Beverly Hills-based real estate company Concord Capital Partners is refocusing on Southern California after years of being primarily invested in Texas, going against a trend seen in recent years of more investors looking at markets outside of L.A.
The company, which was founded in 2003, had been focused on the Lone Star State since 2014.
“In the last two years, I guess the secret was out and lots of investors came in and it got too frothy in my opinion,” Concord Founder and Chief Executive Reuben Robin said. “I see opportunity in California. There’s a lot of money heading away from California.”
“Now more so than ever, we’ve seen high net-worth private capital move its way out of California,” Anthony DeLorenzo, a vice chairman at CBRE Group Inc., said.
As a result of such large amounts of money moving out, Robin believes there is an opportunity for others to fill the vacuum in Southern California.
As part of its L.A.-centric strategy shift, Concord has hired commercial real estate veteran Samuel Landman as chief investment officer.
In the role, Landman will oversee the acquisition, financing, optimization and disposition of real estate assets.
Prior to joining the company, Landman held positions at companies including Century City-based WealthStone, Century City-based Universe Holdings Development Co. and Calabasas-based Marcus & Millichap Inc.
Landman called his start at the company a “great transition,” adding that he has been “very busy” raising money for the company’s growth plans.
The firm is now looking to increase its portfolio from 3,200 units to 10,000 units in the next five to 10 years.
Robin spent time as a commercial real estate broker before deciding he “wanted to be on the other side of that phone” and launched his company with a friend in 2003 from his garage.
At first, the company was doing smaller deals, such as duplexes, which it would flip and sell for a profit.
From there, Concord worked on purchasing 20- to 100-unit apartments in Southern California. But in 2014, the company changed gears and began purchasing larger properties in Texas and Illinois, creating a portfolio of 3,000 multifamily units and 700 student housing units.
“I realized it was difficult to get scale in L.A.,” Robin said of the decision to buy elsewhere.
Concord purchased its first property in Texas, and soon “we were cash flowing better than anything we’d ever seen,” Robin said. From there, the company kept buying in the area, as well as in Illinois, where it purchased both traditional multifamily and student housing properties.
But now other companies are looking at cities in other states in which to expand. Dallas, Denver and Phoenix, experts agree, are now among the most desirable locations.
“It’s a trend that I think is going to continue to accelerate,” CBRE’s DeLorenzo said.
A few years back, Mid-Wilshire-based Decron Properties Corp. turned its focus beyond California, buying assets in the Pacific Northwest. Company executives told the Business Journal at the time that the decision to buy in other states was spurred in part by the legislative environment in California.
Universe Holdings, meanwhile, purchased its first asset outside of California in 2021, and plans to prioritize states outside of California going forward.
Mark Witsken, senior vice prescient at Stepp Commercial, said he was seeing lots of companies looking outside of L.A.
“Many, many, many owners are selling and exchanging and buying in other states,” he said. “It’s for two or three reasons. Number one, we might see an owner who’s owned in Long Beach and been doing this for 20 or 30 years and realizes all their net worth is within a one-mile radius and is not diversified at all…and realizes that I have all this equity all in one spot and decides to diversify a little bit.”
“Another big reason is because the environment here gets less and less landlord-friendly every year…these other areas where we’ve done a lot of deals, these are much more landlord-friendly markets, it’s easier to conduct your business there…the third reason is they can recognize better cash flow right away. It’s not as expensive to renovate units there and you’re buying buildings that need renovation,” he added.
He added that people were calling him “constantly” to explore buying out of state.
Now, in an environment where many other local companies are looking outside of California, Concord is looking to strengthen its hold here.
Robin said Concord now has two properties left in Dallas and has sold its other assets there.
“We decided we wanted to refocus the energy and the priority right in our backyard,” he said.
As noted, some property owners and developers have cited California’s legislative environment as a reason to refocus on other areas. But for Robin, it’s a plus.
“Strict zoning laws keep us safe from overbuilding,” he said.
And rent control means that when tenants do relocate, there’s a lot of value to unlock.
“From an investor point of view, rent control is a good thing…when you have laws and regulations it keeps you in line with what you can do and what you can’t do. It allows us to understand deals and underwrite them,” Landman said.
Concord isn’t the only company that sees opportunities with other entities looking to invest outside of California.
John Drachman, co-founder of Newport Beach-based Waterford Property Co., which has a large number of assets in Long Beach and the San Gabriel Valley, said, “It’s dumb to be focused on those markets right now (areas such as Denver, Phoenix and Dallas). They are incredibly overheated, and you will see some major issues hit those markets.”
“We don’t have the supply issues those markets will have. One of the benefits of being an owner in Southern California is we have massive supply issues,” he added. “A lot of investors are chasing deals in other markets because they think it’s better, and long term I think they’re going to regret it.”
Concord is seeking core assets that it can hold for the long haul.
“We look for value-add opportunities, multifamily communities in barrier-to-entry markets with historically low vacancy rates,” Robin said. “The worse the asset, the more excited I get.”
Properties it purchases elsewhere will be shorter-term investments, Robin said, adding that it is more difficult to get deals now in markets like Dallas since “the secret’s out” on the market.
Going forward, the company is looking to expand.
“We want to grow our assets in our backyard and focus on what we have and grow it gradually and have it so we can have more assets under management and become a better operator,” Landman said. He added that improving their assets meant going to them frequently, which they can only do if their properties are local.
Robin said the company, which counts 150 of its 200 employees as being based in Southern California, will be more efficient because it will not have to rely on other teams.
Concord is looking to grow the company to 5,000 units in the next year, and grow every year after that. And while the company owns other asset types besides multifamily, Robin said garden-style, value-add multifamily properties were its focus.
The company is also looking for strategic capital partners. And despite rising interest rates and fears of a recession, he sees a bright future ahead for his company.
“Recessions create opportunities,” Robin said.