Institutional investors are interested in increasing the amountof California multifamily product in their portfolios—with goodreason. While the market has bottomed and occupancy is strong, dueto a delayed recovery, California has not yet experienced the samerun-up in rents that other major MSAs have experienced. Therefore,the opportunity for investors to take advantage of the major uptickin rents in California still exists.

In addition, while some construction has begun, a majority ofthat work is in the planning phase. This means that there won't beany meaningful new supply for two to three years. With highoccupancy in existing product, rents increasing and no newdevelopment on the near-term horizon, this is an excellent time forinstitutional investors to acquire in California with the rightlocal partner. Interestingly, though, after the last several yearsof a tough financial climate, we've seen many local multifamilyfirms close up shop, leaving institutional investors fewer choicesas to which local firm to choose as a partner.

Why did some firms do better than others? Some experiencedfirms—ourselves included—saw the signs and simply stopped investingin new multifamily product in 2007. Because we had stopped at thattime, we not only avoided problem property buys and debt, but alsohad capital on hand to take advantage of opportunities that beganin 2010. Additionally, companies with a range ofoperations—including acquisition, development, construction andproperty management—were able to remain active in the market whenothers stopped during the downturn. As a result, they were able toavoid layoffs and retain all of strong team members.