Part II: Delivering More Affordable Housing in California

Jim, we know Mosser has some very deep roots as a company. Can you please introduce yourself and talk about the history of Mosser Capital as well as your experience with workforce housing investment?
jim farris: Yes. Thank you, Youmna, and thank you for having us on. I'm Jim Farris, the CEO of Mosser Capital. And I have a 20 years roughly of experience in residential real estate. I started the first 10 years of my career on the mortgage brokerage side. And in the last 10 years after I started Mosser Capital with Neveo, then focused on urban workforce housing. During that time, we've invested and acquired over a hundred properties and invested over $750 million of equity on behalf of our investment partners.

yA: Where do you see the real estate market headed in the next 10 years? And what role will Mosser Capital play?
jf: Well, it's clear that the Biden administration is pro housing. It's going to going to do everything that it can to keep interest rates low. And in turn, I think that housing prices will continue to be out of reach for most citizens, primarily the younger population, so a lot of our future demographic of tenants. Over the next few years as COVID subsides, I think that we'll see gateway cities that will once again thrive as 24-hour cities, and that will propel a large run-up in rents from the bottom that was reached last winter.

In addition, institutional investors that have been focused on multifamily as an alternative asset class within real estate, are refocusing on multi-family as a strategy and looking for niche strategies within multifamily to invest. So, our view is that the broader housing theme of investments will continue to increase, and themes such as workforce and affordable housing will increase as a percentage of over all the real estate investing.
yA:Jim, over the past 18 months, COVID has had significant impact on the real estate market and specifically the residential rental market. Can you touch upon the effect that COVID had on your properties in the Bay Area and Los Angeles, and also on the market overall in that geographic location?
jf:Being in the San Francisco Bay Area, and Los Angeles, and focused on urban infill locations, we were at the epicenter of COVID and the effects that it had on not only our residents, but also the communities that we invest in. We experienced historical lows in occupancy and historical drops in rent growth. And the market seemed to bottom out at the end of last year of 2020. And we've seen improvement in leasing activity and rental rates since January of 2021. Now that the eviction moratorium has ended officially in California, and that coincided with the ending of additional employment benefits, the factors of how our city is going to reactivate, what's going to happen to housing prices, and how we're going to continue to make our best effort to keep existing residents in their houses is really at the forefront of what we're focusing on.
yA:And can you specifically share with us your experience and provide some relative perspective regarding your existing residents, and existing investment, and also your future investments?
jf:Yeah, I'll let Neveo chime in on our residents, as he's the CEO of our operating business, and is really the face of the franchise in regards to being in front of those residents. But as far as our existing investments and future investments, we really had a strategy focused around urban infill being in immediate proximity to job centers and to public transportation. And what COVID is done, and this world of remote work has done is now that employees are not necessarily going to have to be in the office five days a week, maybe it'll be two to three days, we're still focused on locations where we believe that people want to live regardless of where they need to go to work. But we're also considering and have expanded significantly geographic range that we're investing in.

So whereas before, we wanted to be within a 10 to 15-minute bus ride or walk to the office, now, if someone doesn't need to go there only two to three days a week, that has opened up the range of properties that we feel are very, very viable investments going forward. An additional change that we've mentioned that we've done, incorporated is we're really leveraging the ability to invest in our cottage industry, which is the smaller, multi-family properties. So we've gotten even more granular, and expect to going forward investing in even smaller assets. And we're able to operate and invest in them successfully, not only through our own experience, and the knowledge that we've accumulated, but also with some of the interesting technologies that we'll touch on later as well.
yA:Neveo, and on the current residents, what would you say about the experience with the existing residents?
nm: Having been in the industry for over 37 years, I've seen many down cycles, and I've seen many tragic events that have happened to our industry and in the communities that we serve. But I've never seen, just like many others or most others, anything like what we've experienced with COVID. For us, we provide an essential service throughout California. And with that in mind, we actually worked harder, and never stopped working or working from home during the pandemic. It was, as a company, we worked hard together on trying to figure out how we can deliver more to our tenants at this time of need. And as Jim mentioned, as we've come out of the eviction moratorium, and as we've continued to do throughout this process is how do we keep people housed, and how do we go ahead and assist our clients, and/or our tenants in maintaining their housing? And that's something that we subscribe to, and aspire to perfect throughout this process.
yA:How do the governing values of the operational side of the business translate into Mosser Capital investment strategy? And Jim, how are you a proponent of delivering even more workforce and affordable housing in California?
jf:Yeah, thank you, Youmna. And I love that question, because the governing values of investing in underserved communities and improving them is one of the many core values that Mosser and Mosser Capital share. And as Neveo mentioned, Mosser has been active in ESG, and specifically DEI for decades.

And I think it's very rewarding to both of us to be able to bring these values into greater scale with Mosser Capital. In regards to delivering and improving the quality of workforce housing, that is one of Mosser Capital's primary goals. And the way that we do that, as we significantly improve the properties that we invest in, and we provide a higher quality of housing for all of the more affordable residents who will stay with us, as well as providing a quality opportunity for housing for a lot of the essential workers that need quality, affordable housing as they come into these locations. Our in working with the communities that we're in, the political stakeholders in California have been significant over the years. And we'll continue to leverage those relationships to help combine our efforts and develop successful programs to build new affordable housing, and to convert existing market rate housing, or NOAA, to true deed restricted, affordable housing going forward.
yA:That's really great to hear. Thank you, Jim. In addition to that, I've heard you talk about bringing innovation and technology into your business to give it a competitive edge. I know you will be talking more in depth about innovation during our December 1st webinar. But could you please tell us briefly, how do you grade yourself on that curve, and comment on how that affects your performance?
jf:I think that myself and Neveo are probably the hardest graders on ourselves than anyone. But I will say that at Mosser we have the unique opportunity to leverage a lot of these new technologies that are coming out in the real estate space, specifically in multifamily. Since we are fully vertically integrated, we touch every aspect of the operating, property management, accounting, acquisitions, investor relations, reporting. We're very fortunate that we are touching all of those aspects, and we have key insights, and we're able to see many, many points in that process that can be improved by the use of technology. I would say at Mosser and in the Mosser Platform, we've been a leader in the use of technology. We work with new companies that are in beta, alpha stages. We help do product development for folks who have been looking to create a solution for multifamily operators and investors.

Two of the things that we're focused on currently are the leasing and marketing. If you combine those two aspects, that's one focus that what happened with COVID, and the old style, and the old ways of leasing apartments were no longer viable. So we really had to dig in, and leverage any technology that was available. And we've been consistent in our approach and continue to leverage those technologies going forward.

Additionally, data analytics and portfolio management and having transparency into our portfolio are very, very key to how we plan to scale. And so, I think I'll speak for Neveo and myself. I think we're both very excited about the use of technology within our platform, and our position, and ability to leverage those technologies. We're also really excited for our next webinar with EisnerAmper, which is going to include several key leaders that are focused on innovating specifically in the housing side, and looking to solve the affordable housing problem through the use of scalable technologies.
yA: That's great, Jim. We are looking forward to hearing more about the innovation from you. Jim and Neveo, thank you again for your time today. This has been great. And thank you for your insight and sharing your Mosser Capital experience. And what you bring to the community has been really impressive. And servicing the workforce housing affordable housing is very, very rewarding, and much needed, especially in the state of California. Thank you to all our listeners for tuning, and to Breaking Ground. Please join us again for our next podcast episode or visit EisnerAmper.com/realestate for more real estate news.

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