The math on crowdfunder Yieldstreet’s CRE performance is in, and it ain’t pretty: Investors pumped $370M+ into 30 deals reviewed by CNBC, and those deals have already recognized $78M in defaults in the past year, w/ Yieldstreet customers expecting significant or total losses on the rest. Yieldstreet has declared 4 of the deals to be wipeouts, watchlisted 23 more, and 3 others are listed as “active” but have stopped making distributions. And after a REIT formed from 6 of those deals plummeted in value, Yieldstreet shut down the vehicle, which means customers’ funds are stuck for at least 2Y.

The firm said that its ‘21 and ‘22 vintage deals were “significantly impacted” by rising rates and falling valuations. It added that out of the 149 deals funded through the platform since inception, 94% of matured investments have delivered positive returns, though it’s unclear how many of the deals qualify as “matured.”

Among the troubled deals: Nashville’s 2010 West End Ave, a 358-unit rental owned by Adam Neumann’s Flow. The cash-bleeding property, on which CIM held a $121M loan, had turned to YieldStreet to plug the shortfalls and purchase a rate cap, but then began searching for rescue pref, as The Promote reported in April. Yieldstreet marketed the offering touting the chance to score 20% annual returns 🎃 , but in May, after Tishman Speyer bought the property for less than the debt, Yieldstreet declared the project a total loss.

“There isn’t a day that goes by without me saying, ‘I can’t believe what happened,’ Justin Klish, who invested $300K in the Flow project via Yieldstreet, told CNBC. “I consider myself moderately financially savvy, and I got duped by this company.”

CRE players have long felt that deals that go the crowdfunding route are a grab-bag of undesirables that struggled to land conventional investment for a variety of reasons – troubled capstacks, high basis, questionable sponsors. They say that saddling babe-in-the-woods retail investors with such deals is a fundamental issue in these platforms’ business models – basically setting such investors up for losses. (Related: 7 Highlights from CRE’s Biggest Crowdfunding Scam)

It’s a fairly incestuous world of players & investors, too. a16z invested in crowdfunder Cadre at an $800M valuation in ‘17 (the deal memo from a16z partner Jeff Jordan kicks off w/: “I love marketplace businesses.”). In ‘23, Yieldstreet acquired Cadre in a stock deal at a massive 💇 to that valuation, for reportedly around $100M - keep in mind that Cadre had raised $133M from VCs such as Thrive, a16z, Khosla etc. “Been excited about this for a very long time,” Ilan Stern, a key player at Adam Neumann’s family office, Nazare, commented at the time of the announcement. Flow’s biggest backer is, of course, a16z – it invested $350M in ‘22 and topped that up in a round this spring that more than doubled Flow’s valuation to $2.5B. Here’s part of the Yieldstreet memo for the Nashville deal.

Yieldstreet was founded in ‘15 by Milind Mehere & Michael Weisz, and has raised hundreds of millions of dollars in VC. In May, it tapped former E-trade CEO Mitch Caplan to replace Weisz as CEO. Caplan’s investment firm, Tarsadia, was an existing investor in Yieldstreet, and led its $77M fundraise this July.

“Be a gentleman, and take your shorty out to dinner.” - NYC Mayor Eric Adams

Office REIT Paramount Group, which controls 13M sf of prime property in Manhattan and SF, is led by a man called Albert Behler. Behler’s penchant for steering business toward Behler-related parties (his wife, his vineyard, his aviation company) has attracted the attention of the SEC, even as the firm has tapped BofA to help it conduct a strategic review. But that’s not all: TRD reports that Behler pushed for a no-bid security contract on 60 Wall Street, a 1.6M sf office tower in which Paramount owns a 5% stake, to be awarded to Guardian Services, a company tied to his ex-girlfriend. The 2 remained on warm terms after the r’ship ended, and the Guardian employee, 30Y junior to the 73-year-old Behler, referred to him in texts as “Albertcim,” using a Turkish suffix of endearment.

This 9/19 exchange is notable

Behler: How are you? Hope all well. Talk tomorrow?
Her: Yes please 🙂 call me anytime xoxo
AB: time for lunch?
Her: That will be so nice to see you. Yes I am available.
AB: 12:30 le Bernadin lounge.
Her: Perfect.

A Paramount rep told TRD the contract was arms-length and in line w/ the REIT’s internal policies. We dove into Paramount’s nepo playbook at the end (last 4m) of a recent pod.

The lads are moving quick: Just days after they pulled off the Canadian IPO of their Manhattan multifamily UPREIT, Meyer Orbach & Josh Gotlib landed fresh debt for one of the vehicle’s biggest properties. The partners scored a $525M refi from Arbor Realty Trust for the American Copper Buildings, per records spotted by PincusCo. Orbach & Gotlib had bought the 761-unit two-tower property from Michael Stern’s JDS for $837M in ‘22, and landed $611M in a CMBS floater from JPM at the time. Part of the duo’s motivation to go public was to raise the cash to restructure its capstacks, per the prospectus for the UPREIT, dubbed GO Partners. That includes buying new rate caps, refi’ing, and paying down some of the pref the partners loaded onto the portfolio soon after acquisition.

We have a settlement in the whistleblower lawsuit brought against former major Chicago player Pangea Properties, which was accused of systematically overcharging the Chicago Housing Authority for Section 8 tenants. Court records filed Monday (Case No.: 18-CV-02022) show that the federal govt., whistleblower Antoni Muhawi and Pangea filed a joint stipulation of dismissal. Pangea had previously denied that it committed fraud or engaged in “systematic” overcharging, but acknowledged some instances of overcharging.

Pangea sold its 7,500-unit Windy City portfolio to Moshe Wechsler’s Emerald Empire in a $600M+ deal in late ‘22, and Weschler has been working through its capstack woes: He recently struck a forbearance agreement w/ Fannie on a tranche of the $430M debt on the portfolio.