Santa Monica-based Vista Investment Group has closed on four multifamily properties that are part of a larger plan to purchase properties subject to rent control, something the company did heavily even before recent statewide regulations went into effect.
The assets, comprised of nearly 170 units in Koreatown, Culver City, Mar Vista and Los Feliz, sold for a combined $50 million. All four sites were already subject to rent control before the statewide measure passed.
Los Feliz’s Park Winona, at 1840 Winona Blvd., has 50 units. The property was built in 1963. Vista Investment Group plans to upgrade apartment interiors and renovate common areas.
Vista Investment Group also purchased the 38-unit Leeward Apartments at 2810 Leeward Ave. in Koreatown.
Additionally, the company bought a 41-unit apartment property at 4325 Berryman Ave. in Mar Vista.
Vista Investment Group’s final acquisition in the portfolio was the 40-unit Canterbury Court Apartments at 6125 Canterbury Drive in Culver City.
Since 2009, Vista Investment Group has invested in more than 1,500 rent-controlled units in L.A.
“We started buying rent-controlled properties in Los Angeles in 2009. We’ve been buying, really, ever since,” Vista Investment Group President Jonathan Barach said. “As we’ve gotten more comfortable, we’ve gotten more bullish on the sector, and we’ve been able to outperform returns really by all measures. And that has given us more confidence.”
Under the new statewide rent control law, landlords can raise rents 5% a year, plus the rate of inflation. The regulations do not affect buildings constructed in the last 15 years.
But Barach says the change hasn’t affected Vista Investment Group.
“This statewide rent control hasn’t changed anything in terms of the L.A. rent-controlled properties or those properties that were already subject to L.A. rent control, which is a lot more strict than statewide rent control,” he said.
Vista Investment Group is in a better place than other companies who are navigating rent-controlled properties for the first time, according to Barach.
“There’s the operational component of owning these buildings, and there’s the underwriting component to determining what the controls are going to be and how much you should pay for it. Both of those require a certain amount of expertise in rent-controlled apartments,” he said.
Barach said Vista Investment Group has learned how to run these rent-controlled buildings, which are often older.
They present different underwriting issues than buildings without rent control, he said, adding that Vista Investment Group had learned how to value these buildings specifically.
“It’s really having a good understanding of what your turnover rate is going to be and making those turnover assumptions in valuing a property,” Barach said. “There’s no book — there’s no market data that one can look at to understand what turnover rates are going to be at rent-controlled properties.”
Those issues can scare some potential owners away.
“If you’re new to the market in the rent control space, those are a lot of big unknowns that either are going to dissuade you from making the acquisitions or you’re going to be closing your eyes and making a blind guess in those regards,” Barach added.
Vista Investment Group is interested in the high-demand markets of Koreatown, Hollywood and downtown, as well as the emerging areas of McArthur Park, Westlake, West Adams and Baldwin Hills. Barach said he believes the latter have huge potential.
“Those will do better in terms of the overall market in rent growth and vacancy,” he said. “You also don’t have a lot of new construction going into those places. You don’t have the concern of over supply affecting your rent-control properties like you might in downtown L.A.”
