Decron Completes $193M Multifamily Trade

LOS ANGELES—Decron Properties Corp. has completed a multifamily transaction valued at $193 million. The investor traded out of its sole multifamily asset in Sacramento, a 264-unit property, with Sequoia Equities for a two-property multifamily asset in Simi Valley. The Decron traded the single asset along with cash for the portfolio, which includes the 372-unit The Villas and the 132-unit Overlook. The two properties are both located in the Wood Ranch master planned community. To find out how this massive deal came together, and why the firm traded out of Sacramento, we sat down with Daniel Nagel, VP of acquisitions and finance at Decron Properties Corp., for an exclusive interview.

GlobeSt.com: What was the impetus for this trade and how did it come together?

Daniel Nagel: We only owned one asset in Sacramento and while Sacramento continues to boast sound market fundamentals for multifamily investment, we were operating inefficiently. The equity from the sale of Broadstone is being deployed to meet our current strategic focus in more core California markets adjacent to major employment centers which includes first ring submarkets around Los Angeles, Orange County, San Diego, Silicon Valley and East Bay (Contra Costa and Alameda County) where we believe sustained rent growth can be achieved over time. In addition, we already own 1200 units across 4 communities in East Ventura County and are very familiar with the demographics and rental upside.

A lot of pieces needed to fall into place in order for this transaction to occur. A direct exchange is highly unusual and had never been executed by any of the parties involved all of whom collectively have hundreds of real estate transactions under their belt. It started with IPA representing both parties in their respective sales. When we learned that Sequoia Equities was as interested in our Sacramento property as we were in their Simi Valley portfolio, we asked the brokers to find a creative way for both companies to achieve their business goals at a time where deal volume has slowed significantly and inventory is limited.

GlobeSt.com: Why was the Simi Valley portfolio a good acquisition opportunity?

Nagel: The Ventura County economy continues to be driven by strong job growth in high-tech, clean energy, and healthcare. Highly educated professionals are migrating to the area from Los Angeles and beyond, for the jobs, great schools and quality of life, but are finding quality affordable housing options difficult to come by in one of the most supply constrained multifamily markets in Southern California. The confluence of demand drivers and limited supply creates a compelling value-add story. In addition, Decron can operate at maximum efficiency in Simi Valley given that we own 1200 units across 4 other communities within 10 miles of these assets.

GlobeSt.com: What are your plans for the portfolio?

Nagel: We intend to fully renovate all 504 units with new cabinetry, new quartz countertops, new vinyl plank flooring, new doors, new baseboards, new lighting and plumbing fixtures. In addition, the community's common area amenities including pool, gym, and outdoor lounge areas will be enhanced and modernized.

GlobeSt.com: How does this deal fit into your current acquisition strategy?

Nagel: Over the last three years Decron has acquired $500 million of multi-family communities all located in areas that meet the following criteria: Jobs, meaning the property is adjacent to major employment centers; schools, meaning the property is located in areas with highly rated public schools; and supply, meaning the location is in an area with high barriers to entry and limited supply. This acquisition meets all three criteria and being of 1980's vintage, in need of renovation.

LOS ANGELES—Decron Properties Corp. has completed a multifamily transaction valued at $193 million. The investor traded out of its sole multifamily asset in Sacramento, a 264-unit property, with Sequoia Equities for a two-property multifamily asset in Simi Valley. The Decron traded the single asset along with cash for the portfolio, which includes the 372-unit The Villas and the 132-unit Overlook. The two properties are both located in the Wood Ranch master planned community. To find out how this massive deal came together, and why the firm traded out of Sacramento, we sat down with Daniel Nagel, VP of acquisitions and finance at Decron Properties Corp., for an exclusive interview.

GlobeSt.com: What was the impetus for this trade and how did it come together?

Daniel Nagel: We only owned one asset in Sacramento and while Sacramento continues to boast sound market fundamentals for multifamily investment, we were operating inefficiently. The equity from the sale of Broadstone is being deployed to meet our current strategic focus in more core California markets adjacent to major employment centers which includes first ring submarkets around Los Angeles, Orange County, San Diego, Silicon Valley and East Bay (Contra Costa and Alameda County) where we believe sustained rent growth can be achieved over time. In addition, we already own 1200 units across 4 communities in East Ventura County and are very familiar with the demographics and rental upside.

A lot of pieces needed to fall into place in order for this transaction to occur. A direct exchange is highly unusual and had never been executed by any of the parties involved all of whom collectively have hundreds of real estate transactions under their belt. It started with IPA representing both parties in their respective sales. When we learned that Sequoia Equities was as interested in our Sacramento property as we were in their Simi Valley portfolio, we asked the brokers to find a creative way for both companies to achieve their business goals at a time where deal volume has slowed significantly and inventory is limited.

GlobeSt.com: Why was the Simi Valley portfolio a good acquisition opportunity?

Nagel: The Ventura County economy continues to be driven by strong job growth in high-tech, clean energy, and healthcare. Highly educated professionals are migrating to the area from Los Angeles and beyond, for the jobs, great schools and quality of life, but are finding quality affordable housing options difficult to come by in one of the most supply constrained multifamily markets in Southern California. The confluence of demand drivers and limited supply creates a compelling value-add story. In addition, Decron can operate at maximum efficiency in Simi Valley given that we own 1200 units across 4 other communities within 10 miles of these assets.

GlobeSt.com: What are your plans for the portfolio?

Nagel: We intend to fully renovate all 504 units with new cabinetry, new quartz countertops, new vinyl plank flooring, new doors, new baseboards, new lighting and plumbing fixtures. In addition, the community's common area amenities including pool, gym, and outdoor lounge areas will be enhanced and modernized.

GlobeSt.com: How does this deal fit into your current acquisition strategy?

Nagel: Over the last three years Decron has acquired $500 million of multi-family communities all located in areas that meet the following criteria: Jobs, meaning the property is adjacent to major employment centers; schools, meaning the property is located in areas with highly rated public schools; and supply, meaning the location is in an area with high barriers to entry and limited supply. This acquisition meets all three criteria and being of 1980's vintage, in need of renovation.