By: Karen Jordan
Jan 12, 2017
With the optimism that comes with the dawning of a new year, what is 2017 looking like for multifamily? Cypress Equity Investments CFO Alla Sorochinsky sees challenges ahead, but also says there may be a silver lining for investors.
Bisnow: How did you get into multifamily?
Alla Sorochinsky: I was a controller of several startup technology companies during the technology boom. By early 2000, the technology boom was coming to an end and I was looking for new opportunities and challenges. In 2001, I had an opportunity to join Cypress Equity Investments, an entrepreneurial real estate company focused on multifamily investments. I started my real estate career in the value-add multifamily space. We purchased and renovated approximately 3,500 units, primarily in California. By 2010, we saw a real shortage of quality apartments in Los Angeles and other urban markets around the country. We saw tremendous opportunities to build Class-A apartments and jumped into development. We purchased our first development site in Santa Monica and continued to purchase 14 sites in Los Angeles, totaling 2,500 units. Our pipeline includes developments in LA, Chicago, Las Vegas, NY, San Francisco and Portland.
Bisnow: What do you like the most about your job?
Sorochinsky: My job is very exciting and challenging. I work with some of the brightest people in our industry and no two days are alike. I’m involved in every aspect of the investment and development cycle. It is very rewarding to purchase an empty lot and watch it transform into a building that offers quality housing, beautiful amenity spaces and ground-floor retail. I am extremely proud of the communities that we have delivered to the market.
Bisnow: Are there trends in LA in multifamily you see for this year?
Sorochinsky: In the last couple of years, cost of land and construction has been steadily rising. A lot of units have been delivered into urban markets, and we’re starting to see a softening in rental growth and an increase in concessions. Debt and equity providers are conservative in their underwriting of new development deals and concerned about markets getting overbuilt. The merchant-build model no longer works and new investments are moving toward high quality assets in core locations with a longer-term hold periods.
Bisnow: Is this true just for Southern California or for other parts of the country?
Sorochinsky: I see this trend in urban infill locations throughout the country, and I believe it will continue. The key in this part of the cycle is to stay disciplined and conservative when underwriting deals.
Bisnow: Are there other trends you’re seeing?
Sorochinsky: There is still high demand for luxury apartments in major urban markets. There are many “renters by choice” around the country with sophisticated tastes and a desire to live in luxury apartments that offer great amenities, and proximity to jobs and entertainment. I think that investments in the Core and Core-plus development will continue in 2017.
Bisnow: Despite the pending challenges for the industry, do you plan to stay in it?
Sorochinsky: Absolutely — there are challenges in every real estate cycle. In this industry it is important to be flexible and adapt to changes in the market. We will continue to make thoughtful investments focused on quality high-end assets in core markets.
Bisnow: Tell us about your life away from work.
Sorochinsky: I love spending time with my family and friends. I love cooking and hosting intimate dinner parties. We always have a house full of people. I also love to travel. It is most rewarding to travel with my kids and explore the world together.