HUNTINGTON BEACH, CA—While some apartment owners and developers are over-improving, Interstate Equities Corp. is concentrating on optimizing space for the current tenant rather than fashioning it after a different tenant profile's tastes, co-president and CEO Marshall Boyd tells GlobeSt.com. As we recently reported, the institutional fund manager has acquired a 400-unit value-add multifamily asset in here, “Surf at 39,” for $134 million, and while IEC will perform upgrades to the property, it is not renovating it to class-A standards but instead keeping it a workforce-housing community.
We spoke with Boyd about the way developers are viewing workforce housing today and whether luxury development is cooling off.
GlobeSt.com: What's changed in the way developers are viewing workforce housing?
Boyd: Workforce is an interesting word. It can mean a bunch of different things. For this transaction, it's a really strong location in coastal Orange County, and we wanted to differentiate it. A lot of folks in this cycle are over-improving. Our approach on this deal is consistent with what IEC as a firm has done over the last three decades: optimizing the space for the current tenant rather than making it for someone else. We want to improve the living conditions for the same resident profiles.
GlobeSt.com: Is this the beginning of a new trend?
Boyd: We're seeing some people renovating to core, trying to make a '70s asset compete against a '90s asset, and in many cases with success. This is not our approach, but it comes with additional risk.
GlobeSt.com: Is luxury development cooling off?
Boyd: No, not necessarily. The later we get into the cycle, the larger the chance of that cool-off happening, but since we're not developing, we're not as close to it as developers are.
GlobeSt.com: What else should our readers know about developers and workforce housing?
Boyd: Generally—not really for this asset because it was not family owned—but generally, private ownership of apartments has led to fewer upgrades occurring in the housing stock. Folks appreciate well-cared-for upgraded living conditions. This project looks a lot like the smaller assets we've worked on in the past. The exciting thing about multifamily is that it comes in multiple sizes, and it's unique that we like both small and large assets. Some owners only focus on small or large, be we will do either one if there's value to it.
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Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
