If there are two things Bob Hart, founder, CEO, and president of Los Angeles–based TruAmerica Multifamily, knows, it's making deals and market-rate, workforce housing.
At TruAmerica, which was founded in June 2013 in partnership with The Guardian Life Insurance Company of America, Hart and his colleagues bought $3 billion in apartments from October 2013 to October 2015.
As former CEO and president of Kennedy Wilson Multifamily Management Group and now, at TruAmerica, Hart has run predominantly Class B portfolios for households making between $50,000 and $75,000 a year.
"We're not building Taj Mahals," Hart says. "We're trying to offer a better-quality product to people who are blue or gray collar."
Hart recently chatted with MFE about how he provides this essential housing:
Tell us a little about your renter profile.
We're dealing with renters by necessity rather than the renter by choice. Our renters stay renters for a long, long time. They rent because they have to. Although the homeownership rate has come down a lot, from 70% to 63%, in this sector, it's even lower in the major metropolitan areas—sometimes closer to the 40s and 50s.
What's the competition like for B assets among investors?
Competition for B is pretty intense. We have a lot of competitors, ranging from small entrepreneurs all the way to opportunity funds. It's a very competitive space, and more competitive than it used to be.
Are you seeing Class A buyers come down to the B space in search of yield?
People who buy A, like pension funds and REITs, buy Class A because that's what they do. We have blended a little bit, but we're really a solid B renovator and owner–operator. We have a quarter of a billion in rehab backlog.
How do you underwrite rehabs in the Class B space, where renters are more sensitive to price?
Our margin for error is tighter because income constraints are tighter. We're trying to rehab to get a return on investment but not pushing the price up so high that there are no longer renters in that category who can afford our rents.
We're doing what we have to do while still offering a decent product. We're not doing $30,000-per-unit turns; we're doing $10,000-per-unit turns. We understand that there's sensitivity to price. Workforce housing is what I've been doing for 30 years. We're renting to the guy who works at the post office or who works at Walmart. It's more of a permanent renter.
Has credit quality changed?
Because the economy is strong and most families are working steadily, it's lifted the overall renter market in terms of tenant quality and being able to fill the buildings with people who can sustain and afford those rents.
How have Class B amenities changed?
We try to configure amenity spaces for larger fitness centers and create more issuable outdoor area for dog parks and pool decks. We're trying to create both indoor and outdoor spaces where people can spread out a bit and still enjoy a higher quality of life in their apartments.
