Arixa Capital interviews Paul Schon, Managing Partner at Schon Tepler, a fully integrated real estate development and investment company based in Los Angeles, California. Their focus is on creating and preserving value for our equity investors using their specialized knowledge of the multi-family and residential real-estate business.
In part three, Paul Schon discusses their target market, what they look most for in a lender, and projects they’re working on.
Who is your target renter?
We get a lot of millennial couples. Most of our buildings are unique, they’re townhome style units, it’s cool it gives it good separation, so we have the bedroom on the first floor with its full bath, a living room and kitchen on the second floor with a half a bath, then we have a mezzanine on top where they put their office space or just another hang out area, a private rooftop deck. Couples love our units.
What do you look for most in a lender?
We use three types of lenders. So the first lender is that we use is a construction lender to give us a construction loan, we look for rates, we look for a good amount of leverage, loan-to-cost, so most construction lenders are giving us between 65-70% loan-to-cost now, their rates went up, they used to be 75%. And then once it’s built, we look for a perm lender, and same thing, rates, we’re rate driven, and loan proceeds driven. And then the third lender is we enjoy working with you guys, because once we find a good deal – which good deals are hard to find in this market, sometimes we have to close fast, so it’s just nice, I call Jan and Arixa Capital, and ‘hey we got this deal, we need to execute it and close fast on it,’ and we really enjoy working with you guys.
What other projects is SCHON TEPLER working on?
We’re doing our first co-living project which we’re really excited about. Which basically it makes renting in LA affordable for the college grad who’s just making 40,000, 50,000 a year and wants to live in a new building and also gets a community of similar demographics, similar people that are also living there. We’re building our first one in East Hollywood, it’s 40 beds, and basically it’s 1 unit has 5 bedrooms/5 baths and we’re going to rent it out by the beds, and they share the living room and kitchen. So it’s similar with WeWork, but instead of office it’s with residential and housing. I think there’s a big demand for them because to live in a new building, you [have] to be earning 70,000+ so this opens there’s just big opportunity there. That’s the first one we’re doing. Another project we’re doing is microunits. So similar thing, renters are looking for ‘what’s the least I can pay or what’s financially feasible for me to live in a nice new building?’ So we’re building 375 square foot units in Echo Park and I think the demand is going to be huge for those units. Lastly, we’re looking in opportunity zones, I think there’s opportunity there to invest so we’re really looking into doing some projects in opportunity zones.