Anbang, luxe home truths, LLCs ♥ Mnuchin … & more

The industry news you need to start your week, and what’s ahead

TRD New York /
May.May 01, 2017 01:45 PM

From left: Steve Mnuchin, Billy Macklowe, Wu Xiaohui and Dolly Lenz

Anbang Insurance Group has quickly gone from industry darling to cautionary tale. The Chinese insurer lost major mojo in the U.S. in the wake of two splashy deals that fell through, the Starwood Hotels portfolio and Kushner Companies’ 666 Fifth Avenue. (Don’t get me started on the latter.) And it’s facing a fair bit of drama back home, too.

On Wednesday, WeChat went nuts with talk of Anbang chairman Wu Xiaohui being detained over alleged financial irregularities at the firm. The troubles reportedly rose from a $14.5 billion loan Wu obtained from China’s largest private lender. Anbang eventually put out a statement rubbishing the rumors and said everything was business as usual. On Thursday, Wu also granted a rare interview to a Chinese state media outlet, in which he defended the firm’s flurry of overseas deals.

And then on Sunday, the firm said it would sue Caixin, a Chinese investigative magazine that reported on potential financial irregularities at the insurer.

Ludwig Chang, the former boss at China Orient Asset Management, a top state-owned asset management firm, predicted that the Chinese government’s increased scrutiny of overseas real estate transactions – also the subject of TRD’s new cover story – would be felt by Anbang and those of its ilk.

“Some insurance companies, who shall remain unnamed, have had two or three failed transactions,” Chang said. “I think those are the handiwork of the new insurance regulatory regime.”

Israeli billionaire is Kushner backer: The moneymen are being unmasked, one by one. Bloomberg reported last week that Kushner Companies’ secret backer on 15 Manhattan properties is Raz Steinmetz, who hails from the billionaire Israeli family that includes Beny Steinmetz. Raz’s firm, Gaia Investment Corp., was the buyer of 475 Kent Avenue in Williamsburg, but their connection to the Kushners wasn’t known until now. Representatives for Kushner Companies were careful to disassociate the firm from any connection to Beny, who was being questioned in an international money laundering investigation late last year.

“He [Raz] is the only Steinmetz that we have done business with,” the representative told the Times.

Lax on tax: Treasury Secretary Steve Mnuchin came bearing good tidings for landlords: The Trump administration’s tax reform plan, revealed last week, includes a 15 percent “business rate” that would also apply to LLCs and S-corps, vehicles for holding the bulk of the city’s privately owned real estate. Mnuchin didn’t touch upon, however, the fate of 1031 exchanges, which investors use to defer taxes again and again. And no word yet on the low-income housing tax credit, which has helped create a good chunk of the country’s affordable housing stock.

Dead Hook: The Red Hook Innovation District won’t be a thing, at least not for now. Italian developer Est4te Four scrapped a $400 million proposal to transform the sleepy waterfront into a 1.2 million-square-foot, mixed-use destination. Instead, they went for a tidy profit by selling the assemblage to Sitex for $110 million. The Jersey firm will keep the properties industrial, meaning a site that was set to be the next TAMI haven will more likely become the next warehouse for Amazon.

Luxe home truths: Haute Residence’s luxury summit at the Core club Friday led to some terrific tidbits on the residential market. Top luxury brokers such as Dolly Lenz and Noble Black spoke about buyers getting “stuck” with overpriced apartments, or stomaching losses of up to a third of the purchase price. Steve Kliegerman said developers who paid “through the nose” in the last three years for land were now looking for salvation, but would be hard-pressed to find it.

The developers at the summit took on the topic du jour, the changing capital stack. From a pre-crash market built on OPM, we’re now in a situation where “there’s enough skin in the game where it would be painful for the developer to walk,” said Don Peebles. I hope no one missed the irony of Ian Bruce Eichner saying: “The more you’ve seen the rodeo, the less you’re willing to expose yourself to highly leveraged debt.” It’s been less than a year since he lost 1800 Park Avenue to Durst.

But Billy Macklowe stole the show with his thoughts on the retail market. Though other landlords have taken the “Fifth is forever” approach, Macklowe offered no such comfort. “I think retail is fucked,” he said. “Plain and simple.”

Bonus: Rafi Toledano in 2016 on his East Village holdings: “These are things I buy to own and to pass on to my kids.”

Rafi Toledano now: “I kind of want to get out of the East Village walk-up business, to be honest.”

(Paydirt is a weekly column that riffs on the biggest NYC real estate news of the moment, providing analysis and historical context on the deals and players that make this town tick. Read more from Paydirt here.)

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