What makes a good multifamily housing investment, and how can family offices determine if such an investment is a good fit? Sean Burton, CEO of Cityview, a real estate investment management and development firm based in Los Angeles, offers one perspective on these questions. Cityview acquires and develops multifamily housing in the Western United States, and its investors include family offices as well as institutional investors and high net worth individuals.
Where does Cityview invest, and how do investors work with you?
We have a series of discretionary comingled funds that we have launched and managed over the years. Those investors usually include a variety of groups such as family offices, high net worth individuals and large institutions. We also fund some projects individually, including some Opportunity Zone funds.
We focus like a laser on markets where you have really strong demand for housing — where you’re seeing population and jobs grow faster than the rest of the country. These are also markets where it tends to be difficult to build new housing. When you have really strong demand and not enough supply, it drives really solid investment fundamentals and returns.
Los Angeles has been a great example. You continue to have a strong job base here: entertainment, tech, gaming, healthcare, trade, tourism, aerospace — high-paying jobs, and people need to be here to do them. And we don’t build enough housing. We already have a housing crisis; it’s only going to get worse. So if you are able to invest and build and develop housing in a market like this, you end up with some winds at your back from an investment perspective.
Is now a good time to invest in multifamily housing?
A lot of people say it’s a bad time for real estate. But when everyone is buying real estate, they are really driving up prices. Right now you have fewer buyers, and in markets where the fundamentals are strong, it could be a really attractive time to buy high-quality assets at discounted prices because there is less competition.
Fundamentally, we still need housing. Relatively little new housing is starting construction right now in many markets because of interest rates. The supply/demand balance is getting worse, creating more upward pressure on rents.
You’re also seeing a lot of developers and operators who really got over their skis — they took too much leverage or they got caught short because of interest rates and they’re now being forced to sell those assets by their banks, which creates pretty interesting distressed buying opportunities for experienced operators who have dry powder and who have invested through a down cycle before. We’re in no hurry — you really want to pick your spots. But we’re pretty excited about what we’re starting to see in the marketplace and what we think is going to be coming down the pike.
Why do family offices consider this type of investment?
More and more family offices are investing in real estate. I think this is going to continue to be a bigger part of the family office investment space.
There are some common denominators among investors. They want stability. They want to work with experienced developers and operators who are going to be good stewards of their capital. If you’re looking to triple your money overnight, you’re not going to get those kinds of returns in multifamily real estate. It’s generally a very stable business. A lot of our family offices are thinking about capital preservation — they’re thinking about the long-term, in terms of generations, not quarters — and real estate lends itself really well to that. Real estate is also very tax efficient, which is important to family offices and high net worth investors.