Go Big or Go Koch on Distressed Real Estate

Sign up for smart news, insights, and analysis on the biggest financial stories of the day.

During the pandemic, many of the richest investors in America have been doubling-down on real estate.

Rolling the Dice on the Vegas Strip

Four years ago, the Koch’s opened their Dallas-based property arm, Koch Real Estate Investments.

As more of a sovereign wealth fund than a regular real estate investor, the company doesn’t have to solicit funding thanks to the bankroll of its conglomerate parent. “We don’t have to follow the old rules of real-estate private-equity investing,” as president Jacob Francis puts it.

And Koch Real Estate stayed largely off the radar until last spring, when it backed Ladder Capital with a $206.4 million credit facility after the mortgage lender stumbled under pandemic stress.

Then, last month, came the really big splash: Koch Real Estate secured an unfinished multibillion-dollar casino and hotel development on the Las Vegas Strip for $350 million:

  • Started by property developer Jeffrey Soffer in 2007, the 63-story and 4,000-unit hotel, condominium, and casino tower is one of the oldest and biggest unfinished real estate projects in the U.S. But it’s been in development purgatory since the project filed for bankruptcy in the fallout of the 2008 financial crisis.

Casino Hot Potato: Famed businessman Carl Icahn bought the project for $150 million in 2010. He subsequently flipped it to New York developer Steven Witkoff for $600 million 2017. But Witkoff defaulted on the mortgage — and $200 million in subordinate debt — when the pandemic rocked the hotel market.

That’s when the Kochs swooped in to pick up the mortgage for a relative bargain, bringing back the original developer, Soffer as a partner.

Real Estate Elite: In other rich guy real estate news, Bill Gates recently became the biggest farmland owner in America. Everyone needs their own little (or ostentatiously large) slice of paradise.