When Real Estate Headwinds Hit Big Developers: a Greybrook Case Study

Many people who discovered real estate investing via the Keyspire universe have investments with Greybrook Securities. If you have attended a Keyspire summit, you would have seen CEO Sasha Cucuz on stage discussing his company’s latest offering. Many new Keyspire members choose Greybrook for their first real estate investments.
 
Size is an advantage in real estate and Greybrook has that. A large player like Greybrook creates big real estate development projects in big cities and can secure favourable credit facilities from lenders. If you want to make life-changing money in real estate, partnering with big players and their experienced teams will generally boost your portfolio.
 
But when business cycles change, interest rates go up, and land valuations go down, the downdraft caused by big companies in stress is magnified. Investors need to place their full hope and trust in the management team to get you through tough times because a lot of liquidity is needed to stave off default when economic fundamentals swing against you.
 
That’s happening now.

Small players get washed out in bad economic times. Amateur developers who took an online course or two don’t have wherewithal or the financial strength to hold off creditors when they buy high and are suddenly called on to make mortgage payments they never prepared for. Austrian economist Josef Schumpeter coined the term creative destruction to explain this economically essential phenomenon. It’s business Darwinism.
 
Now the big boys in land development are feeling pain too. In Canada, ProFunds has been an ugly case in point with several projects collapsed or on the verge of it. The Stanley land development project in Niagara Falls and Port Dalhousie project in St. Catharines are two examples.
 
Greybrook issued a new investor report on its Denver land development project – Greybrook Society Denver LP - this week, and it makes for sober reading. I’m going to pick my way through the report and explain in plain English what it’s saying. 

Let's begin wth the project's investments basics, as provided by Greybrook. The company's website says $37.749 million was invested into the project, although the July 2025  update (seen to the right) shows the number to be almost $45 million.

in 2021, when the investment offering closed, the expectation was that Society Denver would have a $330 million valuation once the 12-storey 339 unit build was completed.

Greybrook's partner on its Society Living projects is Property Management Group (PMG), a New York City -based company that claims 34 years of history, 180 development projects in markets right across the United States, with $11 billion of real estate reportedly already in the ground and another $6 billion under development.  https://propertymg.com/portfolio 

Greybrook’s has replicated its Society Living model in several different U.S. cities. It features the construction of large multistorey (think 40+ stories) rental apartment buildings with rich living facilities that will appeal to a predominantly young, white collar professional tenant who wants lots of in-house options for sport, leisure, entertainment, and general tenant-mingling. Greybrook’s goal is to create a vibrant, fully-serviced community – or ‘society’ – so that many of the tenants’ leisure needs can be fulfilled without ever leaving the building. Greybrook has built Society towers in Miami, Nashville, Atlanta, Brooklyn, Orlando, and Fort Lauderdale. The concept is bold, innovative, and personally, I love it. The potential for success is high. You can see why in the promotional video below.

Here is how Greybrook and PMGs marketing teams described the concept in their May 2025 press release celebrating the topping off of phase 2 of Society Las Olas, 42 storey apartment tower in the riverfront district of downtown Fort Lauderale. 

Designed by FSMY Architects + Planners, Society Las Olas will feature 563 rental units, offering a mix of traditional layouts and small collection of ‘Rent-by-Bedroom’ (co-living) options providing the lowest entry rents for a luxury building of this magnitude. Built for modern convenience, the development will also include 1,625 square feet of ground floor retail alongside extensive amenities geared toward fostering wellness, culture and growth. These include a co-working hub with private meeting rooms, a sprawling pool deck with a yoga lawn, and a large, state-of-the-art fitness center.

To foster a sense of community, Society Las Olas will offer residents regular events, such as fitness classes, panel discussions and networking opportunities. A custom mobile app will provide keyless entry and allow residents to manage guest lists, access smart thermostats, receive package notifications, handle payments and maintenance requests, and sign up for community events.

“It’s encouraging to top off the second phase of what will be Fort Lauderdale’s largest multi-residential project to date. These investments activate the Las Olas Riverwalk as a multi-use neighborhood,” said Sami Mouaket, Director of U.S. Investments and Developments at Greybrook. “The urban fabric and downtown context continue to evolve rapidly and we’re glad to be a part of it having been one of the first to invest in this community.”

Launched in 2019, PMG’s national Society Living multifamily brand was created to address the insatiable demand for reasonably priced rental communities in the most desirable locations, where neighbors can thrive together. Urging residents to “Choose Happiness,” Society Living focuses on creating inspiring living spaces that foster personal growth. 
​​https://greybrook.com/greybrook-and-pmg-celebrate-topping-off-of-society-las-olas-phase-ii/

The mood in this statement is very different to what’s happening at Society Denver in Colorado. That project has been caught in the maw of high interest rates, rising construction costs, and economic decline. Here’s the opening paragraph of the August 2025 project update:

In plain English, this statement reveals that the Denver project, in its current form, is dead. It cannot be built because the business plan it was based on has been rendered obsolete by a combination of increased construction costs, elevated interest rates, and stagnant rents. Which brings me to this interesting table, because it shows just how bad things have become.

The table shows that when Greybrook initially underwrote the deal in 2021, it predicted an investment return of 110% over 7-8 years, or about 14% annualized. Later, this was revised down to a 60% return (7.75% annualized), and now it’s bottomed out at 0%. Investors can expect zero return on their money. 

This is bad, but it gets worse because 0% actually translates into a large decline because inflation will eat about 21% of investors’ capital (3% annually over 7+ years), plus investors must factor in the opportunity cost of not being able to invest this money elsewhere. ​

If we assume that investors could reasonably earn 7% annually between now and 2029, that would leave investors a further 54% (7.75 x 7) in the hole, for a total loss of 75%. So, if you invested $100,000 in 2021 and you got back for full $100,000 principal in 2029, you would effectively have lost $75,000.

​Sobering. But it gets worse. Look closely at the report, however and you will see Greybrook’s caution that there is no guarantee investors will get all their money back. Having given up all hope of achieving on profit with Society Denver, management’s goal now is to try and staunch the bleeding in the hope investors can be made whole to avoid the loss of principal.

This section of the update report  indicates that the best investors can hope for is zero profit, but it’s likely there will be losses. And we won’t find out how bad things are for quite a while. The phrase ‘preserve value’ translates as, ‘we are completely screwed right now and the best we can hope for is not to lose a bucket of money, but we probably will.” Or rather, investors will. I don’t know to what degree Greybrook principals invest in their own deals.

So, what’s the future of Society Denver?

This is the red, octagonal, 'brutalist' building currently on the 2.3 acre site. It was the home of a local TV station  for 51 years. Some residents fought to save the structure from demolition by declaring it an architectural landmark, but it's difficult to understand why.
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With the Society Living concept permanently on hold, Greybrook wanted to use the land as a surface level car park to generate some income, which is the equivalent of renting out your spare room on Air BnB to generate some income. It’s a desperate but logical idea because any income is better than none. There’s no respite on making mortgage payments. But that didn’t pan out because the demolition, permitting, and operational costs made the plan uneconomical.  The seller moved out of the current building in July 2024. Over the last year, the location has become a boarded-up eyesore. Security guards patrol outside – another expense – but empty buildings attract vandals, transients, drug users, and the homeless. So it is in Denver. The only solution is to demolish the existing building – ka-ching – then sit back and wait for happier times.​

Greybrook points out that the problems plaguing Society Denver are not unique and that multi-family building construction has declined in all markets across the United States. With construction down, this should eventually lead to a shortage of rental accommodation, a boost in rents, and the economic viability of building more multi-family rental accommodation. But this supply-and-demand rebalancing act will take years to play out and each year investment money isn’t working, it’s losing value.

That leaves just a couple of options to escape the death spiral, and neither is appealing. Greybrook could sell the land and make a giant loss based on the current valuation. Or it could invite in what it calls “a strategic partner”, which means another developer with a lot more cash on hand than Greybrook has. Another developer with a healthy balance sheet would have a lot of leverage in that scenario. They would take took the lion’s share of the equity at an enormous discount to Greybrook’s 2021 land purchase price, which means investors would again be the big losers.

There is nothing positive about these options – sit and wait, sell, or invite in a rich benefactor – because they will all result in large investor losses. It’s ugly out there in the real estate investment world right now. Despite promoters claiming double digit returns, there are no guarantees. So, choose your investment partners wisely. At a minimum, you need to like trust and respect them. And you don’t want them to be amateurs whose only credentials are that they’ve taken the same online real estate courses you have.

My Personal Take

I don't want to suggest Greybrook and PMG are bad companies. Their portfolios show many large and successful projects over a long period of time. But every developer has deals that go wrong. My personal rule is that investors may not see a profit because the economy and the real estate market can gyrate in ways developers can't even imagine when assembling their business plans. But investors should always get their principal back. In other words, the goal is for investors to make money, hopefully good money. But they shouldn't lose money.

If you have been impacted by a bad deal, give your developer time. Real estate development is an obscenely high capital-expenditure activity. If a strong management team is in  place, a project that's not meeting its profit projections may not actually be a write-off. The developer might just need time to wait out macro-economic decline or the local council's infighting to start moving forward again. Real estate is a long term investment. Money needs time to work. If you want super high returns with regular dividends and a full payout within 1-2 years, you're in the wrong asset class. I can think of no real estate project I've been involved in that could meet these kinds of speculative demands. If a promoter tells you this is possible, be very, very careful because investor ignorance in the hands of a high energy marketer/promoter whose promises are full of unicorns and infinite returns will be dangerous to your financial health.