Editor’s note: Multifamily maelstrom

Inside the latest edition of TRD's monthly magazine

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.” Read the story on page 22. 

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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 get under the company’s hood on page 50. 

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. See page 16. 

Also, check out our ranking of the top Hamptons brokerages and brokers on page 42. 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.” See page 18. 

The market may make fools of us. But there are worse things. 

Enjoy the issue.