[If you missed the last live event on Capital Calls, you can watch the replay HERE.]
In prior posts and live events, I shared about the deal review my firm and I can help with. In today’s Underwriting Minute I want to share with you the evolution of a real time case study.
Client Background
The client, a passive investor in a multifamily real estate deal, found themselves in a high-stakes situation: the sponsor issued a capital call, warning that without an additional investment, their original capital might be lost. Feeling pressured but uncertain, the client sought an objective, expert second opinion through the Deal Review Service. The clock was ticking.
Results and Progress
Upon reviewing the underwriting, several red flags emerged. The sponsor had assumed material cap rate compression for the new exit event, which artificially inflated projected returns. Rent growth projections were also overly optimistic, especially for a market currently experiencing rent declines. A critical discovery was that part of the capital call was earmarked to fully repay a shareholder loan owed to the lead deal sponsor – a conflict not clearly highlighted. Essentially the analysis concluded that they would either lose their principal today (if they do not participate) OR if they participated in the capital call, they would face a high probability of losing the full principal (or most of it) at the time of the new exit event.
After receiving a clear, data-driven summary and a 30-minute Q&A session, the client opted not to contribute additional funds. As a result, they avoided further potential losses and gained a renewed sense of confidence in their decision-making.
Client Qualities and Challenges
Despite being a passive investor, the client showed initiative in seeking a third-party analysis. They were open to feedback, willing to ask hard questions, and ultimately prioritized clarity over pressure.
Impact and Experience
The experience provided emotional relief and financial protection. Instead of acting from fear or sponsor influence, the client made an informed decision rooted in objective data.
Summary and Next Steps
This client’s journey shows how powerful a second opinion can be – especially when faced with urgent financial decisions.
Vessi Kapoulian,
Breaking down multifmaily underwriting one step at a time to create educated and empowered investors
PS: Need help evaluating a multifamily deal? Send me a message for a Deal Review. I am opening two more spots this week.