?? Cracks show in the multifamily market; NAR’s big, bad year … and more
Here’s THE RUNDOWN:??
?? Brad Sumrok has turned hundreds of people into millionaire multifamily investors, with disciples doing billions in deals. But now some investments are bleeding money, and the Apartment King’s success story could fall apart.
?? It’s been a big, bad year for the National Association of Realtors. The trade group is facing external lawsuits and internal turmoil. Now Redfin has ordered its agents to cut ties with NAR, but the breakup will be messy.
?? Deal Alert: Harry Macklowe landed a $300 million inventory loan for his residential conversion at 1 Wall Street, where he’s had a notoriously hard time selling condos.
?? It’s been a tough year for the residential industry. Many teams saw sales totals drop as the market came down from 2022’s wild highs.? But the best of the best have managed to weather the storm. TRD ranked LA’s top brokers and Chicago’s top brokerages.
??Once upon a time, owning in New York meant owning a co-op. Now buyers and developers alike have turned to condos, forcing co-op owners to find creative ways to stay relevant.
??? An Airbnb guest in Brentwood has overstayed her welcome, staying in the home for 540 days without paying rent. Yikes! You won’t see the same problem in New York, where short-term rental restrictions have rocked the company’s hosts, putting what some have called a de facto ban on the platform. But rental landlords and hotels could benefit.?
THE DETAILS:
Brad Sumrok, the self-anointed “apartment king,” has his pitch down: By investing in apartments, anyone can achieve financial freedom. Sumrok says he’s “created over 600 millionaires,” and that he has “never lost anyone’s money.” A few years ago, when the multifamily market was running hot, it was a convincing argument. Upper-middle class Americans paid for his knowledge and sought to get in on deals or orchestrate them on their own. Now, the market has turned sour, and Sumrok’s students are facing mounting debts and foreclosures.?
NAR’s tumultuous year has been well-documented in this newsletter. Here’s a quick refresher: The organization is at the center of two potentially earthshaking lawsuits. It also has a new president after the last one stepped down over claims of sexual harassment. Things took a turn for the worse earlier this week, when Redfin told its agents to sever ties with the trade group. But there is still hope for NAR. The organization has a monopoly on local Multiple Listing Services in a handful of major markets throughout the country. For now, that will force many agents to continue working with NAR, and could save the group a whole lot of trouble.
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Harry Macklowe was into office-to-residential conversions before they were cool. The developer spearheaded New York’s largest pre-pandemic conversion. But the project has been troubled by delays, and Macklowe and Co. have struggled to move units. Now, he’s taken out a $300 million inventory loan to help cover costs as he looks to unload unsold condos. The loan raises the total cost of the project to $2.6 billion and increases the ever-likely possibility of Macklowe realizing huge losses on the property.
?? Resi Rankings: LA’s top brokers, Chicago’s top brokerages
It’s been a down year for residential sales across most of the country. But that hasn’t stopped the nation’s top sellers.?
In LA, the top 20 brokers did $7.3 billion worth of business from July 2022 to July 2023, a drop of a quarter from the previous year. The list is filled with household names, like Aaron Kirman, Kurt Rappaport, and Branden and Rayni Williams. But there was still room for a couple new entrants.
In Chicago’s Cook County, a homegrown brokerage earned the top spot, doing over $7.5 billion in sales volume. Compass did its part to close the gap, jumping from sixth to second in the rankings. But it still has a long way to go before capturing the crown.
Thirty years ago, co-ops ran the show in New York. Co-op sales were double or triple those for condos. The much-coveted addresses along Central Park were almost exclusively co-ops. They were also essential for agents: “If you didn’t sell co-ops, you didn’t sell anything,” said veteran broker Lisa Lippman.?
Now condos have taken over the city’s residential scene, as buyers have shown a preference for the lower barriers to entry. Developers have responded to that buyer preference, especially on the highest end of the market, where discretion can be of the utmost importance. But co-ops are still out there, and some of them have become very proactive in their fight for relevance.?
In September 2021, Elizabeth Hirschhorn rented an LA-area Airbnb for six months. But when her rental period ended in April, she refused to move out. It’s been 540+ days since then and she has refused to move, citing an LA rent control law protecting her from eviction.
Airbnb’s problems run much deeper, though. New York City passed a law recently to crack down on short-term rentals, making it all but impossible for thousands of Airbnb owners to host guests in the city. Landlords and hotel owners have celebrated the law. But homeowners have fought back, saying it makes it impossible for some people to buy homes.
THE CLOSE: What’s next for NAR? Will more residential firms urge agents to sever ties with the trade group? Keep reading TheRealDeal.com to find out.
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