Apartment Syndicators are Tenants Nightmare

ACORN Housing

            Marble Falls     A couple of years ago in the wake of ACORN’s Homesavers’ Campaign around predatory rent-to-own schemes, I got a call out of the blue from an Illinois-based owner of various apartment buildings, mostly in the southeastern United States.  He was calling in a long shot hope for relief from some tenant organizing pressure put on several of his complexes in Little Rock and North Little Rock by the former Arkansas ACORN, now Arkansas Community Organizations and its leaders.  Looking him up, I was amazed that somehow, he had put together all of these properties totaling thousands of units, partially in the wake of the housing meltdown in 2007-2008, out of what seemed like nothing.  The advertising pictures looked OK, but these were clearly low-and-moderate-income working-class housing he had somehow financed and picked up on the cheap with no infrastructure for management, repairs, or much else.  He was claiming he wanted to do right, so I connected him to ACO’s head organizer, Neil Sealey, to force him into negotiations, but, unsurprisingly, he was all boots and no cattle, and quickly ghosted ACO.

Reading an article on the Wall Street Journal gave me more of a clue to how this guy and others worked that we had dealt with in Atlanta and elsewhere worked where we were supporting tenants organizing.  Now I understand that he was likely a syndicator.  A syndicator is someone who sells packages of highly leveraged real estate deals on apartment complexes to investors with various versions of get-rich-quick promises of doubling and tripling their money in three to five years.  For the investors, this is an unregulated caveat emptor operation, meaning you put your money in and take your chances.

Since much of the alleged returns are premised on the syndicator and their bankers having concluded that the complex is charging below market rents, for tenants it’s simply predatory, because the wheeling and dealing depends on the syndicator’s ability to jack the rents.  The ACORN Tenants Union saw this in a number of complexes in Atlanta during the pandemic when ownership was changing and tenants, even on HUD Section 8 vouchers, were receiving increases of 50% and more with almost no notice.  The other edge of the syndicator’s sword for tenants is that bleeding money out of the complex also depends on little or no maintenance.  The Journal piece highlights a similar complex where in the space of a year, the property went from shiny to slum, provoking organizing by the Texas Organizing Project, formerly Texas ACORN, and a visit from Houston’s Mayor Sylvester Turner threatening to condemn the property.

Of course, the Journal’s story is not really about tenants or investors, but the syndicators themselves, who constructed high-flying, but fragile real estate empires based on higher rents and lower maintenance, but are now frequently facing foreclosure because of equally shaking financing.  They borrowed at cheap interest rates and often made deals where the rates floated with the market and are now caught in a squeeze as the Federal Reserve rackets up the rates, bringing their formerly compliant bankers pounding on their doors as loudly as their disgruntled tenants and desperate investors.

All of this adds up to a perfect storm scam with the only real victims being the families desperate for affordable housing in a country and an economy with no real housing policy and willing to look the other way, when the housing players and bankers are trying to make a buck and tenants are out of luck.