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KeyBank’s Matthew Haas, Lowney Architecture’s Mark Donahue, CCE Design Associates’ Randy Chapman, AVRP Studios’ Doug Austin, Standard Communities’ Aaron Thomas and EAH Housing’s Welton Jordan.
Institutional investors have demonstrated some wariness around Los Angeles’ multifamily market since the pandemic, but interest from smaller investors is giving owners in the market hope.
Family offices that act like institutional investors and investment firms with dedicated funds are among those most likely to form a joint venture and purchase an apartment asset in LA, Optimus Properties partner and Director of Acquisitions Jesse Liu said at Bisnow’s Los Angeles Multifamily CRE Summit Feb. 18.
These buyers are able to look past challenges like the city’s transfer tax and see the benefits in historic low supply and high barrier to entry.
Most active buyers have been private equity funds with core-plus capital buying newer vintage, Class-A properties, said Jake Michaels, vice president of investments for San Francisco-based family office Geolo Capital.
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CLA’s Carey Heyman, KKR’s Corey Hall, Pearlmark’s Kelly Nealis, Optimus Properties’ Jesse Liu and Geolo Capital’s Jake Michaels.
Los Angeles’ multifamily market had a 95.2% occupancy rate in the fourth quarter and saw rent growth of 1% year-over-year, according to a Colliers report. Recent growth has been slower, but rents are still 11.5% higher than they were before the pandemic, Colliers found.
It has been challenging to court institutional capital like the pension and sovereign wealth because of the many uncertainties that properties in the city are subject to, Fairfield Residential President of Development and Construction Tommy Brunson said during the event, held at the Sheraton Grand DTLA.
“Review times and permitting are taking twice as long as we expect it to,” Brunson said. “Inspections are taking twice as long on the backside to get a certificate of occupancy, and so that’s stretching out our construction timeline, and we don’t know what’s going to happen in terms of regulation here from one day to the next.”
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AvalonBay Communities’ Katie Nyberg and Villa Homes’ Peter Winscott.
Other elements of the process, including eviction protections and rent freezes, resurfaced after the Palisades and Eaton fires gobbled up thousands of buildings.
Measure ULA is also frequently cited as a deterrent from investing in Los Angeles property.
The real estate transfer tax, which applies to transactions over $5M, has been blamed for slowing down the multifamily investment sales market in the city.
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Sheppard Mullin’s Tim Reemers, Fairfield Residential’s Tommy Brunson, The Max Collaborative’s Kevin Ratner, Bernards’ Carl Vizcarra, Stack Modular’s Konstantin Daskalov and Cypress Equity Investments’ Adrian Berger.
Speakers across multiple panels agreed that those that can make deals work in Los Angeles are poised to reap enormous benefits down the road, as the market is critically undersupplied and has an insufficient pipeline, positioning the area for strong rent growth in the future.
“The fundamentals here are amazing,” Cypress Equity Investments Managing Director of Acquisitions Adrian Berger said, noting the large undersupply while at the same time acknowledging that “LA continually trying to add these unknowns to the equation just makes it hard for us to do our job.”
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Manatt, Phelps & Phillips’ Fernando Villa, RDC’s Bob Lisauskas, VCC Construction’s Dolph Erskine, Lendleasde Ryan Burton and Goldrich Kent’s Emily Taylor.
Those trying to convince investors to spend on Los Angeles properties are finding that they at least have some solid ammunition, pointing to Hollywood and a potentially doubled film tax credit as well as the 2028 Olympics and World Cup in 2026, which some hoped would help the city mobilize and put its best face forward.
“The reasons that folks want to be here and have invested in this market, historically, haven’t gone away,” KKR Director of Real Estate Corey Hall said. “We’re starting to see some green shoots that make us hopeful.”