Time Heals All Wounds (Even Those Self-Inflicted)

A tenant advocate’s highest praise is to be called out by a landlord in print or in a public forum for being a “zealot” or a “dog-and-pony show orchestrator”. It is even more gratifying to be the focus of an amateur gumshoe investigation that purports to uncover some measure of hypocrisy for calling for a sustainable rent stabilization ordinance. Behold this letter to Apartment Age magazine from a local landlord. It’s practically an expose!

Orit blau letter to Apartment Age

There is no better outlet for Orit Blau’s umbrage at tenants who live the high life on the landlord’s dime than Apartment Age magazine. It is an in-house publication of the Apartment Association of Greater Los Angeles. Blau is particularly unhappy to “subsidize” residents of rental housing who drive fancy cars when she herself drives a modest American make: a “Chevy.”

Yukelson-Blau family picturePresumably Blau is an Apartment Association member because she owns an Olympic Boulevard fourplex, which she purchased in 2014. That would make sense: the century-old AAGLA is our region’s leading property owner’s lobbying group. Your landlord probably is a member too.

But Blau is not only a member of AAGLA; she’s literally in bed with the Association’s Executive Director, Dan Yukelson. With him she shares the fourplex and the Chevy. And clearly she share’s his perspective on rent stabilization. Indeed behold how closely their thoughts do align! This is Dan’s letter to the Beverly Hills Weekly last November. It included the very same image of the garage.

This is a photograph showing the cars parked at the apartment building where Beverly Hills’ rent control advocate Mark Elliot lives. Look at the cars parked at Mark’s building: a Lexus SUV, a BMW 5-Series, and two Mercedes Benz sedans. Why am I and other owners in Beverly Hills being forced to subsidize these renter’s lifestyles through the rent control ordinance? I drive a Chevy. I can’t afford the cars at Mark’s building! How about helping the truly needy? Why doesn’t the Beverly Hills City Council see the irony in all of this?

Now either this couple really thinks alike, or Dan, the chief of the Apartment Association, simply put his wife’s name on his own missive and then published it as a letter to his own magazine. (Their relationship is not disclosed in her letter to Apartment Age.)

Now when it comes to an exposé, the first rule is to get the facts right. And the one fact Dan includes in his letter to the Weekly he gets wrong: the cars pictured don’t belong to my neighbors or to me. And that is not even our garage. The second rule is not to ghost-write it in order to repeat the specious claim under someone else’s byline.

Anyhow, let’s focus on the sentiment behind Dan’s letter: that instead of having landlord “subsidize” tenants the city should help the “truly needy.” But who that would be? Perhaps it is the aggrieved property owner who drives a Chevy while even a tenant advocate affords a better ride. While we can sympathize with anybody that makes due with a Chevy, we can’t feel too sorry for Dan.

Dan Yukelson is an accountant and experienced finance executive who surely knows a good investment when he sees one. He chose to invest in residential rental property in Beverly Hills (nobody’s idea of a bad investment). There are cities without rent stabilization that will welcome his money but he chose to invest here. He also chose residential real estate rather than some other commercial asset class. No commercial property comes under rent control. Yet he chose residential real estate. If you can’t make it pencil, Dan, that’s on you!

Dan is also a former planning commissioner. He knows the city well. No doubt he considered our city’s four-decade long history of rent stabilization before purchasing his fourplex. Dan can’t complain too much about that either.

Time Heals All Wounds (Even Those Self-Inflicted)

Perhaps Dan is aggrieved because he bought his property at a price that required him to be raise his rents up to 10% every year. At that rate it would not take too long until his rental operation was back in the black. If the rent stabilization ordinance allows only half that magnitude of increase this year, then it will only take longer for his cash flow to turn positive.

As an investor in residential rental property in Beverly Hills, Dan and his partner will do just fine on the asset-appreciation side. Real estate analysis firm Costar shows that gains in appreciation for residential multifamily real estate outpaces other commercial real estate categories.

US West Multifamily sales via Costar
Source: Costar

Looking more closely at multifamily sales here in Beverly Hills, asset prices seem to be on the rise too despite rent stabilization. Dan’s retirement ‘nest egg’ will not suffer in the long run. Rising asset values will bail him out.

Fourplex sales 2007-2018 chart
Source: Multiple Listing Service data. Chart: Renters Alliance.

Blau and Yukelson should do fine with their apartment rental business over the longer term too. City consultant HR&A Advisors estimates that residential multifamily rental operations yield about 66% net operating income, on average, after expenses are subtracted. That’s a pretty substantial margin! Even if these owners find themselves in the red now, because they bought recently, it would be on them if that was not expected. No investor in real estate should expect positive cash flow from day one.

However allowed annual rent increases of the magnitude proposed by our City Council — and which will compound annually — will fix things. Indeed it won’t take them long to catch up with expenses and then generate some serious positive cash flow. Time heals all wounds, says the proverb!

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