Century City-based Universe Holdings Development Co. says the coronavirus pandemic may impact the acquisition tear it’s been on this year, but it will not derail the company’s strategy.
The company announced its purchase of the 100-unit Serena Vista apartment complex in La Mesa for $34.5 million in March, and in February announced its $65 million purchase of a 249-unit Southern California portfolio that included a 17-unit building at 4325 Franklin Ave. in Los Feliz.
It also purchased a 122-unit portfolio in Granada Hills for $25.5 million in April.
Founder Henry Manoucheri said the company owns about 3,000 units in Southern California, with assets that range in size from 10 units to more than 400.
“Everything we have is here and close to us,” Manoucheri said. “It gives us good control over our assets.”
The real estate veteran has been through three down markets and sees a silver lining in the current situation.
“This pandemic is yet another down cycle with a lot of similarities to what I’ve seen in the past,” Manoucheri said. “We believe there could be a lot of opportunities coming out of this disaster,”
Universe Holdings said it is prioritizing the $1 billion in assets it has under management, including the most recent acquisitions.
“We went ahead on these deals that were in the pipeline from a while back. We went ahead and closed on them,” Manoucheri said. The company is now working on raising capital to make additional acquisitions.
“We like to buy properties from sellers who are motivated, sellers who want to sell, sellers who need to sell,” he said. “We have been raising money. We just raised nearly $30 million for our last fund, which went to those investments, and we are trying to raise a second fund of $50 million to $100 million looking for these kinds of opportunities.”
Manoucheri said Universe Holdings will continue to focus on multifamily properties.
“With apartments, you can’t evict right now if they can’t pay rent,” he said. “That will create a financial hardship for many owners … many long-term owners who had access for generations and had no debt and were thinking about selling.”
He added that the company would look at assets that were as much as 20% vacant or hard to finance for other companies.
“There are fewer lenders, and loan terms aren’t as good,” he said. “We are trying to formulate new pricing, sort of like discount pricing.”
Manoucheri said there are roughly 90% fewer buyers in the market now.
The company previously thought about expanding into other states but now plans to stick to Southern California and is interested in expanding in other ways.
“We are also selectively looking at other property types. We are probably going to start looking at hotels and some industrial properties. Right now, hotels are a fantastic buy, and we think that industrial is going to be an investment of choice in the future because it has held up so well,” Manoucheri said.
CBRE Group Inc. predicts that industrial and logistics real estate across the country will recover in the next 12 months while multifamily properties may take closer to 18 months, and hotels could take as long as 30 months.
Manoucheri said the hotel industry has been very hard hit by Covid-19, and there might be some opportunities in the marketplace.
Universe Holdings is also looking at buying notes from banks and financial institutions.
Manoucheri said some might see real estate as a safehold for money.
“People right now are shocked by the volatility in the stock market, the way the market goes up and down every day,” he said. “Real estate doesn’t act that way. Everybody before was really fixated on the stock market and realizes that real estate is a much safer asset class to be in today, especially multifamily.”
Universe Holdings is generally a long-term property owner. Manoucheri said that five to 10 years from now, things will likely be “very, very good.” If the company can make smart choices, he said, it could do very well in the long run.
“Right now, in a crisis like this, this is really going to test who are the best operators and owners of businesses. This is a time where the cream rises to the top,” he said.
“Anybody who finds themselves overleveraged, who bought too much or was not very careful and bought too many properties,” Manoucheri added, “those people will pay a heavy price today.”