Multifamily Lenders Look to the Coast

LOS ANGELES—Multifamily lenders are looking to coastal infill markets for multifamily opportunities. Arixa Capital is finding the best opportunities in major coastal California markets, including Los Angeles, where it has more than half of its projects, as well as Orange County and the Bay area. These markets have strong access to job centers, which is one of the firm's key investment characteristics.

“The big thesis plan of our whole business is that people would prefer to have less square footage to be close to where they work than having a lot of square footage but have to commute an hour every day,” Jan Brzeski, CIO and managing director at Arixa Capital, tells GlobeSt.com. “We are betting on housing shifting to urban, smaller projects that are close to the best jobs. The supply of those projects is very constrained because it is hard to deliver the product. It is always going to be oversupplied in the areas where it is easy to deliver product. We are lending to people that are delivering product where it is the most difficult. That seems to not be oversupplied.”

The firm believes that proximity to job centers will help protect against a future recession. The other key factor in these sites is price point, especially since being a player in coastal markets isn't cheap. “We are trying to avoid very high price points, whether that be for-sale or huge rental rates that make the project hard to pencil,” he adds. “We are trying to stay more focused on workforce price-points or dual-income price points. Basically, if you can hit the right price points and be close to where the best jobs are, you can't go wrong. Of course it is hard to do that when you go to where the best jobs are.”

Specifically, Arixa focuses on smaller developers that can take on a small development site, which are more common in these markets. “We should have more redevelopment of urban infill sites,” says Brzeski. “A lot of the parcels that are available for redevelopment are not one or two or three acres. They are 14,000 square feet or 12,000 square feet. We are enabling the smaller developers to build smaller projects, and I believe that those will fill a big part of the need.”

LOS ANGELES—Multifamily lenders are looking to coastal infill markets for multifamily opportunities. Arixa Capital is finding the best opportunities in major coastal California markets, including Los Angeles, where it has more than half of its projects, as well as Orange County and the Bay area. These markets have strong access to job centers, which is one of the firm's key investment characteristics.

“The big thesis plan of our whole business is that people would prefer to have less square footage to be close to where they work than having a lot of square footage but have to commute an hour every day,” Jan Brzeski, CIO and managing director at Arixa Capital, tells GlobeSt.com. “We are betting on housing shifting to urban, smaller projects that are close to the best jobs. The supply of those projects is very constrained because it is hard to deliver the product. It is always going to be oversupplied in the areas where it is easy to deliver product. We are lending to people that are delivering product where it is the most difficult. That seems to not be oversupplied.”

The firm believes that proximity to job centers will help protect against a future recession. The other key factor in these sites is price point, especially since being a player in coastal markets isn't cheap. “We are trying to avoid very high price points, whether that be for-sale or huge rental rates that make the project hard to pencil,” he adds. “We are trying to stay more focused on workforce price-points or dual-income price points. Basically, if you can hit the right price points and be close to where the best jobs are, you can't go wrong. Of course it is hard to do that when you go to where the best jobs are.”

Specifically, Arixa focuses on smaller developers that can take on a small development site, which are more common in these markets. “We should have more redevelopment of urban infill sites,” says Brzeski. “A lot of the parcels that are available for redevelopment are not one or two or three acres. They are 14,000 square feet or 12,000 square feet. We are enabling the smaller developers to build smaller projects, and I believe that those will fill a big part of the need.”