Somerset Properties

I’m excited to share about hitting a significant milestone with the Somerset project last week. The Somerset property consists of 10 residential units spread out between an 8-unit apartment building and a detached 2-unit ADU structure, located in the West Adams neighborhood of Los Angeles. I’ve been working with Ari Wintraub and Jeremy Lappen to revitalize the property through a value-add approach in several phases – first phase included unit rehabs and modernizing the existing 8-unit building; second phase was to activate the front yard and provide open social space for the residents; and the third phase was a new construction of the detached 2 ADUs. The past week we attained the Certificate of Occupancy on the 2 ADUs and had tenants move in, making the property fully stabilized!

When we first purchased the property in 2021, the entire site and existing building was in poor shape after years of neglect, needing major TLC. Through improvements to the units and site, we were able to provide much higher quality spaces for living and give our tenants access to a community outdoor space. On a level of financial performance, our approach was able to increase the gross income generated by the property by 207%, and in turn raised the evaluation of the property based on the increased NOI of the property.

The journey was not one without challenges. As we navigated the various hurdles, from dealing with the painfully slow permitting process in Los Angeles, to constant setbacks with construction and unanticipated issues that come with older buildings, we’ve definitely had a longer ramp-up to full occupancy than originally projected. Then in Q2 of 2022, came the sharp rise in interest rates, and we had to make a quick push on refinancing out of a hard money loan into a perm loan to secure a decent rate, before fully completing the ADU construction. Despite the challenges, a conservative proforma helped us land where we are, with rents outperforming our original 2021 assumptions and helping to make up for the extra time and expenses incurred along the way. With the property now stabilized, we are anticipating a 5 year hold (possibly more); with the current performance, we anticipate 18% IRR and 3.1x MOIC at exit.

Front Facade

Typical apartment Living Room in 8-unit

Typical ADU studio

Front Yard

The passion for wanting better communities and elevated living environments is what makes small scale development projects like this worthwhile. It has been a rewarding process to reposition the Somerset property, and I look forward to seeing other properties in the area undergo a similar transformation to bring up the quality of the community overall.

Resilience in the Workplace

There is a lot of discussion on what steps need to be taken to reopen the economy and start bringing life back towards normalcy. It is most likely our lifestyles will not go back to exactly how they were before COVID-19, and we must understand and figure out ways to adapt our living, working, and playing environments to a new, safer day-to-day. While a vaccine or treatment might be available sometime in the future, we need to think of creative ways to re-establish and re-open businesses in the interim.

Many building codes, city planning, and infrastructure models were developed as responses to previous pandemics, and today’s situation will be no different. Short-term, the trend seems to favor the more resilient Class A commercial spaces, and will increase their demand. However, long-term, this can open up opportunities in the larger inventory of Class B commercial space, if the older buildings with outdated systems are updated and positioned correctly. Creative office floorplans with close, high-density workstations will need to be reconfigured to give more space to each employee using the space, and emphasis will be placed on effective air ventilation and sanitation.

Here are some design adjustment that can help with creating a safer working environment for commercial spaces, as we transition from the stay-at-home life and re-engage in social interaction.

Air Filtration

One of the key elements of creating a healthy indoor space is having adequate air circulation and ventilation to remove stagnant air and filter out airborne particulates. Original building ventilation guidelines and requirements were based on preventing the spread of infectious diseases; however, during 1970’s the focus on building ventilation was shifted to energy usage and savings. The easiest and most cost-effective approach to getting fresh air is simply opening the windows. In building that have fixed glazing and controlled envelopes, HEPA filters should be used for the HVAC equipment through the building. For residential spaces and WFH applications, an air-purifier like Molekule or Dyson is a great solution so conditioning a small space.

Touch-free solutions

Restroom fixtures – water closets, faucets, dispensers, hand dryers, etc. – come in a variety of motion-activated versions and should be implemented to keep public restrooms sanitary. Expect to see more motion-activated and mechanized doors which will not require handling the hardware. Where security is required, magnetized access hardware provides the ability for keyless entry that can be granted by keyfob or opened from your cell phone. When electronic hardware updates are cost prohibitive or does not comply with codes, consider copper finishes which are inherently anti-microbial.

Cellphones have great capacity to be used as our personal controls to our environments with automated systems which allow us to control lights, temperature, and other technology within our homes and workspaces.

Personal Space Graphics

Even as businesses and social spaces begin to open, it is likely that the concept of social distancing will be more prevalent than before. The layout of public spaces will need to be re-thought to allow for circulation patterns and personal space to promote social distancing. We’re seeing DIY applications of this in grocery stores and pharmacies where aisles are converted to one-way traffic and tape marks indicate cue patterns at the registers, but I expect to see graphic designations become more widespread in public spaces. Cushman&Wakefield touches on these concepts in their application of the 6 Foot Office, which addressed the use of social distancing and personal space in an office setting.

Interested to find out how to apply these tactics to your workspace? Let’s discuss solutions!