OC Capital Is Heading Out of State

It is no secret that capital is starting to chase yield outside of Southern California. Phoenix and Denver had been the markets of choice for Southern California-based capital sources, but now Northern Las Vegas is joining the list, as well as Tucson and Salt Lake City. Orange County-based Alpha Wave Investors is starting a new round of value-add investment after completing its business plan and disposing of six properties. The firm has acquired Cypress Springs, a 144-unit apartment complex in Northern Las Vegas. We sat down with Jordan Fisher, a founding partner at Alpha Wave, to talk about why the firm is so bullish on Las Vegas and why it isn’t looking in Southern California markets.

GlobeSt.com: What has attracted you to the North Las Vegas market?

Jordan Fisher: This is our most recent acquisition and only property in this market, but we started investing in Las Vegas in 2014 and we sold six properties in 2017. What first attracted us to the market in 2014 was a little bit different than what attracts us there today. It was a more opportunistic move, and we took properties that were really struggling and stabilized them. We did well doing that. We like the Las Vegas market now because it is a little less heated than Southern California or even Phoenix; it is smaller, so you aren’t competing with a lot of the institutions; it has a growing job market; and it doesn’t have as much new supply coming on the market. We are still bullish on Las Vegas.

GlobeSt.com: Las Vegas has become a popular investment market in the last year. How has the market changed since you started investing there?

Fisher: It has changed dramatically. In 2015, when we were first acquiring assets, Las Vegas was still a bad word to a lot of people. A lot of the lenders that we talked to at that time weren’t interested in the Las Vegas market, even from a debt perspective. For investors, there are a lot of bad memories there. Fast forward to 2018, it is a completely different story. People have seen the growth prospects and the rent growth and the job growth, and there is a lot more interest. That has also made it harder to buy, but when you do find a good opportunity, there is a lot more interest on the debt and equity side.

GlobeSt.com: You were an early investor in the market. Do you think that has given you an advantage over competition today?

Fisher: Definitely. We know the brokers that have done the deals here, but we have also performed as buyers. One of our strategies in trying to get off-market opportunities is to try and be the buyer or investor that you would want if you were the seller. That is one that does their homework upfront, and once we go under contract, we try to make it a very clean deal with limited re-trades, and only if it something that we couldn’t have known before going into the deal. We do our best to make it smooth for everyone, and I think that reputation has helped up. Also, when we reach out to equity capital sources, we can show that we aren’t new to this market and we know the market and we feel confident in our proforma rent projections.

GlobeSt.com: Have you changed your strategy as the market has grown?

Fisher: It has changed a little bit in that the first investments that we made were really more distressed properties. We acquired properties that were 30% occupied, and there was a lot more difficult work to be done with a lot of deferred maintenance. This property is a little bit different in that it is a true value-add deal, where the property has been well maintained but needs a refresh. We can concentrate our capital on revenue-generating work rather than addressing the deferred maintenance.

GlobeSt.com: Why have you moved your investment focus outside of California?

Fisher: We are active in Tucson, Las Vegas and Salt Lake City. We do underwrite in Southern California, but we have not been able to do a transaction in the last three years in Southern California. The prices that properties are trading for in the Southern California market just don’t meet our underwriting standards. We continue to look, and we would love to do local deals—but they have to meet our underwriting standards. We have not been successful in finding anything so far. As much as we would like to grow, we don’t want to do any bad deals. As a result, we are being very selective on our deal flow at this point.

GlobeSt.com: What are your investment goals in the market this year?

Fisher: Cypress Springs was the third deal that we closed this year, and we would like to do six deals this year. However, that deal is secondary to not doing a bad deal. We would rather not meet that goal that do a deal that doesn’t meet our standards.