For 14 years, Robert Hart was chief executive of Kennedy Wilson Multifamily Management Group. Twenty-two months ago, he founded his own investment firm in Brentwood, TruAmerica Multifamily, and has since amassed more than $1.5 billion in multifamily assets on the West Coast. In Los Angeles County, Hart’s firm has acquired nearly $500 million worth of apartments in the last nine months, many of them below Class A. The Business Journal caught up with the 57-year-old Hart recently and asked him why he started out fresh and why he’s interested in well-used buildings.
Question: What was your motivation for striking out on your own?
Answer: I wanted to do something that was more my own. Real estate is a cycle-oriented business, and I saw that the timing was right based on where we are in the cycle and where I am in my career with the capital partners I have garnered. Sometimes you have to take the plunge.
So you went in with a capital partner you had a relationship with?
Yes. The Guardian Life Insurance Co. of America in New York is my 80 percent partner in TruAmerica. They have an ethical, long-term view of this business, and they’ve been around since 1860.
It seems like you’ve hit the ground running. Did you expect the pace to pick up so quickly?
Candidly, when I first made the transition I was nervous about whether the phone was going to ring, even though I was a leader in the industry. When you’re starting a new company, the process is the same: You put your head down, you build a track record of showing up on time, and that translates. My old boss Bill McMorrow at Kennedy Wilson always said, “You have to put your bets down.” So we put our bets down.
You partnered with Capri Capital Partners to buy the Vermont, a new 464-unit high-rise in Koreatown. How much of your focus is on this kind of Class A acquisition?
Newer buildings like the Vermont represent about 25 percent of our strategy, while repositioning is about 75.
Tell us about what distinguishes TruAmerica: that 75 percent of “repositioned” apartments.
Our major focus is on what I call market-rate workforce housing. It’s Class B. There is a lot of older housing stock in L.A., and there’s no one building for Class B, so my focus is to find quality two- and three-story buildings that have the right bones to reposition at a higher level. We’re adding better amenities, running them better, giving them better finishes and rebranding them. It’s for renters by necessity, which has been my stock in trade in all the investments I have done in my career.
“Renter by necessity”?
As qualifying for mortgages has become more rigorous, families and individuals have chosen to delay homeownership. The homeownership rate in L.A. is fairly low, while the rental rate is high, and our typical renter is in the $50,000-to-$75,000 household income range. That’s what’s driving the multifamily market. I grew up in what I would call a tenement, and didn’t own a home until I was 30. People today are living that way for longer, and it’s by necessity. The Vermont, for example, is a luxury building, so that would be more for renters by choice.
Any advice for someone who is just getting started as an investor in multifamily?
My first investment was a two-unit apartment building in Venice in 1986. Since then, I’ve always invested side by side with my own capital. You have to put some skin in the game. You also have to be engaged with operations. You have to touch the real estate regularly to understand the property and its residents. Owning apartments is a consumer business, and at the end of the day, you’re dealing with tenants who want to have a nice home.
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