Fed up with new transfer taxes and the inability to hike rents, Decron Properties is cashing out of Los Angeles.
The firm has sold two properties in the city of Los Angeles and two more in Thousand Oaks for a combined $212 million, according to CEO David Nagel.
Decron sold 6805 Louise Avenue in Van Nuys for $18.9 million and 1340 North Poinsettia Place in Hollywood for $22 million, records show. The deals, totaling 144 units, came out to about $284,000 per unit.
An entity linked to attorney Bobby Saadian bought both properties using equity and assuming loans tied to the complexes.
In Thousand Oaks, the firm sold 399 units across two complexes — one at 300 Rolling Oaks Drive and another at 550 Laurie Lane, Marcus & Millichap’s Institutional Property Advisors announced last month.
FPA Multifamily, which also recently bought multifamily complexes in Santa Monica from Neil Shekhter’s firm, paid about $171 million for the properties.
Decron sold the properties with assumable financing, whereby the new buyer can assume an existing loan on the property. The option has become an attractive option for buyers in the current lending environment, which makes it difficult to score new loans given the rise in interest rates.
The properties were sold for $65.5 million, records show, and the buyer assumed about $105.5 million in loans originated by Wells Fargo and sold to Fannie Mae.
Decron has already used some of the proceeds to buy in San Diego, and wants to make future purchases in Phoenix, Salt Lake City and Austin, among other markets.
“We’re looking to buy real estate that is not regulated,” Nagel said.
Nagel noted that L.A.’s regulatory environment — including the city’s new transfer taxes and rent restrictions — was a primary driver for leaving.
“Once Measure ULA went through, it really disincentivized us to stay,” he said. “And what’s the next thing that’s going to happen that’s going to hurt us and prevent us from reinvesting in our properties as we would like to?”
Nagel also slammed the city’s moratorium on raising rents, enacted after the pandemic started in 2020.
Since then, the City of Los Angeles has blocked landlords from hiking rents on all units affected by L.A.’s rent stabilization rules, specifically units built before 1978, which represent about 75 percent of the city’s apartment stock.
The city is ending its moratorium next month and will allow a 4 percent rent hike on these units.
“We haven’t received a rent increase since 2020,” Nagel said. “Owning rent-controlled real estate is so much harder to get yield.”
Without a rent increase, and because of the growing cost of insurance and maintenance, the firm has been unable to reinvest in the properties the way it would like to, Nagel added.