GlobeSt.com: How does the firm decide whether apartments or townhomes work better for a particular market?

Santry: To determine whether apartments or townhomes are a better fit, we review comparable multifamily properties, both for-sale and for-rent, in that specific market and submarket. From there we can identify which products and densities create the greatest residual land value, and will therefore be a more attractive project in the eyes of potential developers. We also seek to determine the sentiment of the community itself, including gathering input from city staff members and elected officials on their specific desires for a community. In many locations, renting is simply less desirable than ownership, and that can often sway our decision. Of course, at the end of the day, the housing crisis in Southern California requires that we continue to develop both types of multifamily product for the foreseeable future.

GlobeSt.com: How does the demographic for townhomes differ from that of apartments?

Santry: The demographics are very similar. Townhomes in many locations are considered first-time buyer homes, so these are the consumers moving from rental to ownership. The Millennial demographic cohort straddles, based on the range of ages, between these housing types. It is usually a life event, such as marriage and/or a childbirth, that motivates a renter to become an owner.

GlobeSt.com: What else should our readers know about the Vista disposition?

Santry: The Vista project is a great example of the flexibility Shopoff's business strategy affords us. While we originally believed the highest and best use for the property would be to entitle this land as for-rent apartments, the municipality did not agree that this was the best direction for the community. We were able to modify our strategy for this property and entitle as for-sale condominiums instead, a plan that was harmonious for both our business and the community.

|

IRVINE, CA—Shopoff Realty Investments reviews comparable multifamily properties, both for-sale and for-rent, and then identifies which products will create the greatest residual land value to attract potential developers in order to decide whether apartments or townhomes will be better on a given site, the firm's EVP John Santry tells GlobeSt.com. As we recently reported, the locally based manager of opportunistic and value-add investments has sold 16.1 acres of vacant infill land entitled for 124 two-story townhomes in Vista, CA, to residential developer CalAtlantic Homes to help ease the tight housing inventory in that Northern San Diego County submarket. The land, known by local residents as Delpy's Corner, is currently vacant.

We spoke with Santry about Shopoff's multifamily strategy in Southern California and how developers and landowners decide between apartments and townhomes on any given site.

GlobeSt.com: How does multifamily fit into Shopoff's Southern California strategy?

Santry: When it comes to multifamily, Shopoff Realty Investments considers both for-sale and for-rent product when underwriting one of our land acquisitions. With our current business plan, we seek to add value through land entitlements in municipalities and then to exit with a sale to a homebuilder or apartment developer. Current high land values have made the conventional detached for-sale home with a larger lot simply unfeasible from an economic standpoint, in most infill locations in Southern California. The additional density that multifamily permits, has made it the most sustainable product for SoCal land use, and we anticipate we'll continue to see this trend for years to come.

GlobeSt.com: How does the firm decide whether apartments or townhomes work better for a particular market?

Santry: To determine whether apartments or townhomes are a better fit, we review comparable multifamily properties, both for-sale and for-rent, in that specific market and submarket. From there we can identify which products and densities create the greatest residual land value, and will therefore be a more attractive project in the eyes of potential developers. We also seek to determine the sentiment of the community itself, including gathering input from city staff members and elected officials on their specific desires for a community. In many locations, renting is simply less desirable than ownership, and that can often sway our decision. Of course, at the end of the day, the housing crisis in Southern California requires that we continue to develop both types of multifamily product for the foreseeable future.

GlobeSt.com: How does the demographic for townhomes differ from that of apartments?

Santry: The demographics are very similar. Townhomes in many locations are considered first-time buyer homes, so these are the consumers moving from rental to ownership. The Millennial demographic cohort straddles, based on the range of ages, between these housing types. It is usually a life event, such as marriage and/or a childbirth, that motivates a renter to become an owner.

GlobeSt.com: What else should our readers know about the Vista disposition?

Santry: The Vista project is a great example of the flexibility Shopoff's business strategy affords us. While we originally believed the highest and best use for the property would be to entitle this land as for-rent apartments, the municipality did not agree that this was the best direction for the community. We were able to modify our strategy for this property and entitle as for-sale condominiums instead, a plan that was harmonious for both our business and the community.