RENT COLLECTIONS AND LEASING REMAIN STRONG; HOWEVER, NEW DEALS HAVE BEEN PAUSED.
Los Angeles-based apartment owner and developer Cityview is taking the COVID-19 pandemic one day at a time and keeping an optimistic outlook for the future.
“Everyone is disappointed that generally, we have taken a step backward as a country, a state, an industry in the past week. We were getting ready to bring people back to the office,” says CEO Sean Burton. “We know this is an incredibly difficult time for people who lost jobs or are concerned regarding their health. We have been optimistic about working closely with our residents. There is a lot of positive spirits out there.”
From a business standpoint, Burton says a couple of positive surprises have come out of the pandemic. “Collections continue to be strong,” he says, noting that Cityview is averaging 96% to 98.5% collections from its traditional Class A developments. “We’ve been very proactive with the tenants of the 5,000 units that we own and manage. We have reached out to every single tenant each month to see what they are facing and let them know what we are doing to keep them safe in their buildings. That proactivity has helped us collect rent and get some set up on payment plans.”
He says the firm is benefiting from its tenant base. “We build in urban locations near great jobs. I do think our tenant base is stronger than a lot of others and is able to weather the storm a little more.”
The firm also is seeing robust leasing. Burton says Cityview had already invested in technology and virtual leasing prior to COVID-19 and ramped up those efforts at the start of the pandemic.
“In fact, in our Los Angeles portfolio, we had our largest leasing month in June than we ever had even pre-COVID,” Burton adds. “Virtual leasing is here. That’s been a pleasant surprise.”
The greater challenges have come with new deals. “How do you price real estate today? How do you make assumptions of when companies will hire again and when state orders will end?” he says. “There’s been a lot of turmoil in the debt market. It’s disappointing that a lot of new deals aren’t getting done.”
During the pandemic, the firm finished construction on two projects: the first phase of the 97-unit Haven in Culver City, Calif., and the 350-unit DECO, developed in partnership with The Dinerstein Cos., in Denver.
Burton notes that the construction of the buildings has gone smoothly, with social distancing and cleanliness as priorities. City inspectors and others working on the projects have been accommodating and available to keep everything moving. “We haven’t had any issues at those projects,” he says.
However, Cityview had planned to start four new construction projects in the second and third quarters but pushed those out 90 to 120 days to reprice the contracts. “We have been hearing rumors that costs are going to come down. On value-add, we had seen costs come down 5% to 10%. We have been watching lumber and steel futures as well as labor. I’m optimistic we will get some cost savings.”
Looking ahead to the future and what impact the pandemic may have on multifamily, Burton isn’t convinced that renters will move out of cities and turn to homeownership.
“Pre-COVID, we were feeling good about the fundamentals of the industry. Millennials are the largest share of renters in our buildings, and it’s the largest demographic in the history of the country. It’s also a demographic that’s renting more than Generation X or baby boomers,” he says. “All of those tailwinds are at the back of multifamily.”
He adds that in some ways the industry maybe even stronger due to COVID, with the economic turmoil potentially making it harder for millennials to come up with down payments.
Burton also doesn’t see a fundamental shift in urban living. Although he says instead of the densest experience, there could be a shift to a more balanced urban environment. Cityview typically builds four- or five-story buildings in strong West Coast urban markets with open-air amenities, such as rooftop decks.
“Fundamentally, we believe in cities and all that cities have to offer,” he adds. “We think they will continue to be robust and will attract a lot of the best talent around the country with culture, nightlife, and jobs.”
However, the pandemic is pushing the firm to rethink its designs.
“We think multifamily is strong and here to stay,” he says. “But that doesn’t mean we’re not rethinking floor plans in the units. If there’s going to be a larger shift to people working from home part-time or full time, how do we design units differently? How do we design common areas for more open-air?”
He adds that the firm isn’t taking a knee-jerk approach but is looking to come up with some best practices that provide flexibility and optionality. “It’s about creating a living space where we can design the shell and core but not make final decisions until much closer to when we deliver and have more information.”
ABOUT THE AUTHOR
Christine Serlin is an editor for Affordable Housing Finance, Multifamily Executive, and Builder. She has covered the affordable housing industry since 2001. Before that, she worked at several daily newspapers, including the Contra Costa Times and the Pittsburgh Tribune-Review. Connect with Christine at [email protected] or follow her on Twitter @ChristineSerlin.
