Exclusive Guest Q&A With Mark Weinstein
MJW Investments founder and president Mark Weinstein is leading his firm's expansion in the student housing market as the company, known for its value-add investment and development, continues to search for SoCal multifamily opportunities.
Peter Strauss of Iconic Investments (above right) chatted with Mark (left) about the LA market and his future plans. Peter gave Bisnow an exclusive look.
Peter: How did you get started?
Mark: When I was in law school, I convinced fellow classmates to give me their student loan money to invest in multifamily buildings around Los Angeles. We owned the [first] building for three years and made a very good profit.
Peter: What’s your favorite building in Los Angeles?
Mark: Santee Court mixed-use project in downtown (below is MJW's nearby Santee Village project). I am a little biased in choosing this building since it was the largest project that I developed. When we purchased 10 buildings in downtown to convert to condos, the majority of people said it couldn’t be done and that I was crazy for undertaking such a large project. Because of the success of Santee Court, many developers started to look downtown as well. Since my other passion in life is philanthropy, I was especially proud that we built low-income housing without any government requirements.
Peter: Your portfolio is widely diversified between student housing and apartments. What type of properties and neighborhoods interest you the most today?
Mark: I target multifamily properties that are in areas showing signs of gentrification. It is always very exciting to have the building that is pushing rents in the neighborhood. We have done extensive renovations at some of our properties and have noticed that our main competitors are now raising their rents and even doing renovations as well.
Peter: Most people probably assume you only buy large buildings. What size properties are you looking to buy?
Mark: We buy anything from 16 units and up. If we see opportunity to add value, we will always make an offer.
Mark: Exchange money, institutional money and an abundance of available capital is fueling the market. Sellers are taking their riskier assets and exchanging them into Class-A buildings in highly desirable locations that are strongly hedged against an economic downturn. Additionally, the Expo Line and Subway development have been huge catalysts for market growth as well. In the Koreatown market, we have found that there has been a tremendous amount of commercial spillover from the Hollywood market. Within the past year, there have been major restaurant and bar openings, new art galleries and, generally, a younger crowd migrating in that direction.
Peter: Where do you see these markets 10 years from now?
Mark: I see the market as even more desirable and more expensive. Living in central Los Angeles is a huge amenity that people are paying huge premiums for. I believe that the East Hollywood/Koreatown submarkets (above and below) will become homogenous and much more difficult to differentiate between the two. Hollywood’s multifamily market is on fire right now, but there are still pockets that have failed to improve. We love targeting these niche spaces, but you really have to understand the market to know where to look. Ideally, Koreatown would transition and become more like Silverlake, which has become a haven for artists, designers and other creative types.
Peter: What do you see as the biggest challenge to the LA market?
Mark: New capital coupled with favorable bank terms have flooded the LA market and driven prices to unsustainable highs. Because of the competition in acquiring new properties, sellers are now pricing their properties based on the achievable upside and not what is in place.
Peter: What’s the important piece of due diligence that is often overlooked?
Mark: We often feel that, although tedious, drilling down on historical expenses and identifying patterns and anomalies help tell a comprehensive story that a GL wouldn’t be able to explain. Los Angeles just instituted new earthquake requirements that could greatly burden a property. Some of the requirements can cost hundreds of thousands of dollars and we make sure to understand what exactly, if anything, needs to be remedied prior to close.
Peter: What improvements/renovations give you the greatest ROI? The lowest?
Mark: When units become available we often put in vinyl planking, granite countertops and stainless steel appliances. I believe the most important feature would be hardwood floors. While tenants used to cherish the sound dampening qualities of carpet; we find that tenants now are more interested in the aesthetics of the space. I find that many property owners like to renovate units to the specifications that they would want to live in and go overboard with finishes.
Peter: Tell me about the one building that got away?
Mark: A 40-unit building in Koreatown…I got cute with the time period and the broker sold all-cash with 10 days due diligence. I offered the highest bid but said 30 days due diligence and lost the deal. What I learned from this experience is that if you find a good deal, you must jump on it fast. The market is too competitive to second-guess yourself.
Mark will be one of our speakers at our SoCal University Development and Student Housing event Dec. 6 in LA.