Happy Friday. This is The Shake 🤝: the reliable weekly newsletter catching your attention, unlike some WRs in week 1…

Here’s what we got this week:

• The Diamond Hands Tenant 💎 

• Even Pro Sports Teams Pay Rent 🏈 

MARKET RADAR

The Diamond Hands Tenant 💎 

New York City real estate has always been a land of extremes. From lavish $200M+ penthouses to billion-dollar development deals, there’s a story for every win (and loss).

This NYC saga revolves around another milestone: arguably the most expensive eviction EVER.

It’s 2004, and big-time developers Arthur & Will Zeckendorf recently completed a historic purchase of the Mayflower Hotel for $401 million. With plans to develop the now 15 Central Park West, the Zeckendorfs had a vision to set record sales for luxury condos.

Ironically that vision was achieved alongside another NYC record that is nightmare fuel for developers… the costs of relocating a tenant from a rent-controlled apartment.

FYI, rent-controlled leases protect tenants from being evicted – forcing new buyers to come to terms with a relocation package.

Luckily (sort of) most of the top floor rent-controlled tenants agreed to the first offered compensation of $650k to relocate. Only four bachelors remained that have lived in the tiny 350 sqft rooms for over 30 years. 

Out of those four, three of them accepted a ~$1M package to head out… One of them (a 98-year-old) infamously checked out with only a single suitcase.

Then came the problem tenant: Herbert Sukenik

The 411 on him:

• Born in the Bronx in 1930

• Attended Cornell University where he earned both a master's and Ph.D in physics

• Father passed away while in college and left enough money that he didn’t have to work

• A bit of a social outcast

• He worked for General Electric for a while then at Martin Company in their Space Systems division

• Moved into the Mayflower Hotel in 1974

• Never married and seemingly had no friends or family

• Lived in seclusion for the next three decades doing crossword puzzles in his moldy apartment

Leveraging the most valuable factor to the Zeckendorfs (time), Herb stated he didn’t want to start negotiations until all his fellow neighbors were situated.

Now as the last tenant standing, Herb came to negotiations prepared with all the critical details: how much the developers paid, the precise acreage of his block, taxes, insurance and even carrying costs of the empty building.

At first, money wasn’t attractive to the 73-year-old Herb. The only key demand was a central park view from his soon-to-be new digs.

So the developers arranged a tour for the Essex House on Central Park South – a two-bed 2,200 sqft unit on the 16th floor.

The initial agreement: the Zeckendorfs would buy the $2M condo and retain ownership, but he could have it for life and they would furnish it. One refused demand was free meals twice a week at the world-renowned restaurant in the building.

Herb’s response to the written agreement was silence.

Shortly after, Grabow received a call from a well-known tenant attorney stating his new client (Herb) now wanted a whole lot more than just an apartment… *record scratch

He had, as Lil Wayne would say, money on his mind…

Flabbergasted and unwilling to be held hostage, the Zeckendorfs split the two halves of the building lobby and began demolishing the southern end.

They hoped to drive Herb out with all the construction hassle and noise but he was undeterred.

“I love the noise,” Herb said.

One final bluff was serving Herb with the papers for the multiyear demolition-related eviction process the Zeckendorfs hoped to avoid.

After living in a construction zone for over a year, Herbert's stubbornness finally paid off in 2005.

Admitting defeat, the Zeckendorfs caved and finally got a number from Herb’s attorney.

The offer: a one-time cash buyout of…$17 million 🤑 

It's likely the most money ever paid to get anyone to leave any apartment.

But it gets better.

Not only did the Zeckendorfs agree to give Herb Sukenik $17 million cash, but they also agreed to let him live in the $2 million condo on Central Park South where he will pay $1 a month in rent for the rest of his life.

Two days after moving out, the first wrecking ball hit the Mayflower Hotel and the Zeckendorfs had a successful outcome for their vision.

As for Herb, he continued to live a low-profile life until he passed just 6 years later in 2011.

We can all learn a thing or two about leverage and negotiation from Herb 📝 

Even Pro Sports Teams Pay Rent 🏈 

Ahhh football is back and everything is right in the world.

We made it through the worst month of sports (IMO) where a bunch of people pretend that they’re bigger baseball fans than they are, people watch golf besides just being hungover on Sundays, and your colleague Ted is talking to you at the water cooler about tennis like you’re supposed to be up-to-date on what’s going on.

Often discussed in the world of professional sports teams are the highest-paid athletes, the most valuable franchises, and the most popular jersey sales.

It seems more and more fans are infatuated with the business surrounding the leagues versus the actual product on the field.

Now that sports betting has been legalized in many states (did anyone have the Lions moneyline last night?), the financial aspect of the game is in the public eye as much as the winner, loser, MVPs, etc.

With that, these leagues have elevated to unparalleled money machines that continue to push the envelope on what we thought was possible year in and year out.

One of the most recognizable ways they continue to crank things up a notch is in the construction of brand-new, state-of-the-art stadiums.

In my lifetime I’ve seen some incredible stadiums get built and open. We’ve seen the Dallas Cowboys “Jerry World”, the NY Jets/Giants Metlife Stadium, and more recently as the Rams and Chargers moved, So-Fi Stadium.

It’s never failed to mention how expensive these stadiums were to build (a whopping $1.3 billion in the case of the Cowboys), but what is rarely brought up is the fact that in most cases these teams are actually paying rent. Yep.

Let’s dive into the industry of pro sports teams and their commercial real estate leases.

In the NFL, almost every team leases their space in the stadium they play in. Just like the Airbnb arbitrage gurus you’re seeing all over your social media, these teams tend to make out like bandits.

After the Lions upset the Chiefs last night, I decided to make them our case study today.

Let’s dive into the numbers for the Lions & Ford Field.

Ford Field opened in 2002.

Landlord / Stadium Owner: City of Detroit

Main Tenant: Detroit Lions

Construction Cost: $430 million ($154.8 million publicly subsidized)

As for the rent versus income (in just ticket sales!):

Lions Annual Rent Cost: $250,000

Ticket Sales in 2021: $55 million

Not bad and this is just one example of the ROI from a pro sports team leasing space and cashing in on it…

On the flip side, even the country’s biggest sports teams are starting to understand the value of ownership versus rent.

The Philadelphia 76ers just made a massive splash about a year ago when they announced plans to not renew their lease with Comcast Spectator upon the expiration in 2031 and completely move out of the Wells Fargo Center.

In a borderline desperate landlord move, Comcast is offering the Sixers to split ownership of the building. The franchise, worth +/- $2 billion (per Forbes), was originally owned by Ed Snider, who also owned the Philadelphia Flyers.

The Sixers not only plan to build a major stadium in Center City Philadelphia, but also affordable housing.

Will this be the next wave of the way professional sports teams operate? Is ownership the new move?

Only time will tell, but let’s see if projects like the Sixers’ proposed arena end up succeeding...

FIN 🤝 If you enjoyed this week's edition, don’t be selfish — share with a friend!

^{DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.}