BY BRYNN SHAFFER
NOVEMBER 6, 2023
During the first half of the year multifamily properties in Southern California saw both vacancy and asking rents rise. Still, developers were active, with tens of thousands of units under construction in the region, according to a report from Northmarq. This Special Report talks to 12 multifamily experts, including both developers and brokers, about the state of L.A.’s multifamily market.
MEETING DEMANDS
Sean Burton has been with Century City-based multifamily development firm Cityview since its inception, starting as chief operating officer and working his way up to chief executive. Cityview, a vertically integrated real estate firm that specializes in multifamily development for market rate housing, has invested in more than 130 projects. Cityview’s latest development is The Parker, a 123-unit multifamily community in Carthay Square. Earlier this year, Cityview opened Jasper, a 296-unit apartment complex located in University Park East. Some of Cityview’s projects currently under development include Belle on Bev, a 243-unit multifamily project in Historic Filipinotown, and Apollo, a 265-unit multifamily development in Los Angeles’ South Bay.
Which submarkets are you most interested in and why?
We as a firm gravitate towards supply-constrained markets with significant barriers to entry. These are often markets that are more challenging to build in, but after having developed an expertise in these markets over the past 20 years, we find them to be the most resilient long term and provide the biggest sustainable upside advantage. We target markets with strong demand fundamentals as well, including population growth, employment growth, income growth and rent growth.
How do you assess if an asset is valuable or not?
Cityview’s strategic focus is on top-performing Western U.S. markets with what we believe to be strong growth, high barriers to entry and a lack of sufficient supply. We specialize in multifamily because we believe it is the most resilient asset class, offers inflation protection with the ability to resent rents weekly and is the least sensitive to a fundamental disruption similar to what office and retail have undergone in the past.
In a land of a lot of luxury, why is market-rate housing important?
The U.S. has a significant housing shortage that cannot be solved without providing more housing at all levels. Where I believe we as an industry can be most effective and receive the best risk-adjusted return as investors is by providing market rate-attainable housing. Our focus on this segment of housing has allowed us to keep our construction costs significantly lower than luxury high rise thereby reducing some development risk, but still allowing us to target attractive risk-adjusted returns. Market rate attainable housing also attracts the largest segment of the renter population and can be less susceptible to adverse market conditions.
In your opinion, what are the biggest challenges facing the Los Angeles housing market today?
Los Angeles faces a severe housing shortage and we need to focus on policies that encourage development of all types of housing, including affordable, workforce and middle income. The recent hindrance to our goal was the enaction of Measure ULA. ULA, dubbed the ‘mansion tax,’ does not only impact luxury housing, but all new housing as well.
When a developer runs a pro forma model on the cost of a new market rate housing development, this new 5.5% gross tax – on top of spiraling costs, sky high interest rates and the already high price of land in Los Angeles – is often the straw that breaks the camel’s back and makes it too unprofitable to build.
As a result, many developers are electing to no longer build in the city, which will only continue to worsen our housing shortage and cause rents to go up for those who can least afford it.
What’s your favorite part of your job?
It’s extremely fulfilling to work for a mission-driven company that is creating housing in markets that desperately need it while striving to deliver solid returns for investors who are teachers and firefighters and nurses and other key members of the workforce.
We build and improve market-rate and workforce housing that makes a real difference for communities and do so in a way that we hope provides lasting value for our investors.
My brother was a 37-year LAFD firefighter who was married to a teacher, and it’s meaningful to spend my days striving to drive the returns that create a safe and secure retirement for him and so many others through the public pension systems and investor community. For those reasons, I will never forget who I work for. It is extremely fulfilling to wake up every day and get to do what I love on behalf of our investors.
How has Cityview evolved?
Over the years, Cityview has pivoted to meet the needs of the marketplace. During the 2008-2009 recession, for example, it shifted its focus from for-sale housing to multifamily – forecasting a need for the product type as residential was taking a big hit.
What’s next for Cityview? Upcoming projects?
The firm recently commenced construction on Apollo, a 265-unit multifamily development in Los Angeles’ South Bay, and will have completed four projects consisting of over 1,000 units this year nationwide.
Read more: https://labusinessjournal.com/special-reports/whos-who-in-real-estate/