With SoCal’s tremendous multifamily rent growth and escalating cost for new construction, value-add, Class-B assets “are a fairly safe place to be,” TruAmerica's Greg Campbell tells us. Greg is among our all-star cast of presenters at Bisnow's Orange County State of the Market event on Feb. 18, on the 15th floor of the 2600 Michelson Dr office building in Irvine.
Newport Beach-based TruAmerica Multifamily is in the workforce housing business, buying up Class-B assets within easy commuting distance of employment centers and renovating them in ways that keep rents affordable to median-income residents. Here's a shot of Greg, TruAmerica's senior managing director of acquisitions, walking on the beach.
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The 148-unit Canyon Crest complex in Santa Clarita (pictured) is part of a 14-property portfolio acquired by a partnership of TruAmerica, The Guardian Life Insurance Company of America and Allstate, for $483M in January 2014.
Demand tends to remain strong for workforce housing in downturns, Greg tells us. In certain markets with skyrocketing rents, such as San Francisco, LA and the Pacific Northwest, renters are being priced out of the market. “Real wages haven’t gone up all that much, so people are paying a higher percentage of their incomes for housing,” Greg adds. “The pace of this income-versus-rent disequilibrium cannot continue indefinitely."
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The companies invested another $40M to update the 14 properties in the portfolio, including the apartments at the 384-unit Vicino (formerly Towne Center Apartment Homes) in Lakewood (above).
With today’s market dynamics, developers have to build Class-A product to make projects pencil. “Our primary focus continues to be on Class-B assets, because they are affordable for working-class families, and that’s why so many of our B projects are 97% to 99% occupied,” Greg tells us.
Vicino rents one-bedroom units for $1,500 and two-bedroom units for $1,900 to $2k. Comparable apartments on the Westside rent for $3k to $4k. He says people are willing to commute farther for housing they can afford.
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Another part of the acquisition was the 60-unit Bayridge Apartments, overlooking the Pacific Ocean in San Pedro (above is an updated kitchen).
Nearly half of LA's residents are spending 50% or more of their incomes on rent, Greg says, but the high cost of land and city fees mean no one is really building Class-B or workforce housing. If cities want more workforce housing, they need to offer further incentives and decrease—or even suspend—fees, he says. Instead, cities have increased fees in recent years, he says.
“With the cost for raw materials starting to trend down, there might be an opportunity to create more workforce housing,” Greg adds, “but city fees at $30k to $50k per unit are a tall hurdle to overcome.”
Hear more from Greg and other SoCal industry experts at Bisnow's Orange County State of the Market event on Feb. 18, on the 15th floor of the 2600 Michelson Dr office building in Irvine, beginning with breakfast and networking at 8am. Sign up here!
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