Underwriting Adjusts As Pandemic Continues

Last August a multifamily property went on the market in Los Angeles with cash-flow issues that would have made an underwriter pause even without a pandemic underway.

There were five vacancies and seven additional tenants weren’t paying rent due to the pandemic. Income in the property was completely off, according to Mik Hanassab, a senior director at James Capital Advisors, who was marketing the building. The building sold in an off-market trade to a buyer that was not concerned about the loss of income and who was able to secure a 70% loan-to-value. If it had gone to market, it could have traded for about $500,000 more, Hanassab speculated.

In this case it is unclear exactly what made the underwriter sign off on the deal, but Hanassab’s business partner, Elliott Hassan, has his ideas.