Microfund Slated to Earn 19% Return

LOS ANGELES—Beach Front Properties LLC has closed its 23^rd microfund, Beach Front Vintage 2014. The fund focuses on distressed multifamily assets in Southern California, and is expected to generate a 19% return—the company's historical average—for investors. As a result, the fund was extremely popular, closing 10% over projections, at $11 million.

“We had more investors that wanted to invest. It was only suppose to be a $10 million fund, and we extended it to $11 million,” Kyle Kazan, co-founder of Beach Front Properties, tells GlobeSt.com. “Our investment strategy is to buy distressed assets, which can be hard to find, but we have been able to find some unique properties.” Kazan purchased the properties while the fund was still open, and the properties are now in the renovation stages. He anticipates holding the properties for seven years, which is the life of the fund. “Typically we will go on the longer end because we're good at turning these around and because people like cash flow and sheltered income from depreciation,” he adds. “So, I think this will land around seven years.”

Beach Front Vintage 2014 has focused on multifamily properties in the Long Beach area, as well as neighborhoods adjacent to Downtown Los Angeles and the South Bay, specifically in Wilmington, San Pedro and Hawthorne. As Kazan explained, distressed assets can be hard to find, and when they do come to market, they usually see tremendous competition. However, Kazan has found a competitive advantage. As a former police officer, he is drawn to high crime areas where he can get a phenomenal deal with little competition. “I was a police officer for five years, so where we have some crime or some issues where the property is really destabilized and a lot of buyers are turned off, we are able to dive in and get a nice pop,” he says. “That gives us an extra edge.”

The previous funds have been able to generate such high returns because Kazan is extremely meticulous about the types of properties he'll buy, and maintains very strict guidelines. “I am amazingly particular,” he says. “We have probably passed up some amazing opportunities and sat and waited for properties that we just couldn't resist. For 19 years, we have been able to have a golden touch. I really like the properties that we bought. We didn't over leverage these properties, so I think we have some downside protection risk. I really like the upside here, and I think we are going to adjust the NOI over the next couple of years.”