Smaller investors go belly-up; The Flatiron changes hands (again)... and other top stories from the week

The best national real estate stories from The Real Deal. May 27, 2023 [View in Browser]( | [$1 for 1 Month](     In today’s newsletter, we look at how smaller investors can buy big properties and [why so many are failing](. Plus, the debt ceiling [places real estate on edge](, a [dramatic auction for the Flatiron](, and one of real estate’s [most controversial moguls](.   [Small-time multifamily investors go belly-up]( Times are tough for many commercial owners, with rising interest rates sending costs skyward. But it’s [exceedingly awful for small multifamily investors](. Many of these smaller buyers invest in multifamily through syndicates, an investment mechanism where smaller investors pool their money to purchase a property, typically with a mortgage. Each coalition has one or two leaders who control the pool of cash. It’s one of the only ways for smaller players to get their hands on major real estate deals, and [it’s not a new phenomenon](. In 1961, Harry Helmsley purchased the Empire State Building through a syndicated deal, raising $33 million from more than 3,000 investors. The average contribution was about $10,000, small money to New York’s big players. Between 2020 to 2022, syndicators raised more than $115 billion from investors, often in five- and six-figure contributions. Now that the market is turning sour, many of these small players have lost — or will lose — a lot of money. The formula is familiar. Interest costs are rising faster than rents. The wave of defaults and foreclosures hasn’t come as hard for multifamily as it has for office, but some onlookers believe foreclosures could be coming soon. While a default can leave investors empty-handed, the syndicators can profit anyway by extracting money through acquisition and management fees. In Houston, Applesway syndicator Jay Gajavelli may be doing just that. Gajavelli has been known to promise huge returns via rent hikes and tenant fees. Now, one of [Applesway’s buildings is being foreclosed on](, and Gajavelli is in the spotlight for all the wrong reasons. Despite the risks, smaller investors continue to get into syndication. It’s not an easy market, but the rewards can be handsome, and the prospect of owning part of the city is intoxicating.   Together with Hilco Redevelopment Partners How a Former Power Plant is Becoming a Sustainable Community In the shadows of our nation’s monuments is an abandoned coal-fired power plant that once powered the country’s capitol for over 60 years. Hilco Redevelopment Partners (HRP) is transforming this relic of the past on the shores of the Potomac River into a modern, state-of-the-art hub for the community. Previously closed off from the public, HRP welcomed the Alexandria, Virginia community to tour the site and learn about the history of the former power plant and the future plans for a vibrant, mixed-use destination that will deliver: • Residential units, commercial and artistic spaces • Up to 16% affordable housing • 14 acres of publicly accessible green space • Environmental remediation of the site • Aggressive sustainability targets This is just the first step in bringing the community back into this space. [See how HRP is working to benefit]( Alexandrians and transforming blight in communities across the country into models of sustainable and inclusive development.   [I'm an image]( [Debt ceiling crisis puts real estate on edge]( The pending debt ceiling crisis has real estate — and the rest of the country — on edge. Here’s how a default would affect the [residential]( and [commercial]( markets. [I'm an image]( [Gural’s group wins auction for Flatiron Building]( The Flatiron was sold (again) this week, as Jeffrey Gural won the building with a $161 million bid. But the building’s saga continues. One attendee [threatened lawsuits in an expletive-laced rant](. [I'm an image]( [What makes Patrick Carroll go tick, tick, boom?]( Patrick Carroll runs a $7.4 billion real estate empire. He’s also known for public outbursts, including allegedly spitting on a Miami restaurant manager. As he looks to sell his business, The Real Deal looked into him.   Advertisement   [I'm an image]( [Brand Studio Miles Nadal shares secrets to successful partnerships]( [I'm an image]( The resi battles in [Tribeca](, [Chelsea]( and the [Upper West Side]( Compass, Douglas Elliman, and the Corcoran Group are household names in New York real estate. So, it’s no surprise that the three firms reign supreme in some of Manhattan’s most coveted neighborhoods. Check out the top brokerages in [Tribeca](, [Chelsea](, and the [Upper West Side](. [I'm an image]( [GW Properties Sues CBRE for Demanding Commission on Broken Deal]( A Chicago-area retail developer is taking CBRE, the world’s largest commercial brokerage, to court over a $6 million commission dispute. [I'm an image]( [Remote work will destroy 44% of NYC office values]( Office occupancy in New York has plateaued at about 50 percent, which could crush the city’s office values. A group of New York professors predicted that the city’s offices would lose 44 percent of their pre-pandemic value by 2029. [I'm an image]( [Bel Air estate goes on sale with $75M ask]( A Bel-Air estate has joined the ranks of LA’s most expensive listings. The $75 million price tag places the 20,000-square-foot home just beneath Steve Wynn’s $85 million Beverly Hills mansion. [I'm an image]( [Alex Sapir lists Miami Beach compound for $54M]( Miami developer Alex Sapir is in the midst of a very public divorce from his wife, Yanina. Mr. Sapir is selling his two Miami Beach homes together, asking $54 million for the waterfront compound.   [Facebook]( [Twitter]( [Instagram]( [LinkedIn]( [YouTube]( [Manage Newsletters]( | [Unsubscribe]( | [Privacy Policy]( | [Subscribe]( | [Advertise]( The Real Deal 450 West 31st Street, New York, NY 10001 ©2023 TheRealDeal. All rights reserved. [View Online](