Seeing opportunities for gainful return on investment in a prosperous real estate market, Stockton-based The Grupe Company has teamed up with Coldwell Banker Commercial BLAIR WESTMAC to buy, rehab and sell apartment buildings in Long Beach.
After flipping hundreds of single-family homes in foreclosure in Southern California after the recession, The Grupe Company, which has 50 years of experience developing, buying and selling commercial and residential real estate mostly in Northern California, started buying apartment complexes in the area nearly three years ago, as changing demographics and market conditions have made multi-family residential property a prime real estate investment.
Representatives of The Grupe Company and Coldwell Banker Commercial BLAIR WESTMAC are seen in front of an apartment building at 1347 E. 3rd St. in Long Beach that is for sale. Pictured bottom row from left are: Cameron Jacques, associate for Coldwell Banker Commercial; Suzanna Willingham, asset manager/designer for The Grupe Company and Austin Carr, associate for Coldwell Banker Commercial. Pictured top row from left are: Chad Van Alstine, assistant vice president at The Grupe Company; Steve Warshauer, vice president of Coldwell Banker Commercial; William Larsen, acquisition analyst/manager for The Grupe Company; and George Bustamante, vice president of Coldwell Banker Commercial. (Photograph by the Business Journal’s Larry Duncan)
The Grupe Company, which has offices in Costa Mesa, continues to see multiple offers on apartment buildings in Long Beach from investors, mostly from outside of the area, looking for repositioned, turnkey properties as rents continue to rise, Chad Van Alstine, assistant vice president at The Grupe Company, told the Business Journal.
“We see so many apartments [in Long Beach] that are just underutilized and see so much value there,” he said, noting that the real estate development and investment firm considers Long Beach as “undervalued” and one of the leading Southern California cities, such as Orange and South Pasadena, that are “slowly changing” with ongoing capital improvements, continued job growth and a rising population of young people.
Van Alstine, who grew up in Long Beach, said The Grupe Company has so far completed six sales transactions of apartment buildings in Long Beach. The goal, he said, is to buy multi-family residential properties, many of which haven’t been upgraded in decades, make investments, such as upgrading kitchens, adding onsite laundry amenities or creating small yard space for pets, and then eventually selling to investors.
The Grupe Company’s first transaction in Long Beach, Van Alstine said, was completed about two years ago and comprised a small apartment building on 4th Street in the Retro Row business district. After reconverting a portion of the property from office space back to residential, the property was quickly leased up, he said.
Real estate brokers with Coldwell Banker Commercial BLAIR WESTMAC of Long Beach have been able to assist The Grupe Company with marketing and finding potential buyers and sellers of apartment assets throughout the city.
Photographs show the kitchen of an apartment unit at 1347 E. 3rd St. in Long Beach before and after The Grupe Company made renovations to the unit. The Grupe Company and Coldwell Banker Commercial BLAIR WESTMAC have teamed up to buy, rehab and sell such apartment units throughout Long Beach as changing demographics and market conditions have made multifamily residential property a prime investment. (Grupe Company photographs)
“[Coldwell Banker Commercial BLAIR WESTMAC] has been able to help us market, find deals in these assets and really understand our model,” Van Alstine said. “We’ve been able to turn [apartment buildings], and they’ve been able to find buyers that want that turn-key property.”
Many of the recently upgraded properties have attracted a new demographic of renters who are mostly female, have pets and are willing to pay a little bit more in rent for better amenities, he said. Most of the apartment stock in Long Beach was first built in the 1930s and 1940s, and apartment owners have put just the “bare minimum” into renovations, Van Alstine said, adding that Grupe is targeting these properties where there is opportunity for high return on investment.
In a “seller’s market” for multi-family properties, demand remains high while inventory of properties for sale is low, said George Bustamante, vice president of Coldwell Banker Commercial BLAIR WESTMAC, and who specializes in multi-family investments and retail leases in Long Beach.
Although Long Beach has a large stock of apartment buildings, there are actually few properties for sale, he said, adding that many property owners are in no hurry to sell and, if they do, are able to get premium price even without upgrades. Brokers are often searching for potential sales of multi-family properties that have yet to hit the market.
“Inventory for sale is very tight,” said Bustamente, who works with Coldwell Banker Commercial BLAIR WESTMAC Vice President Steve Warshauer and associates Cameron Jacques and Austin Carr on deals with The Grupe Company. “There has to be enough of the spread and interest from the seller to make the deal . . . We spend a lot of time reaching out to owners who don’t have it on the market yet.”
Investors are able to get a higher return on investment on apartment buildings in Long Beach, where capitalization rates or “cap rates” (the ratio of net operating income to property asset value) on apartment buildings are 4.5 to 5 percent, about double the percentage for multi-family properties in neighboring cities in Orange County and San Bernardino, he said.
“The returns are really good here,” Bustamente said. “Long Beach is still a very good value relative to Pasadena, the South Bay, San Gabriel Valley, Newport Beach, Huntington Beach, Costa Mesa or anything in Orange County. Our investors are getting a better return and they’re finally recognizing it.”
Jacques, who specializes in multifamily residential properties, agreed, saying, “You’ll pay more up there for the building and pay less here and get a better return.”
Nationally, the No. 1 product for real estate sales continues to be apartment buildings, he said, adding that multi-family residential property sales for the past couple of years have been leading all real estate sectors. He said multi-family residential real estate is also an attractive investment since it provides smooth long-term yield curves.
Bustamente said demand for multi-family housing in Long Beach and elsewhere will remain steady at least for the next two to three years as younger age groups enter employment and move out on their own.
Looking toward the future, Van Alstine said The Grupe Company is considering the possibility of holding on to more apartments rather than selling. In addition, he said the company is looking into providing more housing for U.S. veterans in Long Beach as well while possibly investing in boutique hotels or commercial spaces throughout the city.