Prominent national multifamily developer ZOM Living is prepping to file for bankruptcy, The Promote understands, just weeks after being hit with a crippling $323M in damages stemming from a JV dispute in Arizona.

Layoffs have already begun, and at least one staffer was told that the firm’s imminent bankruptcy filing was the reason for their termination, according to sources familiar with the matter. Earlier this month, a Maricopa County jury found that ZOM had squeezed out its JV partner on a number of development projects.

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Founded in the late 70s by Dutch oilman 🛢 Joost Zyderveld, today ZOM is run by Greg West, w/ Matthew Adler as CIO. Its LP base has evolved from private Dutch capital to US institutional money (AEW among them), per the company. As of May ‘23, the company had led or JV’d on nearly 25K units, and it has offices across the Sunbelt as well as in Boston. Unwinding such a sprawling operation – if it does in fact come to that – will be quite the undertaking: ZOM’s pipeline includes ≈2K Arizona units, per its website, and there’s also the Q of what happens to its stakes in completed projects.

It’d be hard to imagine any other scenario play out after the May ruling, which ended years of litigation between Zom and its fmr. partner, the now-defunct Gray Development. Gray’s suit stemmed from a 13-project, $1.4B pipeline that the firm had assembled over a decade-plus. In ‘19, the firm said it approached ZOM, which was new to the Arizona market, to JV w/ it on 5 of the sites, at which time the parties signed a noncircumvention 🔄 agreement. Gray opened the books to ZOM, it alleged, and ZOM vacuumed up all its project and market intel before shutting Gray out and going solo. Gray went under in ‘20, and ZOM scooped up the land via bankruptcy court in ‘21.

"You can't enter into a deal, then go around the very people that made it possible and offered you a seat at the table,” Gray’s boss Bruce Gray said after the jury verdict. Contracts matter.” Reps for ZOM didn’t respond to requests for comment by press time.

This week on the pod, we talk fear and loathing in interest rates: The 10Y & 5Y are going haywire and threaten to knock CRE's recovery off-kilter. Next, we discuss nepo babies 🐥 running the asylum at Newmark: Howie Lutnick’s son Kyle has decided it’s his time to run the game 😉 . And finally, we have to revisit one of the strangest sagas we’ve discussed on here: Floyd Mayweather is now throwing haymakers at his former confidant Jona Rechnitz in an explosive $175M lawsuit 🥊 . Plus, our Punch List rundown of the newsiest industry news: A syndicator wipeout, BTR back from the brink, CO Power 100, EQR-AVB mega-merger offish.

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Residents of Miami’s mucho tony Fisher Island are suing developer HRP (Roberto Perez) for allegedly striking a clandestine $400M deal w/ Miami-Dade County that leaves them stuck w/ a crumbling fuel depot and puts them in “perpetual danger.” ⛽

Last summer, Chicago-based HRP struck a deal to pay $180M for a 9.6-acre (!) site owned by energy co. TransMontaigne, and billed as the only remaining major dev site on the island (It is hard to explain just how coveted Fisher Island is to a non-Floridian – basically, it’s where the ultra frou-frou go to escape the merely frou-frou.) HRP simultaneously signed 2 deals w/ the island, per TRD: a dev agreement to demolish the fuel bunk, clean up the land and develop luxe condos, AND an option agreement requiring it to convey 4 acres to the Fisher Island Community Association. That agreement, per the suit, bars HRP from disposing of that parcel w/o the association’s consent, but the association says HRP has been negotiating for Miami-Dade to buy the whole parcel – $200M now and $200M paid out over 20Y. A deal of this nature, the association says, could leave island residents (plus those in nearby environs) in “perpetual danger.” This isn’t the first time Miami-Dade has drawn heat over the site, per TRD: In Sept., County Commish Oliver Gilbert described its failure to be proactive as “really, really bad.” He added: “We’ve done some bad things before. But this isn’t, like, the favorite position that I want.” 👏

Jona Rechnitz had a Rasputin-like hold over one of the world’s most famous athletes: Floyd Mayweather basically gave him carte blanche to run his affairs & finances, the boxer’s explosive new lawsuit alleges, and Rechnitz made him pay for that trust. Our video snapshot of how it all went down is now live on YouTube. (Rechnitz’s camp has said the suit is “utterly baseless” and that Mayweather’s gambling & other profligacy “will be exposed.”). We’ll be doing more of these videos on projects & players, so do smash that subscribe button and ✏ w/ suggestions.

CRE’s extremely online crowd has been in a tizzy after a tell-all from Brandon Turner (“❤️Jesus, Family, Beard, Real Estate Investing”), a prominent multifamily syndicator and fmr. host of the wildly popular BiggerPockets pod. In the post, Turner describes how a recent fire sale of one of his bigger properties resulted in a $15M wipeout of LP capital. Now, despite some claims to the contrary, nearly every single CRE investor worth their 🧂 has at some point lost some investor money – this is a game played w/ “live ammo,” as Promote Pod co-host Krasne put it, and risk comes w/ the territory. But Turner confessed 😲 to some pretty wild things, incl. not knowing how rate caps work (“they have terms, and then need to be re-purchased, but when rates are going up, the cost of a new rate cap goes up like 10-100x. Now I know.”) Stuff like this resulted in a deeply underwater property, despite rents going up 33% and NOI up 50% plus, he said.

Now, my first reaction was astonishment that a prominent player (and even more egregiously, a prominent educator) would not know the rules of the game he’s playing. But then I thought about this nugget another syndicator shared w/ me a few months ago: He said a lot of HNW investors WANT to feel like they’re going wildcatting. If they wanted safe and steady returns, they'd just go park their money in an index fund or something. Multifamily syndication’s fast n’ loose nature is a feature, not a 🐛, for such types, he said. It was a wickedly good insight.