I've been with my current LIHTC development firm for about two years on a small acquisitions team. I’m the only underwriter, and during my time here, deal production has been almost nonexistent. A few transactions fell apart late in the process (some after being under PSA for eight months), and general market conditions in real estate and LIHTC have made things challenging.
About a year ago, our strategy shifted to acquiring existing affordable deals using equity. We spent most of our time on those, but we weren’t competitive because we didn’t have equity lined up and were hesitant to make aggressive offers. As a result, we lost every best-and-final round.
At our recent annual meeting, leadership stated that none of those deals counted toward our metrics since they weren’t LIHTC transactions. Essentially, that year of work didn’t move the needle for the company. Now, I’ve been asked to provide more detailed reporting and track additional underwriting metrics. While leadership is complimentary to my face, I can’t shake the feeling that my job might be at risk if production doesn’t improve.
This is hypothetical for now, but I’ve been thinking about sourcing and closing a deal on my own with outside equity. I have a personal contact who knows high-net-worth investors, and I didn’t bring them to the company because I didn’t feel I’d get proper credit or compensation for the introduction. I’ve asked for clarity on my bonus structure, but haven’t gotten a straight answer, which reinforced my decision not to bring in my personal connections. I believe there’s an opportunity they’ve passed on by being overly cautious. If I pursued this and it closed, I would leave the company, but I want to avoid burning bridges.
Has anyone been in a similar position? How would pursuing a deal personally (that my employer passed on) be viewed in the industry? What would you do in my shoes?
If anyone in the industry considers you pursuing your own deals in the industry as a negative—assuming you aren’t doing that when you should be working or something—they are either morons, don’t have your best interest in mind, or both.
Doing your own deals is the industry.
How would you even syndicate the credits? You only have 2 years of experience. You're putting the horse before the cart here.
The basic plan is that it's an existing 4% deal with affordability expiring in 5–7 years, supported by soft funds. My company recently shifted to only doing LIHTC syndications, but I would approach this as a buy-and-hold strategy. The idea is to burn off some significant loss-to-lease, then either refinance in 5–7 years as a market-rate project (after increasing rents on turnover) or sell once affordability expires and capture some of that upside in the sale price.
I wouldn’t be resyndicating because my current employer is most comfortable with that approach, and this deal doesn’t fit that model.
Makes sense. Personally, wouldn't want my first deal to be a long term hold dependent on capital markets in 5-7 years, but best of luck to you.
I think you need to be honest with your firm about it, but it sounds like that was the plan, so I don't see a real issue.
It sounds like your company is treating you pretty poorly and are making the junior folks scapegoats for the bad decisions being made by leadership. Maybe you shouldn't expect a wildly huge bonus in a year you didn't close anything, but it's spitting in your face to tell you that all the equity deals you worked on somehow "don't count".
I'd leave the firm sooner rather than later anyway, but if you have a deal lined up and can bring in capital and execute, that's even better. As @CRE said, any firm which is going to make your life difficult because you went out on your own to do a deal they passed on, is not a firm which you should be overly concerned about burning bridges with
If you are ready to go on your own then do the deal but I wouldn’t tell your current shop. If it falls through you still have a job. If it closes, your current employer shouldn’t care since they already passed on it…But you never know how egos will react. Burning a bridge is a risk you should be willing to take IMO. I’ve seen guys at acquisitions shops do it both ways when they go out in their own. the one who secretly closed a few deals under the radar while still working at their initial shop did so much better than the guys who left thinking they could build from scratch. Just be ready to jump ship if they find out. The first guy would not be able to go back to his first shop.
Another question is, will your equity partners even trust you with their money if you don’t have your own website ;)
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