Our commercial multifamily approach focuses on acquiring underutilized properties in desirable areas for value-add opportunities or ground-up development. The most crucial aspect of our acquisition process is land use feasibility and zoning requirements to ensure we can build density in order to meet pro forma criteria. Our next step is to see if current land basis projects high enough profit margin to move forward with the deal. If project land basis is feasible, we shift our focus to market absorption and climate for high end multifamily buildings.
Our target Commercial Mixed use project would look for an underutilized city block with tear down properties in affluent and risk averse areas. We primarily focus on Redondo, Hermosa, and Manhattan Beach as our target markets. At first pass, we determine if the land value permits for full ground-up development or value-add opportunity. Our goal on commercial mixed-use developments it to maximize urban design, square footage use, and create beautiful landscape for both end users and the community to enjoy. We pride ourselves on providing urbanized developments that offer both depth and character to the area. We run conservative market comparables which drive both our acquisition decisions and our financial modeling. As a conservative metric, we ensure all our for-sale and for-rent properties project high margins in case market failure at time of sale. We work with highly skilled architects and design teams to efficiently create the most useful and low-risk, high reward mixed-use developments.
For ground-up co-living developments, we focus on cash-flowing apartment buildings or vacant lots which allow for low land basis. Ground-up development allows our team to control the design, enhance the neighborhood, and create new affordable product for the end user. Our goal is to develop a cash flow asset yielding a 10% return per year, with a low risk profile allow us to pay proper dividends to our shareholders.
As our primary business plan, we have contracted with Common, Los Angeles’ market leading, roommate centric property manager to brand, market, and operate some of our Project’s residential townhomes with flexible leasing options. Residents will conveniently lease private bedrooms within the respective units, thus sharing the living room and kitchen with 2 to 4 vetted flat mates. This efficient, fully furnished living style provides residents the opportunity to live in a premier urban location at a substantial cost savings to traditional rental units. Monthly rent is all-inclusive covering amenities such as weekly cleaning, kitchen supplies, utilities, and Wi-Fi. Common also requires a high level of finish for each of its buildings, including sound-proof floors and walls, keyless entry, smart thermostats, and high-end appliances. The average lease term for Common’s tenants is 10 months, however residents have shorter term options as well.
With the rise of startup culture and mobile work arenas, our team is looking to acquire old industrial buildings in prime locations to convert to creative, beachfront co-working office spaces. We primarily focus on Redondo, Hermosa, and Manhattan Beach as our target markets. Once we locate properties that allow change of use, we hope to tie up the property, shell and poor construction and manage tenant improvements. Once asset is stabilized, we create a cash-flowing, co-working business which offers memberships for members to use offices, hot desk, and other amenities. We manage in house for ten years and then sell off, generating high profit margin.