Scaling Without the Bidding Wars: The Strategy Built on Clusters of Small Buildings

Written by:

Rudi Davis

Date:

01 Dec 2025

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The real estate playbook says to trade up: sell smaller properties, buy bigger ones, chase institutional-grade assets with stable cash flows. Alejandro Gershanik of BM2 Realty, is tearing up that playbook entirely.

The Miami-based operator, who manages around 680 units across South Florida, has spent 2025 doing exactly the opposite of what most investors pursue. He’s been systematically selling well-performing, stabilized properties and using the proceeds to buy what he calls “literally burned down buildings” and other heavily distressed small properties.

“If you want to make money, you usually have to go against the trend,” Gershanik argues, defending a strategy that flies in the face of conventional real estate wisdom.

The Institutional Squeeze Forces Strategic Pivot

Gershanik’s shift in strategy emerged after realizing that institutional capital had effectively pushed him out of the larger-property market. He estimates he submitted around 60 offers on buildings with more than 40 units in recent months, only to lose nearly every one to buyers with deeper pockets. Over time, he recognized that investment funds and similar institutional groups could consistently outbid him because they were comfortable accepting lower returns than he could justify. That imbalance, and the repeated string of failed bids, ultimately made it clear that he needed to rethink his approach rather than continue pursuing opportunities he was unlikely to win.

Gershanik argues that Miami’s rise as a high-demand market has pushed cap rates down to levels that make sense for large institutional investors but no longer pencil out for operators of his size. With the city firmly in the spotlight, he says it’s natural for yields to tighten, but that very dynamic has made it increasingly difficult for smaller buyers to compete.

This dynamic forced Gershanik to abandon the traditional path of scaling up to larger properties. Instead, he’s found his competitive advantage in a market segment that institutional capital largely ignores: small, distressed buildings that require hands-on management and significant capital improvements.

The Small Building Clustering Strategy

Rather than compete directly with institutional buyers on 50+ unit properties, Gershanik has developed what he calls a “clustering strategy”: buying multiple small buildings in close proximity to achieve economies of scale without the institutional competition.

Gershanik realized he could replicate the efficiencies of a larger building by assembling roughly 50 units located side by side. His goal is to reach about 80 units within each target area, but instead of acquiring a single large complex, he pieces this scale together through several smaller buildings clustered within a short walk or a few minutes’ drive of one another.

This structure positions him against an entirely different set of competitors. Rather than going head-to-head with institutional buyers, he ends up bidding against small, mom-and-pop landlords whose operating costs are significantly higher because they lack the staffing and systems he has in place, owners who, as he notes, might need to call an outside handyman for every basic repair.

The strategy has led Gershanik to some extreme acquisitions. He recently purchased three completely burned-down buildings, acknowledging that “not everyone is willing to do” that level of distressed investing. But this willingness to take on properties that others won’t touch has become his competitive moat.

Why the Contrarian Approach Works

Gershanik’s success with this strategy comes down to operational efficiency and market positioning. By concentrating smaller properties in specific areas, he can deploy maintenance teams efficiently across multiple buildings while avoiding the premium pricing that comes with institutional-quality assets.

Gershanik says his ideal setup is to assemble roughly 80 units within a single neighborhood, a level of concentration that lets him capture the efficiencies of scale without paying the premium associated with one large building. By clustering smaller properties, he can streamline operations while keeping his acquisition costs lower on a per-unit basis.

The model also aligns with his personal style of running properties. He describes himself as a hands-on operator rather than someone driven by spreadsheets, more comfortable walking buildings, taking notes, and managing issues directly. That approach is well suited to the kind of distressed assets he targets, even if it would be unnecessary for more polished, stabilized properties.

Market Implications for Mid-Size Operators

Gershanik’s experience points to a broader challenge facing mid-size real estate operators across major markets. As institutional capital floods into previously overlooked sectors, smaller operators are being forced to either scale up dramatically or find new niches where they can compete effectively.

Gershanik notes that many investors avoid anything with operational headaches, but he’s willing to take on that extra work when it leads to stronger returns. In his view, the ability to manage complexity could become a key advantage for smaller operators looking to differentiate themselves.

His willingness to embrace this complexity – from burned buildings to tenant management challenges – represents a strategic response to market maturation. Rather than trying to compete directly with institutional capital, he’s carved out a segment where operational expertise and risk tolerance matter more than access to cheap capital.

The Gershanik Solution: Embrace the Headaches

For operators facing similar competitive pressures, Gershanik’s approach offers a potential roadmap. His company focuses on properties that require significant hands-on management, often in the affordable housing sector where around “40-50% of our tenants are Section 8 or similar programs.”

This focus on operationally intensive properties allows him to generate returns that justify the additional work while avoiding direct competition with institutional buyers seeking passive investments. The strategy requires accepting higher day-to-day management demands in exchange for better acquisition pricing and less competitive bidding processes.

Whether this contrarian approach gains broader adoption may depend on how many other mid-size operators recognize that competing directly with institutional capital on trophy assets has become a losing proposition, and that sustainable returns increasingly require embracing the complexity that larger players prefer to avoid.