Wednesday, March 30, 2011

Financial Wizards

Regular readers might remember how some time ago I hi lighted the financial wizardry of one Harry Macklowe and his son William. I still remember when CNBC had a real estate summit and the younger Macklowe was invited on as a guest expert to pick his brain.

No readers you cannot make this up. Lucky Sperm Club member Bill Macklowe was invited on the propaganda network. No, not as a Manhattan kickin' night club expert, nor as a Hampton polo or cricket circuit expert, and no not as a 6 star vacation getaway expert but as a commercial real estate expert!

Leave it to CNBC to unearth the real hidden gems. This is what I said way back back in April 2008 regarding the Macklowe's real estate exploits:

"Harry Macklowe the famed real estate investor who recently had the GM building in NYC foreclosed on by lenders which was part of his empire, is a glowing example of this last issue, skin in the game. Everyone is complaining that strawberry pickers in California bought $750K homes and the like but why is no one complaining when Mssr. Maclowe amasses a $7.3 billion commercial real estate portfolio with 55 million down. For those without a calculator that's a down payment of 0.00753% or 7/10ths of 1%."

Now that's some leverage! Ivy league style. You wanna bet on whether the lender(s) on that deal had an Ivy league education as well ?

I didn't think so.

But of course all of this is NOT a ponzi scheme ever dependent on cheap credit, non-existent lending criteria and an ample supply of brainwashed, kool-aid drinking or LSC card carrying marks.

Well, the the Macklowe liquidation sale continues and it now appears that all this financial wheeling and dealing with others' money has taken its toll -on the creditors - not to mention the family, as son has parted ways with daddy and relations between them appear "strained".

What was that phrase again about bear markets returning capital to their rightful owners.

In further news it appears we now have yet another casualty among the financial wizards LSC set. Lucky Sperm club member Jared Kushner, graduate of all those fine institutions of higher learning (Harvard/NYU) where the only entry qualification is that your donation cheque doesn't bounce not to mention famous son in law of Donald 'mirror mirror on the wall whose arrogance trumps them all' Trump, seems to be having some trouble.

According to the WSJ:

Jared Kushner, the real-estate scion and Donald Trump's son-in-law, plunged into the New York market at the top of the boom, paying $1.8 billion for a Fifth Avenue office and retail tower, the highest price ever for a single building at the time.

As of March, the aluminum-panel-clad skyscraper, where retailer Uniqlo is planning its flagship store, was about $3.5 million-a-month short on debt service, say people familiar with the matter. Only $10 million remained in a reserve fund used to service the property's $1.22 billion mortgage, which is tied to the office portion of the building. Its revenues are only one-fourth the amount forecast in 2007.

Lovely. Revenues only a 1/4 of projection. How shocking. Ironically the accounting professor at the 2 bit, couldn't hold a candle to the Ivy league, university that awarded me my sheepskin always counselled to take my revenues and discount them 50% and high ball my expenses/carrying costs very aggressively, modelling a worse case scenario.

Imagine that. But hey, like we're told, Ivy league is da bomb!! And as for Mr. Kushner. Lets just ask his father in law;

"He is a very smart young man," Mr. Trump said of Mr. Kushner in an interview Tuesday. "I think it will come out well for him and everybody."

Wow. Maybe Kushner will get credit for work done at Harvard and skip the first 3 levels of the Trump coursework and jump right into 'Going BK and Bouncing Back Unscathed 404'.

Once projected to take in nearly $120 million in annual office rent, the 39-story building is on track to post income of close to $30 million this year, down from $60.1 million in 2007, people familiar with the rents said. But the higher office rents haven't materialized and vacancies have increased.

Like Donald said, a very smart young man. Must have forgot his calculator or used a ouija board for his business plan. All that said, I fully expect to see Kushner working at treasury or the Fed pronto.

But of course real estate is improving right alongside the job front, just turn on CNBC they will tell you that day in and day out.

Hmmmm let's see now. Should I back the business plan of the "dumb" legal immigrant from Colombia selling hot dogs and soda on the corner by central park or should I back the DNA loaded Kushner, the "very smart young man" from Harvard and NYU?

I'll give you 3 guesses as to which one and the first 2 don't count. But then again I may be stupid but I'm not Ivy league stupid.

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