Apartment developer sets sights on young families of modest means
While many Southern California apartment builders are racing to attract hip, single urbanites with lots of cash, one Los Angeles developer is taking a different tack and pursuing young families of more modest means.
Decron Properties Corp. is buying and upgrading aging apartment complexes in semi-suburban towns, such as Simi Valley, Chino Hills and Moorpark, where residents are seeking family-oriented communities away from the congestion and bustle of Los Angeles.
There are many potential renters who want to raise children in quiet, upscale neighborhoods with good schools but can’t afford homes in sought-after urban centers such as the Westside of Los Angeles, said David J. Nagel, president of Decron.
“Young families are being priced out of the major urban metropolitan centers, and they are not looking for nor can afford to buy a home,” Nagel said. “They want a quality rental that gives them certain levels of security and comfort, and ultimately luxury at a price they can afford.”
By keeping their distance from trendy urban centers where real estate is expensive, Decron keeps its costs down while creating residences for people looking for a more sedate lifestyle.
“Much of the new housing stock is focused on downtown, West L.A., Hollywood and Pasadena,” Nagel said. “Construction is really focused on millennials who are blessed with strong educations that have given them the opportunity to be stationed in high-tech jobs that pay $90,000 to $100,000 a year.”
That means many workers such as schoolteachers are priced out or have to devote an outsized portion of their salaries to rent, he said. Decron’s strategy calls for creating desirable housing for families that earn $50,000 to $65,000 a year.
With that audience in mind, rents for Decron apartments average roughly $1,400 to $1,650 a month, which conforms to economists’ advice that renters should spend no more than one-third of their income on rent.
Decron’s rents are counter to the trend in Southern California in which many upscale apartments are increasingly out of reach of average wage earners. According to a recent study by the UCLA Ziman Center for Real Estate, Los Angeles is the most unaffordable rental market in the United States.
The report said 54% of renters in Los Angeles, which boasts the largest share of renters versus owners in the country, spend at least half of their income on rent, a category UCLA refers to as “severe rent burden.”
But the rising cost of buying a house or a condominium will keep many renters from transitioning to owners, said Eric Sussman, a senior lecturer at the Ziman Center.
“With the increases in housing prices, a lot of young white-collar families — dual income-earning professionals — are going to be lifelong renters,” Sussman said.
U.S. cities with very expensive housing such as New York and San Francisco have long had prosperous permanent renters, but the trend is fairly new to the Southland, he said.
Decron’s plan to cater to young families priced out of homes is consistent with the direction the market is going, he said, and not just because they’re trying to hold rents down. Urban neighborhoods aren’t known for being kid-friendly.
“Young families are concerned with amenities for children from day care to elementary schools to parks and playgrounds,” Sussman said. “And they want safe neighborhoods.”
Decron — which owns retail centers, office buildings and apartments in 55 locations — is targeting multifamily complexes that are about 30 years old in outlying neighborhoods with good schools and within commuting range of employment centers.
A year and a half ago Decron acquired the 1985-vintage Creekside Apartments in Simi Valley for $70 million. It renamed the 397-unit complex River Ranch and set about improving the units with new cabinetry, stone countertops, new light fixtures and the well-received addition of washers and dryers.
“We’re finding that’s an important feature,” Nagel said. “We’re getting away from [community] laundry facilities.”
In common areas, Decron added barbecues, a children’s play area, outdoor lounge furniture, fire pits and a dog run. “All the sexy things you are hearing about in brand-new projects,” he said.
By Decron’s calculations, it can buy an older apartment complex for about half the price of building a new one. Then it spends about $30,000 per unit on improvements inside and out. When finished, Decron can rent the units for about 25% less than competing new apartments, Nagel said.
The company tries to boost its appeal by upgrading its gyms in the hope that potential renters will decide they can drop their health club memberships if they move to a Decron property.
“We have spinning classes, Pilates, Zumba and all the classes they would get in a gym facility,” Nagel said.
River Ranch tenant Donna Mirczak, who shares a unit with her daughter and grandson, said she hoped to buy a house when she moved to Simi Valley two years ago but found them too expensive. She said she is pleased with the recent upgrades, including the addition of a pool table in the recreation area.
“I love pool,” she said, but she admitted with a chuckle that sometimes her fellow tenants are wary when she shows up to play.
“I have my own cue stick,” she said.