MWest Holdings is known for its tremendous success redeveloping historic 1920s poured-in-place concrete buildings. These charming properties are also rent controlled, a characteristic that a lot of investors might shy away from. Karl Slovin, president of MWest Holdings, however, says that rent control isn't a deal breaker. As long as you play within the rules and develop realistic business plans, you can find success. We sat down with him for an exclusive interview to discuss his approach to investing in rent-controlled properties.

GlobeSt.com: You have seen tremendous success with historic and rent-controlled apartment properties that some other investors may have shied away from. Why are you so open to rent-controlled properties and how do you make it work?

Karl Slovin: We don't shy away from rent control because we believe that once you know the rules, you can play the game within the rules. You just have to follow the rules. We can't overpay for a building, and we are not going to underwrite 100% turnover of the units. We are only going to underwrite 50% turnover of the units. Each building has a very specific business plan, and we model it out very carefully. Over a period of time, you become an expert in working in 1920s poured in place concrete buildings that are rent controlled, and you learn how to build that model and what you can pay and what you can't pay. We love these buildings and we certainly want to buy as many as we can, but we can only afford to pay what the underwriting tells us that we can pay. We don't need to do deals, and we will only do deals when it makes sense.

GlobeSt.com: Is your approach to renovation different on rent-controlled properties?

Slovin: We try to be very careful as we get back units through natural attrition to improve units appropriately. We do pretty heavy renovations as units com back through the rent control process to do nice renovations to them. We are very careful about the design so that, over time, it will command a rate that will add value to the building. Some rent control tenants will stay in the building for 30 years. That is to be expected when you buy a rent control building. However, we do find that a percentage of the building will naturally turn. It is that natural attrition that we are focused on. It has worked out very nicely for us.

GlobeSt.com: Because you work in such a specific business plan on these properties, how has the high pricing affected your business?

Slovin: It feels like it is getting there. There has been a market adjustment in New York, and we are generally a year behind New York in Los Angeles. So, we may see that here. However, it could be a very different story in Los Angeles. We are still a relative bargain to other major metros. We will have to see how the story plays out here. Now, things are looking very exciting these days.

Instant Insights /

Rent Control Isn't a Deal Breaker

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