?? Multifamily’s house of cards; Brookfield’s vanishing act… and more

Here’s THE RUNDOWN:??

?? MF1 Capital was the go-to lender for multifamily syndicators, doling out over $7 billion in debt between 2020 and 2021. Now, with rates on the rise, almost half of the lender’s debt is either watchlisted or delinquent.

?? In some industries executive pay is unshakeable, even in the worst of times. That’s not the case for residential brokerages. Executives at the biggest firms saw pay cuts in the tens of millions last year. Don’t worry–they’ll survive.

??? For many companies, losing $2 billion worth of properties would be a death sentence. For Brookfield, “it’s small and not relevant to the overall business.” That’s what the firm’s CEO said. Can he back it up?

?? How does one steal a building? Ask Joseph Makhani. The Long Island man was indicted this week for allegedly stealing two Harlem brownstones. As Makhani fought to hide his alleged crimes, his victim ended up in a homeless shelter.

?? It’s a tough time for condo buyouts, but that hasn’t stopped Mast Capital, Terra, and other South Florida firms from trying. But recently deals have fallen apart, been put on hold, or ended up in messy legal fights.

??? Chicago’s Jackson Boulevard is starting to look like a graveyard, where the biggest names in real estate and finance go to see property values die. While some owners attempt a turnaround, others have given up on the neighborhood.?

THE DETAILS:

?? When the Tides go out: the multifamily market’s house of cards

By early 2022, economists were warning of potential defaults thanks to the Federal Reserve's rapid rate hikes. But Tides Equity and other multifamily syndicators were still in acquisition mode, and MF1 Capital, a preferred lender for Tides, was offering loans despite the risks. After all, the short-term, high-leverage loans had been considered low-risk just a year or two earlier. Then, they turned sour. MF1 now faces significant challenges as half of its loans could head toward delinquency. As more syndicators approach distress, questions rise about the lenders' impact on their downfall.

?? Brokerage bosses take fat pay cuts?

CEOs at residential brokerages raked in cash in 2021 thanks to a post-pandemic boom. Compass CEO Robert Reffkin pulled in $90 million that year, making him one of the highest-paid executives in the world. But last year Reffkin, and other resi CEOs, took a pay cut. The move doesn’t come as a surprise — with rising interest rates and a banking crisis spooking the industry, cost-cutting was inevitable, and when it comes to executive pay there is a lot of cost to be cut. It could take a major shift in the resi industry for c-suite pay to recover.

??? How Brookfield made $2B in defaults disappear

Brookfield has made headlines all year by defaulting on billions of dollars of office debt. But, according to the firm’s Vulcan-like CEO Bruce Flatt, the defaults weren’t worthy of much attention. After all, $2 billion is a drop in Brookfield’s $825 billion bucket, and it holds a massive and diverse set of properties, including trophy buildings in New York and London. Plus, Flatt can say whatever he wants. He took their main real estate arm private in 2021, allowing him to keep the full extent of the firm’s assets close to the vest. But doubts remain.

?? Fraudster indicted for stealing Harlem brownstones

Joseph Makhani, a Long Island man with a long rap sheet, was indicted this week for stealing two Harlem brownstones. He allegedly used forged documents and shell companies to claim ownership while renting out the properties. Makhani has a long history of real estate crimes, and if convicted, he could be sentenced to up to 25 years in state prison. But a legal loophole in the property theft law could limit Makhani’s punishment.?

?? Condo buyout deals in South Florida under pressure

Condo buyouts can be full of drama. Just ask Mast Capital's CEO. Camilo Miguel Jr. Mast has struggled for years to buy enough units at Amethyst, a Miami Beach condo building, to begin redevelopment. He’s not just battling the current owners. Terra’s David Martin entered the ring recently, sending unsolicited offers to unit owners. It might be a terrible time for a condo buyout, with high interest rates, construction costs, and other difficulties leading to dead deals and legal disputes. But that hasn’t stopped developers from eyeing waterfront properties for potential buyouts.

??? Boulevard of broken deals: Distress drives office market on Jackson

Jackson Boulevard has become an epicenter for office distress in Chicago. The once-bustling district has suffered in recent years, thanks to economic pressures from the pandemic, landlords neglecting maintenance, and its position to the south of the Loop’s main business district. The result is over $1.4 billion in real estate value at risk. It’s a dramatic turn for the neighborhood, where office occupancy was mostly strong pre-pandemic. As office owners map out a variety of paths forward, one thing is certain for all of them: trouble lies ahead.?

THE CLOSE:

Has Brookfield really made its $2 billion problem disappear? Or is there more trouble ahead for the investment behemoth? Keep reading TheRealDeal.com to find out.?