CARLSBAD, CA—The ability to acquire almost 30 acres in an extremely infill coastal Southern California market is the most intriguing part of Decron's purchase of eaves Carlsbad, the firm's VP acquisitions and finance Daniel Nagel tells GlobeSt.com. We spoke exclusively with Nagel about the purchase and rebranding of the property, Decron's single-largest acquisition at 450 units and $112 million, and how the firm approaches apartment renovations. Stay tuned to GlobeSt.com for an upcoming interview with one of the Reserve's developers that delves into how Carlsbad has managed to control its density and grow its economy over time.

GlobeSt.com: What stands out for you in the eaves Carlsbad transaction?

Nagel:What we found most intriguing about the eaves Carlsbad (which we are rebranding as the Reserve at Carlsbad) was the ability to acquire almost 30 acres in an extremely infill coastal So Cal submarket less than 2 miles from the Pacific Ocean. The community has great retail support, with a direct staircase leading from the property to the 1-million-square-foot Westfield Carlsbad mall, which is currently undergoing a multi-hundred-million-dollar renovation. From a location stand point, the property has everything: infill, coastal, walkability to retail, excellent school district and proximity to jobs.

GlobeSt.com: How does your firm approach apartment renovations?

Nagel:Our apartment renovations follow our investment thesis of acquiring well-located older communities that are in need of renovations. We invest strategic capital into unit interiors and common areas to create a luxury housing product that the middle and upper-middle class can afford. Our unit interior finishes (stone countertop, modern hardware and light fixtures, stainless-steel appliances, plank flooring, in-unit washer-dryers) rival any brand-new class-A apartment community, but we are able to price the rent at a 20% to 30% discount. Other than the unit having an 8-ft. ceiling, the renter sees and feels like they are living in a brand-new community. Due to the high cost of construction and land, our cost basis, renovating older properties, is substantially less than ground-up development and allows us to charge a lower rent and still maintain the appropriate risk-adjusted return threshold for our investors.

We also emphasize common-area amenities such as high-end gyms, resort-style pools and outdoor areas. With the availability of almost 30 acres, we are planning multiple outdoor lounges with fire pits and kitchens at the Reserve at Carlsbad to take advantage of the beautiful year round coastal weather.  

GlobeSt.com: What other markets appeal to your firm?

Nagel: We are focused on infill California markets with top-tier public schools in the surrounding "first ring" communities of job-center markets. Within those markets, we focus on acquiring the aged housing stock that grants the opportunity to create an affordable luxury housing product for middle to upper-middle-income families and young professionals. In the past months, we have invested in Simi Valley, Moorpark, Chino Hills, Walnut Creek, and Mountain View. Carlsbad, with its top-tier schools and adjacent employment center within the Palomar Airport area, fits these criteria perfectly.

GlobeSt.com: What else should our readers know about this transaction?

Nagel: This acquisition represents Decron's seventh value-add acquisition, totaling 2,100 units and $500 million of new acquisitions in the last 30 months. We have no institutional partners and invest on behalf of a close-knit group of high-net-worth individuals. Our entrepreneurial style allows us to make quick decisions, which sellers love. In order to acquire the Reserve, we were willing to release a substantial portion of our deposit upon signing the PSA because between Decron employees and consultants, 12 people toured the property prior to being awarded the deal. Ultimately, this level of due diligence gave us comfort to be aggressive with our timing which we believe helped us win the deal.