MHN Interview: Underwriting Multifamily Investment Deals
Irvine, Calif.—Anil Advani, who previously worked at real estate investment firm WNC as the senior vice president of underwriting, recently rejoined the company as the senior vice president of private label funds. MHN talks to Advani about his new role and the direction he feels multifamily is heading.
MHN: What are your plans in your new role? What will you do differently in your new position?
Advani: I have spent many years in my roles at other syndicators working closely with investors to help them gain comfort with their deployment of capital in properties that fit their respective footprints, and my role at WNC is all about working closely with the investors in that regard. While I won’t necessarily be working as closely directly on the closings at the lower tier as I have in the past, I will still be staying very close to the closings so that I can ensure they conform with the various requirements of the variety of proprietary investors that WNC works with.
MHN: You previously worked in affordable housing. How will this knowledge help you in your new position?
Advani: Having been involved in the business since 1996 in a variety of roles, I have experienced many changes over the years in how the business is conducted, and have a good sense for the needs of private label investors. In addition, I have spent time in all aspects of the syndication platform, from originations, to underwriting, to asset management, putting me in the advantageous position of having an intimate understanding of all aspects of the business, which can only serve to the benefit of the investors that WNC works with.
MHN: In terms of underwriting, where do you think multifamily is headed?
Advani: Underwriting parameters have shifted substantially from where we were pre-2008 when capital was abundant and, as a result, there appeared to be a lack of discipline in underwriting to enable the capital to be deployed. However, even today, there still tends to be substantial differences based on what parts of the country properties are located. For example, underwriting parameters and what is deemed acceptable differs considerably for properties located in the large metro areas of California as compared to large parts of the Midwest. Where a 1.15 DSC may be acceptable for a tax-exempt bond deal in the large metro California markets, the same will typically not be true for large parts of the Midwest, where underwriting would typically be to a minimum 1.20 DSC. At the end of the day, though, strong sponsorship (experience and financial wherewithal) is of paramount importance to all investors no matter where the property is located.
MHN: What are some of the new challenges you’re seeing now?
Advani: Due to limited resources in a lot of localities around the country, deals tend to be tighter than ever before, making it difficult to make a lot of deals pencil unless developers are willing to forego the vast majority of their developer fee until after completion of the project.
MHN: Is there anything you’d like to add?
Advani: I’m very excited about the new role at WNC. With a stable of talented originators around the country, WNC is working with the strongest developers of affordable housing which, in turn, enables its investors to be involved in strong, well structured transactions, with experienced sponsorship.