Onni Group has become one of LA’s biggest developers. Has it moved too far too fast?

More than 8,000 apartment units are expected to come online in Downtown Los Angeles this year — more than anywhere else in L.A. County.

One foreign developer stands to benefit more than most of its competitors from the region’s biggest construction boom. Onni Group, a Canadian firm, is on track to deliver some 1,250 of those Downtown apartments this year.

The pipeline doesn’t end there. The company has proposed building another 1,800 units in the next few years, bringing its total proposed units in the submarket to nearly 4,000.

“They have really come into the Downtown L.A. market and exploded,” said Bryan Witkow, founder and CEO of the Tenant Group. “They’re putting up the most units in Downtown right now.”

With a small leadership team of four brothers, Onni has been able to expand from its base in Vancouver to become a heavy-hitting national player with commercial, industrial, multifamily and single-family assets across the country. In L.A., it’s taken an especially aggressive stance, picking up a $630 million property in Miracle Mile, building ground-up projects in the Arts District, and planning multifamily complexes in Santa Monica.

But in L.A.’s Downtown, where the firm has been particularly active, Onni’s dominant position also carries significant risks for the company. This year could be a challenging one for the Downtown market, one in which developers may struggle with an overhang of available luxury apartments. The vacancy rate in Downtown’s multifamily market inched up to double digits in December, and marketers are already ramping up the incentives for renters to mitigate the downward pressure from the vigorous building cycle.

The media-shy company has also faced a backlash from labor unions and affordable housing advocates who are fearful that its rapid expansion in the market is coming at a cost. Most recently, the firm has come under scrutiny over its plans to redevelop Times Mirror Square, the former home of the Los Angeles Times.

That project, set to bring more than 1,000 units, is Onni’s biggest and most ambitious in the city yet.

Units in the pipeline

In addition to Times Mirror Square, Onni is working on four other major projects in the immediate Downtown area. At 1212 Flower Street, the firm is close to topping out on two high-rise structures that will include 730 residential units and 8,000 square feet of retail space. Less than a mile away, Onni’s largest tower yet — 825 South Hill — is close to opening. It’ll include 516 apartments and more than 5,000 square feet of retail space across 53 stories.

On that same block, at 1000 South Hill Street, Onni has proposed building a 60-story tower with 700 apartments and 15,000 square feet of retail. It’s also moving forward with a plan to build 347 live/work units, 187,000 square feet of office space and 22,000 square feet of retail on Violet Avenue in the Arts District.

Onni is “seizing opportunities here at a rapid pace and at a large scale,” said Nick Griffin, executive director of Downtown Center Business Improvement District. Onni, which is an investor in the DCBID, is one of the largest property owners in the organization, Griffin added.

Onni denied repeated requests for interviews. In an emailed statement, Duncan Wlodarczak, a spokesperson for the firm, said L.A. has been an attractive market for the firm because of its “strong economic fundamentals” and “positive job growth.”

With all those projects, Onni is more exposed than most developers to the effects of an oversupplied market, industry analysts said. The company also largely offers units that range in the higher end, eliminating a percentage of L.A.’s population seeking housing.

As an example, rates at Onni’s 825 South Hill start from $2,500 per month for a one-bedroom and can range up to $12,650 monthly for a three-bedroom, according to apartment listings online. The firm is also offering L.A.’s most expensive penthouse at Ninth + Olive, an 18,000-square-foot spread seeking $100,000 per month.

Stephen Somer, a managing director at Eastdil Secured, said that a potential downturn could impact Onni, given the sheer amount of units they are bringing in the Downtown submarket.

While Downtown is definitely saturated, it’s still a popular location for jobs, businesses and young people, said Barbara Byrne Denham, a senior economist at real estate research firm Reis.

Units are “just coming online so rapidly that it’s hard to fill them upon completion,” Denham said. She said she expects the vacancy rate to continue to inch up from December’s 10.3 percent as more projects wrap.

In the past four years, there have been about 2,000 to 3,000 units delivered each year, said Stephen Basham, an analyst at CoStar. Most of those new buildings are mostly stabilized or fully leased, he added.

“There’s obviously strong demand for what is being built in Downtown right now,” Basham said.

Rent growth has also been picking up, meaning demand has caught up with the supply boom of the last few years, Basham added. “The area got a chance to catch its breath,” he said.

All in the Family

Onni’s roots date to the mid-1960s, when the first wave of the De Cotiis family immigrated to Vancouver from Italy. Inno De Cotiis started Onni — named after his first name spelled backwards — some thirty years later.

The De Cotiis real estate empire grew beyond Onni. While Inno De Cotiis founded Onni, his siblings and other relatives went on to open other real estate firms, such as Amacon, which owns the award-winning Loden Hotel in Vancouver, and Pinnacle International, which builds high-rise condo towers.

With their expansive family, the De Cotiis clan helped transform Vancouver from a sleepy Canadian town into a bustling metropolis filled with skyscrapers. Onni, specifically, earned a name for itself by building condominiums and master-planned communities.

At Onni, Inno’s four sons — Rossano, Morris, Giulio and Paolo — now run the shop. Giulio and Morris oversee the construction and property management divisions, while Paolo, the youngest, oversees international expansion, according to a promotional feature published by BCB Business. Rossano, meanwhile, is president.

After two decades building the company in Canada, the firm began to eye assets in the United States in 2008, as the recession was hitting, Kevin Carpenter, an executive at the firm, told Crain’s Chicago. By 2012, the firm was picking up multifamily and commercial properties in Chicago and Phoenix.

That same year Onni broke ground on two projects in L.A.: a 12-story office building on 9th Street in Downtown and a five-story office building at 1212 Flower Street. (Onni is currently building a pair of high-rise residential towers at the latter, while maintaining its original office building intact.)

Onni now has offices in L.A., Chicago, Seattle, Phoenix, Toronto and Mexico. Combined, the firm has built 12,000 homes, 9.5 million square feet of commercial space and more than 6,200 apartments in the last decade, according to its website.

Somer, who has worked with Onni several times in the past, said it is Onni’s DNA that allows the firm to be so “entrepreneurial.” In contrast to its publicly traded competitors like Brookfield or Blackstone, beholden to the whims of shareholders, the decision-making at Onni lies in the hands of four key individuals.

“They don’t have the same constraints as other institutional buyers may have with third-party capital or committees, so they can be very nimble when they need to be,” he said. “When they know they want to buy something, they buy it.”

Onni finances most of their projects with their own capital and bank financing, Crain’s reported. The firm generally doesn’t sell many of its assets, utilizing debt markets when appropriate to refinance properties, Somer added.

As a full-service real estate firm, the company also handles most aspects of its projects in-house, managing construction, marketing, and development themselves.

The De Cotiis brothers are former provincial high school wrestling champions, who have ended up hiring other high-level athletes.

“We have several national-level rugby players,” Beau Jarvis, vice president of development at Onni, told BCB Business. “This isn’t coincidence. If you’re serious about sports, then you’re extremely goal-oriented, self-motivated and willing to work hard, and this extrapolates directly to our business.”

Downtown development

As the firm has grown, so have the number of watchful eyes keeping tabs on the company.

In November 2017, a coalition of groups accused the developer of foul play at its Level Furnished Living building at 888 Olive Street. They claimed the developer was operating an “unpermitted hotel” by converting some of its condos to extended-stay units. Onni ultimately won that battle a year later.

In an emailed statement, Charlie Carnow, a research analyst at Unite Here Local 11, said Onni has “not been responsive” to the group’s concerns.

“We hope future housing projects Onni builds actually remain housing,” Carnow said. “We also hope they start including affordable units in their Downtown LA projects.”

Wlodarczak, the Onni spokesperson, didn’t directly respond to Carnow’s claims. He said the firm works “closely with local residents, community groups, and local elected and government officials when developing, building, and operating all of our properties.”

The claims made by Unite and other groups weren’t the first of their kind that Onni has faced. In May 2017, the City of Vancouver ordered Onni to pay $24,000 in fines for running illegal short-term rentals at its flagship Level building in Vancouver.

The company has also been feeling pressure from preservationists, who have gathered in large numbers to protest its Times Square Mirror redevelopment plans.

Late last year, a group led by local resident Richard Schave railed against Onni’s plans to tear down a 1970s-era office building and parking garage designed by architect William Pereira. The City Council ultimately sided with Onni, ruling that the firm could demolish the Pereira structures.

An investigation by the Los Angeles Times, published Thursday, showed Onni donated $50,000 to a campaign committee tied to City Council member Jose Huizar just two months before the city ruled in their favor. Huizar is at the center of an FBI investigation into potential corruption involving City Hall officials and major developers working in the city. It’s unclear if the donation had any impact on the vote.

With the City Council’s blessing, Onni will build two modern, glassy apartment towers rising 37 and 53 stories at the Times Mirror site. They will contain more than 1,100 apartments, a swimming pool, restaurants and offices.

Despite the scrutiny and the market risks Onni is undertaking, industry players say Onni’s broad diversification, coupled with a strong demand for more housing, will likely insulate it from any looming downturn. “They can weather the storm,” Somer said.

And if there is one thing the community does agree on, it’s that Onni is radically changing the Downtown skyline.

“They clearly have a lot of confidence in the market,” Griffin said. “They look at Downtown and see where this is going. We’re not even at halftime for this game.”