Universe Holdings' Henry Manoucheri Explains Why He Likes Buying Rent-Controlled Property
Even with the looming of Prop. 10, the measure that could possibly repeal the Costa-Hawkins Rental Housing Act and allow local municipalities to enact rent regulations, Henry Manoucheri sees some opportunities.
Manoucheri, the CEO and founder of Universe Holdings, is against rent control. But if some form does come into fruition, his company will continue investing in rent-controlled properties.
While some investors may shy away from acquiring properties under rent regulations because of limits on profits and stale tenant mobility, Manoucheri embraces it. His company has 16 properties in rent-regulated areas in California, he said. In March, his company acquired a nine-building multifamily portfolio in rent-regulated areas in the San Fernando Valley.
Patience is key, he said. Manoucheri buys for the long haul.
Bisnow spoke with Manoucheri, a 33-year commercial real estate veteran in Southern California, and discussed his strategy of acquiring rent-controlled properties and the impact of Prop. 10.
Bisnow: You have a unique investment strategy. Why buy rent-controlled properties?
Manoucheri: We are open to rent-controlled properties. We do buy them. We believe that with patience, people eventually leave and depending on where the property is located … people do eventually move.
There are two schools of thought — there are landlords that buy tenants out of their leases, but we wait it out and let life events and tenants’ lives dictate when they choose to move.
Bisnow: What are some of the rent-regulated areas that you like or don’t like?
We have about 16 rent-controlled properties in our portfolio. We have about a 20% to 25% average annual turnover. It is a natural turnover.
Bisnow: What are your thoughts on Prop. 10, the repeal of the Costa-Hawkins Rental Housing Act?
Manoucheri: It won’t be good for the industry. But with enough education this is something that can be defeated.
If it does go through, each city will come up with their own version of rent control.
We’re not buying in those areas or municipalities that are very much to the left [politically]. It might get worse in places like Santa Monica, West Hollywood and Beverly Hills.
If this passes in any shape or form and cities do bring back rent control across the board, you will see an immediate 20% to 25% drop in property values.
Bisnow: Are you seeing a lot of multifamily owners panic-selling right now?
Manoucheri: We have come across smaller owners that own a few properties wanting to get out before this [November]. We do see some opportunities there where people are selling their properties.
Bisnow: What are you and your company doing to send the word out about Prop. 10?
Manoucheri: We are constantly in touch with the Apartment Owners Association, Essex and the NMHC [National Multifamily Housing Council]. We are raising money and just telling people to vote no on Prop. 10.