🗞️ Multifamily's house of cards, death of a sales gallery, and more | Inside the August 2023 Issue

Inside the latest issue of The Real Deal Aug 01, 2023 [View in Browser]( [Share](   [Magazine Cover Image]( [THE EDITOR'S NOTE]( The market makes fools of us all. Those who have been through a recession know how humbling it can be — the palm-sweating, stomach-churning fear; weighing potential losses, your job, your livelihood, your money; all your work being for naught, and the embarrassment of failure and letting others down. Some big players in the multifamily market have never experienced those times. Those in their 20s and 30s were in junior or senior high around the time of the Great Recession. The current fallout hitting these investors in rental properties — rivaling the distress seen in the office market — must be an eye-opening moment for them. In our cover story, we look at some of [these firms and the problems they’re facing](. There is Rise48, the multifamily investment firm of 27-year-old Zach Haptonstall, launched in 2019 with a focus on acquisitions in the Southwest. In just four years, the firm amassed $1.4 billion in assets. Tides Equities, founded by Sean Kia and Ryan Andrade, both in their early 30s, acquired an even bigger portfolio — $7 billion — by taking out floating-rate loans at dirt-cheap interest. But when the Fed hiked rates, the firm’s mortgage payments ballooned. It wasn’t supposed to be this way. During Covid, the mantra was “everyone needs a place to live.” Rental buildings were seen as a fail-safe investment. The plan was to buy buildings, make speedy renovations, hike rents and flip the properties. But those rising interest rates (an uncontrollable factor) hit these companies and the sector hard. From the third quarter of 2023 through the end of 2025, a record number of CMBS multifamily loans will come due, and it looks to be messy. “I think this is going to be the Achilles’ heel of the commercial real estate downturn,” RXR’s Scott Rechler recently said on TRD’s “Deconstruct” podcast. “Everyone is focused on office because it’s sexy, [but] this is where the day of reckoning is coming.” Still, things are not looking good for office space, either. And it can be hard to pin down just how bad the damage is, especially when it comes to [behemoths that have been through a few recessions, like Brookfield](. The private (and relatively faceless) company owns some of the most valuable commercial real estate on the planet, such as London’s Canary Wharf and New York’s Manhattan West, and is a huge owner in Downtown Los Angeles. It has seen billions of dollars in defaults on its properties, but has left those losses out of recent financial reports and minimized the distress as “small and not relevant to the overall business.” Senior Reporters Isabella Farr and Keith Larsen go under the company’s hood. Meanwhile, lending seems to be getting jankier. As big banks pull back from lending and regional banks fail, investors are forced to turn to alternative sources for capital. Crowdfunding has been around for years, but is drawing increased scrutiny after a fiasco involving CrowdStreet. [Tens of millions of investor dollars allegedly went missing]( when the platform released money to developer Nightingale Properties before a deal closed, money that was allegedly misappropriated by Nightingale’s CEO. Also, check out our ranking of the [top Hamptons brokerages]( and brokers. Most [top agents are trotting out their “back to basics” approach]( to keep the deal pipeline flowing in a softened market. Finally, take a look at Senior Reporter Joe Lovinger’s deep dive into a [murder-for-hire plot involving a Los Angeles developer](. The story is focused on an odd pairing that came together to plot two killings (which were foiled before they happened). As Lovinger details in his intro: “Arthur Aslanian was a real estate developer who lived in a mansion and dropped in on his kids’ scout meetings. Sesar Rivera, his handyman and concrete polisher, smoked meth. But a kinship grew between them.” The result? “A half-baked plan that took on a deadly life of its own.” The market may make fools of us. But there are worse things. Enjoy the issue. Editor's Note Stuart Elliott Editor-in-Chief & CEO   If you’re interested in receiving future magazine issues in print, sign up for our [annual subscription](. Save $20 OFF your first year with promo code: MAG20 [SUBSCRIBE NOW](   [When the Tides go out]( Last summer, well before multifamily syndicator Tides Equities would show its troubled hand to investors, economists warned that the Federal Reserve’s rapid rate hikes could trigger a wave of defaults. Meanwhile, MF1 Capital, one of Tides’ favored lenders, was doling out loans like it was 2021. The bulk of MF1’s issued loans come due in the next 18 months, at a time of rising defaults and a dearth of new financing. Lenders will be left to make tough choices — take back the keys or sell loans at a loss. As more syndicators barrel toward distress, observers question how much of a role lenders such as MF1 played in their downfall. [READ MORE](   [Image]( [Cost-cutting crept into brokerage bosses’ bottom lines]( Executives at residential brokerages, beset by rising interest rates and a banking crisis, led their firms through a barren winter. Those executives also saw their compensation fall in 2022 as a result of the penny-pinching, and some C-suite paydays shrank to what might be better called C-minus-suite. [Image]( [Death of a sales gallery]( Here lies the sales gallery. Once a prerequisite in the development process, it’s now deemed by some to be an optional and costly feature. “The day of the sales gallery is dead,” Douglas Elliman’s John Gomes said. “Really, it feels like yesteryear.” [Image]( [Condo buyout bonanza]( Offers suddenly appeared under the doors of units at an oceanfront Miami Beach condo building one sweltering day in July, adding an unexpected twist to a drawn-out bulk buyout of the property. Mast Capital CEO Camilo Miguel Jr. was already in contract to purchase a majority of units at Amethyst, a 120-unit building that was constructed almost 60 years ago. But after negotiating with sellers for more than two and a half years, and repeatedly extending the closing date for many, Miguel lost trust among sellers. [Image]( [Bulgari Hotel and the clash in Benedict Canyon]( There’s little question the 33-acre Bulgari Hotel — if it gets built in Benedict Canyon — will be spectacular, with a 10,000-square-foot spa, top-shelf Italian and sushi restaurants, a private cinema and 18 guest bungalows. While supporters call it a discreet luxury project that will mesh with the area’s natural environment and raise property values, opponents see a catastrophe that will bring congestion nightmares, destroy habitat and raise the risk of wildfires. [Image]( [Powers of towers: NYC’s top architects ranked]( Temperatures ran hot at the Pension Real Estate Association’s annual spring conference. Developers and real estate financiers boiled over with questions with no clear or immediate answers — what’s going on with the office market? How will AI and the currently amorphous tech industry reshape real estate? How can a firm pivot in this climate? Where developers and clients saw problems, New York’s architects saw potential.   [THE CLOSING: MAYI DE LA VEGA]( INTERVIEWS WITH REAL ESTATE TITANTS   [Image]( The ONE Sotheby's founder on Miami's star turn, the power dynamics of development and agent winbacks. “Luxury is not a price point — luxury evokes things in us,” Mayi de la Vega declares. Sure, I counter, but that evocation, in Miami, used to run you about $1,000 a foot. Now, developers can command up to $5,000 a foot for top-shelf product, prices that put Manhattan projects on blast. And de la Vega, as the founder of One Sotheby’s International Realty, has played no small part in that star turn. A former Coldwell Banker agent who got her start working at her father’s aerospace materials business, de la Vega launched the Sotheby’s franchise in 2008. Today, it has over 1,000 agents across 19 Florida offices; it placed fourth on The Real Deal’s latest ranking of top brokerages in Miami-Dade, with over $2.4 billion in closed deals. [Read full story here →]( [FULL ISSUE HERE]( [More Newsletters]( | [Unsubscribe]( | [Privacy Policy]( | [Subscribe]( The Real Deal 450 West 31st Street, New York, NY 10001 ©2023 TheRealDeal. All rights reserved. [View Online](