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Hey. Hey, The following video is the multifamily panel at Rent TV's Greater Los Angeles State of the Market Conference held on August 17th, 2023. It is comprised of Paul Julian with Advanced Real Estate Services, Henry Manus with Universe Holdings. Jerry Fink with the Bascom Group. Daniel Withers with Matthew's Real Estate Investment Services, and Alex Valante with Trammell Crow Company. Thanks, Steve. Appreciate it. Uh, so our company was founded about 43 years ago by my father, and we've been buying apartments here in Southern California ever since. We stay real close to home, so we stay within our, our target is an hour and a half of our headquarters, which is in Orange County in Irvine. And, uh, we've now grown to a portfolio of, uh, over 10,000 units, over $4 billion in real estate. And, um, we hold forever. We don't sell all our money is private capital. So it's all friends and family. It's grown to about 850 investors now. And, um, we also are vertically integrated. So we have our own in-house property management, and we also have our own in-house construction company that's pretty robust. You can see some of the, the slides up here where we build our own cabinets in-house. Uh, we have, you know, all our own trades, framing and H V A C and electrical and plumbing. Everything's in-house, so we can control the, and we just Heard from that last panel how important that could be. That Could be very important. So, so that's, uh, our ability to control the, the speed and the quality. So, Excellent. Henry. Hi, uh, Henry Manchu. I'm the founder of Univers Holdings. Uh, been in real estate for 37 years. I started the company 23 years ago, and I think we bought our first building in 1995. During the last two downturns, uh, we also, like a pulse company, are based in Southern California. We have currently about 3000 units in, so out anywhere from San Diego to Santa Barbara. And we had the same formula up to two years ago. We would not buy anything outside of our market, but in the past two years that changed. We have now opened an office, uh, in New York with one of my sons, and we acquired, uh, our first property in New Jersey, which is at 50 acres site at about 226 town homes. And we are process of buying another 304 units in New Jersey as we speak. We just went non-con contingent today. And, uh, we also, two years ago, opened an office in Miami, was another son. And, uh, second generation has come in and, uh, we've been actively buying on the west coast of Florida. And, uh, we continue to believe in the Southern California market, particularly where you are. Orange County, we love that Orange County, San Diego, inland Empire Insurance, Al Counties. We are not as active buying, uh, as free as we used to in LA because of legislative risk, but, uh, we still would buy the right deal. And, uh, what you see, we just put a portfolio on the market, which was released yesterday. Uh, these are 11 properties that we accumulated over a nine year span, and we were the first ones on the ground in Inglewood. So we're put everything we have on the market in one portfolio in Inglewood and one small property in West la. It's about, uh, an $87 million offering 221 units, all consumable financing. I think eight out of 11 actually, or nine out of 11. And we've been, we'll gonna be doing 10 31 exchanges. And, uh, we, we've shifted these purchases. This is a, uh, ability that we're currently have an escrow non-content that's closing, God willing in October in Tampa, a seller of Tampa called Riverview. It's about a $67 million deal, uh, building a private lake magnificent asset, you know, class A 2016 construction with every imaginable amenity. And, uh, we are shifting from smaller assets, older product to newer product, even brand new. I think our last acquisition was six months ago in Ventura, where we bought a two year old property at about 4 45 a door, about a four and a half cap. So these are some of the numbers on these deals to, to, to compare the, uh, the economics and uh, uh, I think there's also a slide on the Jersey acquisition. This is 304 units in the sub, uh, Western New Jersey called Mount Holly. Brand new property. One part's about nine months old. The other section is built about eight years ago. And, uh, we're buying this at about a sixth chap on year one with about, uh, assumable 3% debt, red hu for 32 years, fixed self, fully amortizing, and we're putting perhaps a second piece of hot on phase two or, or going the fanny feather route. So pretty active, uh, despite all the hurdles in the market, I would say yes, Jerry, Jerry, Jerry, Frank Bascom group. I'm one of the co-founders and managing partners. We started back in 96 and, uh, our program is buy, reposition and sell, typically partnering with, uh, uh, private acqui funds, opportunity funds, pension funds, and, uh, a whole period of typically three to five, uh, years. Uh, pretty active across the us. Were more, you know, the smile states, so it's Denver, Texas on west, southwest, southeast, and then, uh, the Northeast as well, but a bigger presence kinda western us. Um, our, my day job is value at apartments, so, um, that's our core business. We've got about 15 development deals here in southern California that we've, uh, partnered up with developers to build, um, mainly garden style, uh, properties in, uh, emerging areas in southern California, including a couple opportunity zones as well. Um, and then also for Baskin Group, we've got about a dozen different, uh, portfolio companies that do everything from, uh, co-working, which is Premier Workspaces, a couple do industrial. Uh, we've got a group that does office, which is pretty toxic right now. Uh, and then a couple that do, uh, three or four that do apartment development as well. Uh, Daniel Withers, I'm a senior Vice president at Matthews Real Estate Investment Services. We are a full service brokerage firm. We've got 22 office nationwide, got about 600 agents. Uh, my specialty is apartment sales in the greater Los Angeles area, mostly on the private capital private client group doing probably five to 20 million range last year. Did about 45 deals close to about 200 million. Um, I think that's it. Uh, Alex Polete, I'm a principal with the Trammell Crow Company. Uh, we are the largest developer in the us 20 offices across the us about $30 billion of projects and process in pipeline. Uh, and we are a wholly owned subsidiary of C B R E, the, uh, world's largest financial services company, fortune 150 company. Um, I lead our multifamily team focusing on LA County, really up to Santa Barbara. Um, we've got about 3,500 units, um, in process slash pipeline. I think, uh, Steve was gonna show a couple pictures or maybe I, maybe that's later. Um, and, uh, North Hollywood. Yeah, this is our district NoHo project. Uh, few folks in the room might know about it. This is an R F P, uh, that we won, uh, through Metro, uh, almost seven years ago. Um, we are in the middle of hearings right now through the city of Los Angeles, ultimately culminating in a metro board approval that we're hoping to get later this year. 1500 units, half million square feet of office, 60,000 square feet of retail that we've been reshaping, uh, and reshaping and reshaping. Um, right where the red line meets the orange line, what's the intersection in North Hollywood? It's on, uh, Lankershim and Chandler. Excellent, cool project. As is this one The same project? Yep. And then we've got, uh, this Is, uh, vivo on Harbor 137 units. It's under construction right now in San Pedro. Um, we are very, uh, uh, excited for what's going on in San Pedro. Um, southern tip of the city of Los Angeles, right near the port of La Rancho Palace Verdes, uh, the West Harbor Project, which is the big Raco Raco project broke ground in December. Um, that's gonna be about 300,000 square feet of retail right there, um, on Harbor Boulevard right off the water. The port of LA has invested about a billion dollars on that waterfront over the last 20 years. Um, and we are building this project right across from it. We actually just tied up another site across the street. We are very excited about what's going on in San Pedro. I've been about 40 years in the making, and I think we got one more slide. Yes, you do. This one's cool. And then this is our, uh, Luellen project, 318 units in Chinatown. Uh, we delivered this back in 2021, uh, leased up, fully stabilized. Um, it is part of downtown, technically, so it's been, it was a bit challenging. Um, however, it's on the northern edge of downtown, on the eastern edge of Chinatown, right near the LA River, and it's right near the Los Angeles State Historic Park, which is the 32 acre park. If you haven't been there, it feels like it's LA's, uh, greatest, uh, secret, uh, uh, beautiful park, million dollar a year operating budget. It's very cool, state owned park. It's a beautiful park, concerts, uh, fairs, et cetera. We try to focus our, uh, multifamily projects around these kind of great natural, um, amenities wherever we can. That's go slide. Paul, Henry, Jerry, buy one of these. Uh, well, let's get into the market. Uh, let's start with, you know, the drivers, Alex, since you were, uh, all right. We'll go with Paul. Finish your drink there. Paul, who's your tenants? Are they doing better? Like what are the rents they're paying? Who, who are you a landlord of families, single professionals? Tell us your tenant mix. Sure. We, uh, traditionally we've always been kind of value add, you know, garden style suburban apartment owners, but I'd say over the last five or so years we started, uh, buying in a fund structure where we could be a little more diversified in the fund and start buying, you know, some core assets in there as well. So, uh, our most recent acquisition, maybe you can show that, uh, on, on my side, uh, was a, an actually a converted office building in, uh, downtown Long Beach. It was a 10 story office building where the developer in 2016 redid the entire property, added two more floors of penthouses on the top or, and a pool on the roof, uh, to create a really cool, uh, high-rise building right at first in Long Beach Boulevard. So it's a great location that the subway entrance that goes downtown LA is right in front of the property and get on and goes straight to downtown LA in like 45 minutes. Um, and so this kind of, this is obviously a different demographic than our, our typical, you know, uh, suburban garden style, more family renter. Uh, so we're kind of seeing both types of renters out there. It's a good, you know, good diversification to have. What's The rent for apartment there? Uh, you know, the typical rent's about $3,500 I'd say in this property. We have, like I said, the penthouses are more like 5,000, uh, a piece up there, but, um, but our typical rent across our portfolio is probably closer to $2,500, you know, on, on most of our suburban Orange County traditional. And, uh, and like I said, a lot of, uh, you know, Hispanic areas in Santa Ana and those areas where you have a lot of families. Um, so we kind of go across the whole spectrum of 10 or of tenants, Henry, your tenant experience, how you're seeing things, you know, leasing pressure, rental pressure. Yeah, I mean the fundamentals are still very sound in, in multifamily. I think our average portfolio is 96.5% occupied, and our collections have significantly improved. Uh, this year during the pandemic, we started the whole task force with these, uh, draconian moratoriums coming in. And we chased every penny of rent for the last three and a half years. And we were averaging 91% the first year, I think 92 the second year, but were about 97, 97 and a half, which is pretty amazing. But there's still a lot of evictions going on, I think about 41 evictions of the portfolio because we could file 'em, we can get 'em done. And we also be doing, you know, buyouts are tenants for the most part, uh, is the work workforce housing group in the older properties. But in the new properties, which is kind of a shift in strategy for the past year, uh, has been mainly professionals and 95% of 'em, believe it or not, working from home. We've seen this over and over again, which is a whole new phenomenon. And that's what we look for in buying new buildings. But we are following the numbers where the jobs are. And uh, the reason we went to Metro Tampa is probably the number one or number two metro in the country in terms of, uh, rapid growth North Florida. Still today, about a thousand people in a day are moving there. And, uh, that hasn't really changed and it's probably a sign of good governance, affordability and many other elements. But at the same time, you know, Southern California remains to be the fifth largest economy in the world, and that is now changing even if 700,000 people moved out. Right, Right. Alright, Jay, how's your leasing going and how are you feeling about Leasing is fantastic. It's tremendous demand, low vacancy. The challenge we've had, as Henry said the past four years, is getting people to pay rent. Um, it's been our, our bigger challenge. And I'd say that with these eviction moratoriums, you know, a typical building has been 10 to 40% delinquent with non-payers. And, um, you know, and it's random. It could be an activist went to one building, held court in the leasing office and we had one building in Boyle Heights. It was 80% weren't paying rent at one point. And, uh, so it really depends, you other billings where there's been no issue. So it's very random. It's not a function of rent levels or, um, income levels. It was just didn't, activists go there, spread the word, and people stop paying rent. And now the bigger challenge we got is, okay, the eviction moratorium is over, but many of these people owe 30, 40 to $150,000 of back due rent. And, uh, you know, if they move outta the building, you can send to collections. If they stay in the building, you have to go to small claims court. And that's another long disaster if you're fortunate to be able to evict them. Uh, the eviction is six months. If the tent doesn't do anything, if they protest it, delay it, stall it, it might be 7, 8, 9, 10 months or one one year. Uh, it's brutal. So the owner is still getting beat up in LA and it's not just these, this eviction moratorium, these delinquent balances. And the argument was, oh, you've got the housing is key money that will reimburse you. Well, we only got a fraction of that 'cause most of the people either didn't, uh, qualify 'cause they make too much money or didn't apply. And so we got a fraction of the funds, but we never got a hundred percent back. And so now the industry in LA is dealing with this, how do I go from this eviction moratorium to normalcy? And I had this fantasy that when the eviction moratorium was over, collections would jump up and it's back to normal. Well, it isn't. It's a slow process back to normal because you still got a chunk of the building that owe a lot of money, they'll never be able to pay it back. And now you have to start the eviction process, which as Henry said, could be as much as a year to get somebody out. So those are some of the challenges we're dealing with. But on the demand side, tremendous demand, especially for the renovated B quality apartment, which is, um, you know, kinda looks like an A, um, but it's got rents, you know, higher than a C but not quite as high as an A property. So huge demand in that sector. So demand of that problem, it's just kind of dealing with these, you know, covid delinquencies and evictions that are gonna take another year to kind of cycle through the system. Um, I think someone else mentioned the other big battle in LA now is just tent activism is rampant. So, um, you know, but every other building you've got some activist or attorney trying to stir problems and they're calling the city nonstop. They're saying, this doesn't work, that doesn't work. My, my smoke detector's not working. And then the inspectors go out there, they write you up saying, fix the smoke detector, you fix it. Then they go break it, call the city again. The city goes out there saying you didn't fix it. So it's just a lot of, it's a lot more hassle working in la a lot more activism. Um, and they're even saying this 7%, uh, rent increase February 1st that, you know, was supposedly approved, isn't really approved. And now they're talking about pushing that down to three or 4%. So that's all part of the fun of living and owning in la That's after four years of zero increase, so minus whatever, when you look at inflation. But, Well, Daniel, you know, we know you, you sell buildings, you're not really involved in the leasing as much, but in your underwriting, given everything everyone's saying and given, you know, what's going on in the economy, a lot of people thinking rents have peaked out to some extent. How are you underwriting new listings in terms of the rent projections? Well, Rent projections are one thing, but rates are another. Um, I mean, if you look at the last two years, I think we've seen a runup of over 280 basis points from la. If you look at last year up until today, 280, 280 basis points, that's a big, big move. Um, on the transaction side, it's fallen off a cliff, at least local product. I think the spreads right now, um, with where interest rates are at and where cap rates are today in southern California, there's just a big disconnect. So if you look at transactions last year, um, the first eight months of last year, there was $9.3 billion in sales, velocity, million dollars. And up in Southern Cal in LA County. This year it's at 3.5. Um, if you look at transactions, it was close to 1600 transactions last year. At the same time. This year we're at about 300 or 881. So it's, it's changed quite a bit. You know, I think a lot of guys that have been in the market have seen it. Hopefully they've saved their money. And, um, on the brokerage side, you know, I was listening to Fred when he was up here last time talking about that psych ward that he's, uh, dealing out in San Gabriel Valley. I may have to check myself in after this one. Yeah. Actually, can I, Can I touch on that? Yeah. Paul, the volume, 'cause you were talking about all product or, or all sizes probably in those numbers. I looked last night actually was curious on, on just a hundred units and up, which is more the institutional stuff that, that we're, we're working on. And I looked at the first eight months of this year, and then I looked at the first eight months of 2021. 'cause that was kinda the last year where the rates were still low. And in the greater la, which would be LA Orange County, Ventura, inland Empire, uh, this year there's been 19 sales, which is about 4,200 units. If you look at that same period, those same markets, in 2021, there was 41 sales, 9,441 units. And then if you just look at LA itself, and, and, and that includes a big portfolio that traded in Orange County that had been going on for about two years. And the portfolio downtown LA that, uh, Laguna Point had. So, I mean, it had some that's even inflated probably on what's gone on this year. If you take those out, then almost nothing's traded this year. If you look at just LA it was 12 cells this year, 1500 units, and in 2021 there was 22 for 5,329 units. So it's, it's, You know, I think a lot drive It's completely turned off. It's, it's, it is tough to be a broker this year. Yeah. Now on the u l A tax, I think is what's crushing a lot of these, at least local LA product. I think we're gonna see if, if that can get repealed. I think we'll see a jump up in transactions hopefully next year. Um, let's all hope it does. I think we're gonna see a big, big exit of a lot of large operators out of LA if that u l a tax goes, at least a lot of the people we're talking to are looking to reposition money outside of la um, still in Southern California, but they want to get out of, from underneath the city municipality. They just think there's just too much downside than upside with the city. Right. Alex, picking up on that theme, are you, are you involved, you're involved throughout the Southern California, LA, and other parts. How, how much more challenging is it in LA than the other areas you're developing in, In city of la? I, it's, it's, it's tougher. I mean, we focus LA County North to Santa Barbara, like I said, mostly focused on LA County. Um, you know, very tough to, to capitalize or, or sell or happily sell, uh, an apartment building right now. That's why you've seen kind of transactions fall off a cliff. Um, you know, deals we do are 6, 7, 8, 15 years, so we still have plenty to work on, but, um, very tough time to capitalize any new development. Right now in city or county of la we're very focused on the other 87 cities. Uh, there are, frankly, there's probably only a handful of those that can kind of, where the rents kind of justify the cost of development or construction. So we tend to focus on those. Um, but, but, but tough time right now. I think we're all hopeful. Come, you know, November of 24, this, uh, u l a night where we'll get, we're peeled, but we'll see. Um, we're, we're, we're watching it closely and we've had three projects, including district NoHo, including our two projects in San Pedro, including a couple deals in downtown that have been pretty, pretty impacted by, by U L A. Right? Not just the, uh, mansion tax, but if you're buying a new building in LA today, the leverage is 50%, maybe 60 if you get lucky. So you get, if you get a loan, yeah. Very, very low leverage and you're paying a very high rate and you can't raise your rents. Right. So in a portion of people aren't paying rent, that's only on rent control. Not, not the, that's true. Well, I'll expect to, to your projects. We didn't really touch on who your tenants are in those projects. Who are you building for? What are the rates you, you're getting? It's gotta be tough on the ground, pure ground up plays, uh, to nail down those numbers. Huh. You know, we're generally building in sub markets where there's some, you know, pretty comparable like institutional comps that we can look at and point to, but we're probably on average in the 32 to 3,400 on average. Really depends on the unit mix and whatnot. One bedroom, Two bedroom. Well, I mean, studios now are probably starting in the 23, 20 $400 range on most of the stuff that we're building. Most of the areas that we're building it in. Um, one bedrooms are probably, you know, in the, call it 27 to 3,200 range and two bedrooms or, you know, north of 3,200. Again, really depends on the submarkets, the building that you're in. Um, in terms of who's living in our building, Are they single families, are they, uh, single professionals? Are they families? Kind Of all over the board. Again, project by project, that project Lou Ellen, the 318 units in the park, that's, uh, 60% two bedrooms. It was a kind of a big bet we made that actually ended up being pretty successful, probably because we delivered during covid, which was, you know, total, total accident. But we'll take it. I'd say our biggest demographic that I've noticed in all of our projects is just healthcare workers. So doctors, nurses. Interesting. Um, uh, you know, you can't work from home generally, uh, if you're working in healthcare. So, um, I'd say that's probably the biggest, uh, uh, industry that, you know, again, just walking through our projects and looking at our rent roll, we're always looking very closely at who's living there. Um, s not so many kids, I'd say a lot, a lot of singles, couples, um, uh, and, and, and roommates For what you do is there, which is the, the big city or town in the greater LA area that's the best for you to work with? Like which city? Yeah, Glen Burbank, you know, which have you approached that have been the most welcoming for your type of developments? I'll tell you, we looked, uh, really closely, didn't get there on a project in Monrovia. Uh, yeah. And fell in love with the planning staff there, like, incredibly helpful. Uh, we had a project that we were very close to going under contract in mm-hmm. Within like two weeks, had a meeting with basically the entire city. Um, that's a little tougher to do in the city of la Right? Um, but, but that was, uh, an impressive city, but had a great relationship frankly, with the city of Pasadena. Uh, and their planning department politics are a little bit tougher there. We got a 550 unit development, uh, that we entitled, uh, got through a four year sequel lawsuit, which wasn't the fault of the planning department, uh, LA uh, earlier this year it's been tough time to try to capitalize a deal to build it, but a great relationship with the city of Pasadena, city of Monrovia. I really liked San Gabriel Valley in general. Um, Interesting. Jerry Henry, any serious, uh, similar experiences with different cities or municipalities? Um, Yeah, I'd say in every area. It's never been easy, um, but at least it's doable, uh, today because it seems like every place we're going, they're under pressure by the state to build apartments. They don't really want to, but they know they have to. So they, you know, a couple years ago they'd fight you, you never get it done. Today, they will work with you, go along because they know they have to get more apartments being built. So it's a function of all these laws they've passed in California. And, you know, the state of California is going to various areas in suing cities saying you haven't complied with your building requirements. You, I'm building enough apartments. So we're feeling the pressure that the city officials now will, they know they have to do it. They'll go along. Yeah. They won't make it super easy, but at least you can get it done. Henry, thoughts On that? Yeah, just a couple trends. Uh, we have some legacy assets in Hollywood. You know, a few hundred units passed, uh, in one area for the past 20 some odd years we never sold, but we're seeing a tremendous inflow of new supply concessions, et cetera, given with class A building, which is affecting even these, you know, old world charm buildings that a one of a kind turns out there's an effect on that the vacancies are sitting longer. So that's one thing we notice where there's like, you know, 20, 30,000 units released in the market. That's, we've seen an impact in Hollywood, you know, Inglewood, the portfolio we just put up, we have stellar numbers, and uh, we just felt that it was the right time to, to basically push the exit button and consolidate all that into once you don't do much on the Development side, it's mostly investing. No, we, We just like Jerry and like Paul strictly buy to hold value add or, you know, core, core plus. That's, that's really our focus. But one thing we, we didn't mention with all the dark clouds on the horizon, I mean, every two days you get a different email from brokers or from apartment association about this new legislation that this radical senator dreamt up. You know, how to get the landlords now, you know, I just see these crazy ideas, but, you know, I bet you come next year, this is gonna be a hot topic on the panel, this Weinstein 3.0, which, which is a November ballot where he, once again for the third time is attempting to basically impose rent control and, uh, over, you know, uh, turnover Costa Hawkins. And that's gonna have a ripple effect. You know, it had its effect back in 2019. He just doesn't stop. So that's just something that everybody has to gear up for and not fall deep behind the wheel because this is not stopping. Yeah, I think Henry's right that Michael Weinstein's going back at for a third crack with his, uh, AIDS foundation money, but, um, it, uh, and he wants to put vacancy control on units is his dream. So you can't go to market. You'd have some fixed increase. So somebody could be paying $800 for a two bedroom West Hollywood and maybe you can only bump 'em to a thousand dollars. So, you know, that happened in New York City and it was so destructive. There were a lot of companies that overnight were out of business because they couldn't get the upside of going to market. So it's a fear we all have of, at some point he's gonna be successful in jamming through one of these provisions. And the apartment association has said they're gonna have to spend 150 to $200 million to fight this next battle. And, uh, my fear is, you know, well, voters might be getting tired or it sounds like a good plan. They vote for it. So everyone in the industry's kinda worried he might get lucky and get this thing rammed through. Well, I, and sticking with that topic, I mean, you saw it in Santa Ana, so you, you have Orange County City here where there's more renters than owners in the city, and the council realizes that, and they pander to their contingency and they basically threw a rent control ordinance overnight in Santa Ana. And it's the worst rent control ordinance in the state. It's actually worse than the city of la. It's instead of 3%, it's actually 80% of C P I, whichever is lower, or 3%, whichever is lower. So right now, CPIs below that, so it's like 2.4%. You can raise your wrench right now and, you know, if we do end up in a recession or, or inflation does drop off more, you're gonna be down to 1%, or, or no rent increases whatsoever. Um, they, the national, uh, multi-housing, um, uh, N M H C, national Multi-Housing Coalition basically wrote a letter, uh, to the legislature recently, and it's something we should probably publish in every, uh, you know, piece of documentation that we send out. But it, it basically talked about how detrimental rent control is. And one of the stats that they throw out in there is they did a study of all apartment owners across the country and they said, if rent controls enacted in your market, would you stay in the market or get outta the market? And only 27% of the people said they'd stay in the market. So you're gonna have no investment in these cities if they enact rent control and all these, because, you know, we're changing, we, we own a bunch in Santa Ana, about 1600 units there. And we're changing our whole philosophy about, you know, if, if a roof's due in or paint painting that building, we do it every seven years. Well, in Santa Ana we're gonna do it every 15 years, you know, only when it's peeling off, you know, I mean, you're gonna change how you manage properties. You're gonna have blight, you're gonna have more crime. It, it doesn't work. And, and you know, the natural Richard Green from U S C, who's the form foremost authority on this will talk about the filtering effect if you don't have the natural filtering where people come in, they rent their first apartment, which is maybe a C class, you know, lower end property, and then they make some more money. So they go up to the B class and then they go up to the A class when you have rent control, that doesn't happen. Look at Santa Monica, you'll have doctors, attorneys that will still have the same apartment for 20 something years. They don't release that back to become a unit that somebody can afford. So you don't have this affordable component coming back for people to rent it. It disrupts the whole natural progression of how renters, you know, come through this system. So Right. Just seeps through it affects everything. Yeah. If I might just add to that two points. I was on a panel actually last week in New Jersey. Uh, I don't how I even got there, but sat to long at these very large orders in New York City, you know, 30, 40,000 euro on the Northeast portfolio. And, uh, they were sorry they hadn't sold their New York City stuff. And what, what was amazing is the law changed in 2019, exactly what we're talking about. That when you had a vacancy and rent stabilized, that's what they call it on the East Coast rent stabilized unit, you can no longer go to market, you would have to stay at the same rent. So the owner said, the heck with it, we're not gonna rent our units. So there's right now by some counts about 120,000 to 125,000 vacant units in New York City, in these older buildings that are just sitting boarded up. They don't wanna rent them. Right. And, uh, I get a call from my son in New York almost once a week, dad, did you sell everything here in la? You know, it's gonna come. I'm telling you, they're gonna, we're gonna put that de control thing on you guys. I feel it. I live here, I see it. You know, we have more crazy people over there than over here. So that, that's one thing. But then secondly, on the Weinstein initiative, uh, if it were to have the best chance to, God forbid pass it is probably gonna be next year because with the moratorium, they've already set a precedent that emboldened and empowered tenants so much and come up with these crazy ideas that people are buying onto. And you know, uh, Mike Bonner is out there also. He was, he was going after Douglas Emmett with this magnificent project and, and Brentwood, you know, trying to block them from evicting tenants. So people have learned really bad habits, you know, in the last three and a half years. You know, it's the same thing if you go into a store and you could steal up to $950 and walk out with handbags versus not paying your rent. What's the difference? It's really the same story. Yeah, It's crazy. 'cause who've thought rent control would pass in Orange County, you know, a couple years ago. That'd be impossible. But sure enough, the biggest city in Orange County passed it. And as they mentioned it is worse than la 80% of c p I are capped at three. Shocking. And, um, so, you know, this whole, you know, uh, vacancy control issue, now I talk to my partners owners and we look at our buildings, we go, if it gets passed, how devastating is it gonna be? And we're analyzing that right now to see what do we get more buyouts to bring people to market? How do we avoid this crush if this actually gets passed? And I mean, a lot of people in industry are really nervous it will get passed. So. Alright, we got about 10 minutes, 15 minutes left. Wanna get everyone out on time. So let's shift over to capital markets. You guys are all involved, Alex, not as much on the, on the, on the capital markets side, but probably knows, knows this stuff and how you guys have been selling the new stuff. But Paul being an active, active out there trying to buy, trying to, you know, sell, but what's it like being a buyer right now? What, what, what are you finding out there in the market? You know, it's frustrating because we, we, we raised a fund, uh, recently about $183 million that were sitting there, totally discretionary, ready to go dry powder. And there was this big wave of deals that came on the market, especially in Orange County, because what happened is all the institutions looked at their, at their portfolio and they needed liquidity real quick. So they said, what's the easiest thing to sell apartment deal in Orange County? That's pretty bulletproof. Well, they didn't get their numbers because they were unrealistic on, on their pricing because everybody who Underwr wrote it had to put today's, you know, uh, rate in at 6% or whatever it is. And when you underwrite, it didn't get to their numbers. So they all pulled them off. So almost nothing has actually been trading. It's, it's getting tested on the market, it's putting the brokers through a bunch of hoops to go market it, but then it actually doesn't trade. Um, and so you have a bunch, you have a lot of capital ready to buy. I mean, but then there's a lot of guys that are kind of sitting on the sideline too, maybe not putting their best offer. And I heard a a, a funny phrase the other day. There's a, instead of fomo, having fomo, fear of missing out, there's a lot of phobia out there. Fear of being early. So a lot of, a lot of these capital, a lot of these asset managers have capital. They don't wanna be the first guy in and make a mistake. They wanna see if this market's really gonna tank. And as we all saw in 2008, 2009, we thought there was gonna be this big tidal wave of properties. There wasn't. And you know what, this year they're probably not gonna be again. So we're, we're being patient, we're buying good deals. We've got a big deal in Orange County and escrow right now that we're closing September 1st. Uh, that'll be terrific. And then some small deals, and I'll talk about maybe those on another part of this, uh, the small deal program we're doing. Yeah. As far as uh, investor capital, uh, institutions talk the talk, walk the walk, but they're not deploying really common equity. Everybody and their mother is putting out preferred equity of some sort. I haven't, you know, seen numbers from a low 11.5% up to the high teens for for profit equity. But the retail window, which is probably the people who go into your fund and into our deals, the guys is that write the $250,000 checks are alive and well, they want invest and that's a pretty vibrant great market to be in. And uh, our forecast is we don't see a recession coming at all. We think that September for sure, there's gonna be a quarter percent, uh, rate increase. Again, that'll be a number 12 or 13. And I think they'll stop there. And the Fed basically has taken a sledgehammer, you know, to the economy and tried to stop inflation. That's really their mission. They don't care about anything else 'cause unemployment is so low. But we feel that the window now, there are many sellers out there who have value rate loans or value rate that, that don't have rate caps. They're just getting hammered. You know, if you, if you bought something with a three and a half at a three and a half cap with a three and a half percent financing and now it's jumped to eight, you don't have a rate cap, you're dead. And the same thing if you have a rate cap, they're basically escrowing all your cash flow because the cost of cap for the next one 12 months, 18 months down the line has gone up 10 times. So these people have to sell. And I think today is a great time to buy between now and 2024 and probably the first girl, 2025 Henry. But This movie's gonna end In LA though. We saw Florida and you talked about selling in LA and you talked about the problems, but are you still looking at properties in LA to buy Well, As our broker panel and given us some numbers, Paul gave the LA transaction volume, I think it's down 90% for opportunities. There isn't, there isn't enough to buy. Alright. But, but to Paul's point, yes, a lot of assets have come to market larger, but if you don't get the number they're pulling, you look At, you would still look in. If it was a different deal, It was a newer asset selected, we had a present market, we would probably still buy. Gotcha. But, but not, would not be as crazy and as bullish as you would be for, for example, in San Diego or in Vent Shore County. Right, Right. Dan, let's skip over, Jerry, come back to you for a second. Tell us, uh, Yeah, I think the biggest pain point right now is gonna be owners that own R s O buildings. Um, that purchased right before the pandemic started. We're already talking with these investors that didn't not get any n o I growth. Um, and now they're sitting on a, an interest rate north of, you know, close to 7% when they borrowed in the three. Um, we've got guys right now that are trying to fix that, either coming in with some bridge debt to kick the can a little bit. Um, but that is becoming a common theme. Um, not a lot of people are out there that wanna buy R S O buildings. It, they're, they're just not out there. Um, and if they do, they want, you know, they want a good price point for it, they want to go in with a decent cap rate, which doesn't quite exist yet in la. So I think there's still some, some pain that's gonna come. Uh, and I think a lot of it's just Are are you currently working on some decent sized listings that you have out in the market? Yeah, I mean I've got a handful of deals. We're, we're marketing a deal over in Luc Lake 45 unit deal, that value add deal that we're, we're probably getting offers. That one's about eight and a half, 18 and a half million. How's Activity level calls, tours, how, how We've, we've gotten actually great activity uhhuh, which is getting the sellers to meet the market. They've got some exchange, uh, issues outta state that they're working through. Um, But there's a lot of interest. There Is interest. We're not at the price point quite where the sellers want, but we're six, 7% off list, which I think is pretty good, pretty good price point for today's market. I think if I, if I may, if I may also add, if you wanna sell something, if you have a summable debt, that is huge, right? You've got a lot of interest. Interesting. SUMMABLE debt Or seller financing, right? Jerry, your LA assets are you, uh, would you increase, would you buy more if the s right And are you selling? Yeah, Despite all this negativity, including myself, I'm actually pretty bullish on LA because there's very little new construction. The billings are very well occupied, the market's tight. We've had four years of no increases. To me there's nothing but upside, right? Yeah. You have to go to the activism and lawsuits and that's all part of the prop in la But it feels great when you look at buying today looking forward 'cause you feel like most of the worst stuff is over. And uh, I mean we're in a few markets where, you know, new supply, there's no little to no risk of it. If you're in Phoenix or Dallas or Austin, the new supply is scary, but you're in info LA owns some sixties run control building, new supply. There's again, minimal risk of that. Um, so pretty bullish operationally on the future in LA I would say, you know, again, there's just these negatives, which is when you buy a building today, you gotta build in a mansion tax. You have to plug in a five or 6% exit in your, in your property, which is a big hit to valuations. That's a 10, 15% price cut from where you were a year ago. Um, building in rent increases, now we're probably gonna go into this lower inflationary period. So you got lower annual rent increases you can put in your rent control buildings. Um, you know, those are some of the negatives. Um, the other big negative too, I think is, you know, pre pandemic, if you did a, a buyout or cash for keys, it was pretty easy to do. 90% of people would take 20, 25 grand to move out. Even if they're paying a big discount to market today. You are lucky if you get two thirds of the people to even take a buyout and they want 50 to a hundred thousand dollars to even consider it. So the cash for keys buyouts are pretty much fa fitting away 'cause they're just too expensive. So you've gotta buy a building and just get natural turnover and then renovate, uh, uh, on that. And How, how do you typically finance such a buy? Do you put it all cash? Do you put a loan on it and take It out? Yeah. Going back to capital markets, it's probably the worst I've ever seen it. And I've been meeting with a lot of private equity groups. Everyone loves multifamily. That that's the plus. You know, they hate office billings, obviously it's been so toxic. But they love multifamily, but they're nervous. I think we, someone talked about fear of buying. Fear of buying to really is the biggest fear. So very few people wanna invest institutionally in an apartment deal today. 'cause the fear is am I gonna buy this? And then six or nine months from now, it's worth less. And so there's a lot of money sitting on the sidelines thinking maybe it's just too early. Are we gonna go into this crash and I'll get better deals in the future. Um, you know, it looks like we might not even have a recession, so who knows. Um, so it seemed like the, the institutional equities on the sidelines waiting to see some stabilization or normalcy. But I think, uh, these guys mentioned as well, the private capital is just as eager. 'cause they're looking for people places to put their 50, a hundred thousand, $200,000 investment. So we've got a, a private high net worth fund that we're raising 200 million and fundraising is going good. I wouldn't say great. I think it's, it's not great because there's fears about the recession. Um, but it's good. Um, the institutional equity, pretty much everyone I talk to says I'll do a deal, but it better be a big home run. So if you have an eight cap rate in Orange County, I'll look at that. I mean, that's kind of conversation I had. Yeah, it's Coming. Right. Well Greg, uh, you know, time flies. I could ask you guys questions all day, but I realize we're pretty close to out of time. So are there any issues that we haven't discussed regarding the greater la multi-family market that you feel is important to highlight or shed light on? Rent control, cost of construction crime? I think we've touched on a lot of things, Henry, Uh, none that we're in other states and understanding what goes on with dynamics. Uh, the best thing about here with all the negative things we said, we don't have the risk of increased property taxes. Not yet. You know, taxes, reassessments, same thing in Florida, same thing. New Jersey, the property we're buying. New Jersey has a tax pilot for 28 years. I think one month is like almost 30 years. So we know exactly what our numbers are, but this is a risk we don't have in this market. And secondly, uh, I've spent a lot of time lately out of California. Every time I'm not here I'm like, oh, I'd like, I'd rather be in Newport Beach. I miss that weather. You can't duplicate this. You know? Right. We're much more productive and it's, there's, we're still way under supplied. I mean, at the end of the day, there's not enough supply. Right. Yeah. I was gonna add one, one last thing, and this is a little bit of a pitch I guess, but, um, if we scared you all on, on owning properties here anymore, we actually, during this time when we can't find many big deals for our fund, we created something that we're calling the X Fund and we just launched it. We've already have a couple properties in it, but what we're doing is we're taking on properties from small property owners, 10 unit, you know, probably a lot of the ones that you're seeing out there, 30 unit, those kind of properties that are getting old. They're sick of managing their property, their kids don't want to deal with it. They're done. They don't wanna deal with a 10 31 exchange. 'cause right now to try to 10 31 exchange out of a property and find a new one to get into, it's, it's risky. So we said instead of that, just bring your property to us, put it in this fund. And in exchange we'll give you partnership shares. So you can automatically be a partner, limited partner. Now get outta the liability chain and you're an investor in this group of properties. And then we will, we will manage those, we'll renovate 'em, and then in two years we'll do a 10 31 exchange outta those small properties into some big institutional ones. And you stay along with us and you become a partner. So it's kind of a You the next that Paco it, It it's may maybe similar, But ours goes On forever. It's not a, it's not a D S T, you're not kicking the can down the road. Once you're in this, you got these shares, they're cash flowing. So it's a long-term type play. So you gotta get creative, I guess is my point on this. In these times when you can't just go out, out and buy nice big institutional assets, you find stuff like this and become, that's Definitely creative. Dan, you were gonna say No, I was just gonna, is that a preferred return to these guys going in or is it Yeah, they'll get a preferred return and then they'll also get re down the line. We'll refinance the properties, pull money out, tax free, you give it to 'em, they'll continue to get that and they just stay in the deal. And if someday they want to sell their shares, they can. If not, they just keep 'em forever. Interesting. Excellent. That's a good way to close. Got a minute. Yes. Questions. Dr. Gr, Alex Builder's remedy. Um, have you used that? Do you know anybody? Do you know of anybody who's been successful with that yet? Or is there just a lot of talk and no purpose is an issued yet? I don't, I don't, we we have not used it. Uh, we're well aware of it. Um, I think Dave Rand, who's one of our kind of top land use attorneys is like the poster child audience with Bill Remedy, Essentially it is, um, the state of California essentially issues housing goals for all of their cities across the state. And, and each of these cities has general plans and housing elements that they need to hit what's called these arena numbers to meet the housing goals that the state sets for each city. It's determined by the Southern California Association of Government scag. And what happens is that these cities don't get their housing elements approved by the state. Then there's this builder's remedy, um, uh, uh, uh, solution essentially where the cities are not, they essentially not allowed to reject the, the housing application. Um, and there's been some famous examples in Redondo Beach in Santa Monica, um, uh, the Racavich company actually, who I used to work for is now attempting it in Alhambra. Um, we've never done it ourselves. Um, I, I'd say I haven't, except for I think Cypress Equity is doing one in Santa Monica right now as well. Haven't seen as many call it, you know, institutional publicly traded developers utilizing it. And I don't know of any building permits that have been pulled successfully. I dunno if you guys have, um, utilizing Builders Remedy to this point. Um, I think it's fascinating. I think it's a great way to put pressure, um, on cities to, um, you know, really kinda meet housing goals. Um, I think there's a number of cities that are, um, finally paying attention, finally opening up for development. Like the city of Torrance, for example, just kind of green-lighted two products for the first time in 40 years, uh, because they passed through a housing element that allows for multi-family housing. So I think these kinds of, um, kind of blunt instruments that, that some developers are deciding and, and, and justifiably in many cases to use, it's actually a good thing for housing production, which I think we all agree up here on stage, um, is really important, um, to kind of house the folks here in, in, in California, uh, supplies. Santa Monica has a number of applications that are just totally bypassing the planning department, citing builders remedies. Yep. And you've got these huge projects coming on board in Santa Monica, but I don't know if any purpose Yet, I'm not aware of any permits that have actually been pulled. I know the City of Santa Monica ended up cutting a deal with, uh, Neil Scheer's new company, um, on a, on a, uh, they essentially, there was a, an upzoning, uh, in the city of Santa Monica that they, they, they couldn't pass in time. They basically agreed to the Upzoning standards in a higher f a r for Neil's properties in exchange for rescinding his builder's remedy application. But I'm not aware of any actual permits that have been pulled myself. Alright, good. Good question. Uh, thanks for the, you know, all of you who stuck to the end, you know, it's a long day. A lot of information. Let's give a great round of applause. Paul, Henry, Jerry, Daniel, Alex. Hey, hey.