Los Angeles–based Cityview is a leading developer and operator of attainable and market-rate multifamily communities in the West. Founded two decades ago, the firm specializes in developing, acquiring, and operating opportunistic and value-add properties. It manages approximately 5,200 multifamily units, of which over 1,600 units are in active renovations and over 1,500 units are under development. MFE checked in with CEO Sean Burton to discuss what he’s seeing in the current market.
MFE: As a multifamily investor and developer, what have been your biggest challenges so far this year?
Burton: It has been an interesting year in multifamily because it has been a tale of two cities. On the ground, operations and underlying fundamentals have remained strong in our Western U.S. markets. We have continued to see healthy occupancy and rent growth throughout the year. The biggest challenges have been the disruption in the capital markets coupled with the steep and rapid rise in interest rates. The high cost of financing has made many projects not pencil, especially as sellers are still adjusting their expectations on what that means for current values. As a result, transaction volume dropped dramatically, making it difficult to do good deals in the first half of the year.
MFE: Where are you seeing opportunities?
Burton: We are starting to see transaction volume tick up, and many of the deals hitting the market are trading, or expected to trade, at a significant discount to replacement cost. We see more and more sellers needing to transact (many of whom got over their skis by buying at historically low cap rates in 2021–2022 with variable-rate debt and two-year caps), which we expect will present an opportunity to acquire well-located, well-performing assets at a deep discount to replacement cost.
MFE: What is your outlook for the remainder of the year?
Burton: We are excited about potential upcoming buying opportunities. We have dry powder and are being patient about how we deploy our capital. We are creative buyers, and I believe that gives us an advantage in this uncertain market. We had an extremely successful 2007 vintage fund because we were able to employ some of the strategies we are planning to use over the next 12 to 18 months, focusing on agility, patience, and creativity along with rigorous underwriting.
MFE: What’s in the multifamily pipeline for Cityview?
Burton: We have a number of deals at various stages in our pipeline. We have delivered or are delivering several projects this year. One thing we are seeing is that there is still robust renter demand in the market. We delivered a 296-unit project in Southern California in mid-July and are already over 55% leased [as of the beginning of August], making it the most successful preleasing campaign in the history of Cityview. On new deals, in addition to potential distressed acquisition deals, we are seeing a number of interesting re-entitlement opportunities, allowing us to re-entitle land with an obsolete use and secure a very attractive per door land basis.
MFE: Is there an upcoming development that you would like to tout?
Burton: We just put a deal under contract in Denver near DTC. The site is across the street from a light-rail station with phenomenal mountain views in a submarket that has not seen a ton of recent new supply. We plan to re-entitle the site as multiple parcels to create maximum optionality at a basis significantly lower than other deals we are seeing in the market. By putting in the extra work and expertise to re-entitle the site, we can add significant value for our investors. Based on the project timeline, we anticipate financing the project in a more stable debt market and delivering a high-quality product into a market that will not have seen much near-term supply given the recent drop-off in construction starts.
MFE: What multifamily trend have you embraced recently?
Burton: We work to ensure that all of our project and resident offerings are leading edge and meeting or exceeding expectations. For us, especially with our development projects, that often requires optionality so we can repurpose spaces as needed. By keeping spaces flexible so they can serve multiple purposes for our residents, and designing them so they can be easily adapted as technology and trends evolve, we are able to embrace new trends as they occur.
MFE: What is one policy change you would like to see made?
Burton: We would like to see some relief from recent regulations that are chilling new investment in certain communities. One example of that is in Los Angeles. We have historically been very active in the city of Los Angeles, but with the passage of ULA (the “mansion tax”), which imposes the highest gross city transfer tax in the country, it has made it extremely challenging to make deals pencil. It has also made some investors redline Los Angeles completely. For a city that desperately needs housing and especially workforce housing, this policy is already proving to have the opposite effect and will put the city at a disadvantage for attracting new investment in housing and other commercial real estate.
MFE: Outside of work, how do you spend your time?
Burton: I really enjoy being outdoors. I spend a lot of time fly fishing, mountain biking, hiking, and playing golf, when I can fit it in. This past year, my son played his last season of baseball at NYU, and I enjoyed traveling to a number of his games to cheer on him and his team.
MFE: Latest read?
Burton: “Road to Surrender” by Evan Thomas