Greetings from the Algon Group

We hope you are all well and having a great third quarter. Before we dive into our observations in the real estate market, we wanted to wish a happy, healthy, peaceful and prosperous new year to those who celebrate. Shana Tova.

Real Estate Market Trends We’re Seeing

The distressed real estate market continues to reflect structural issues that have been brewing for years but are now reaching critical mass. Across our engagements, we’re observing a troubling pattern: sponsors who spent years “kicking the can down the road” are finally running out of runway as refinancing options disappear and cash flow deteriorates.

The B and C-class multifamily sector presents particularly concerning dynamics. Despite mounting evidence of fundamental business plan failures, we’re seeing too many sponsors continue throwing good money after bad – often doubling down with additional equity injections that have little realistic prospect of generating positive returns. This behavior typically stems from emotional attachment to projects rather than disciplined financial analysis.

Market conditions have shifted dramatically from the low-interest environment that originally underwrote many of these deals. Yet many sponsors remain in denial about the new reality, continuing to pursue strategies that worked in 2019-2021 but are fundamentally misaligned with today’s capital markets and operating environment.

Our message to clients remains consistent: early intervention and realistic assessment of distressed situations typically yield better outcomes than prolonged attempts to “save” fundamentally flawed investments.

New Engagement: Celebration Pointe Restructuring

The Algon Group’s Troy Taylor has been appointed Chief Restructuring Officer for the Celebration Pointe mixed-use development in Gainesville, Florida. This 225-acre project exemplifies many of the market trends outlined above – a complex situation involving in excess of $200 million in outstanding debt, multiple investor lawsuits, foreclosure actions and years of deferred financial reckoning that have finally culminated in Chapter 11 proceedings which were initially filed in March 2024.