Turning Chaos into Communities
No one wants to live or work in a bad neighborhood. Civic-minded former police officer Kyle Kazan and his team at Beach Front Property Management have become experts at turning neglected, dilapidated, and even crime-ridden buildings into attractive properties for people to live, work, and invest in through his company Beach Front Properties LLC. With an embrace of hard work and a keen eye towards the future, Kazan seeks out “Class C” properties as classified by the Building Owners and Managers Association (BOMA) in which Beach Front can invest. These properties are usually at least 20 years old, in need of significant renovation, and located in low-rent areas.
Kazan and Beach Front not only work hard, they work smart; Beach Front Properties are frequently developed compactly by renovating and refurbishing existing structures instead of demolishing them, with benefits for both the local community and the environment. They are also well-located and pedestrian-friendly, offering tenants convenient access to a variety of businesses, services, and transportation to meet their daily needs. Properties in such neighborhoods can command higher rents, offering real estate owners and investors a healthier return on their investment.
Kazan has an impressive track record rehabilitating distressed properties. Since 1996, Beach Front has acquired more than 2,500 units in Southern California, as well as in Austin, Atlanta, Shanghai and Berlin. As he says, “Our track record is 100%. I’ve never had a deal that I couldn’t turn around.”
Here are a few examples:
The Wilmington Building
One jewel in Beach Front’s crown is a corner lot combination of two commercial buildings consisting of 17,862-square-feet and 23 suites, at the intersection of Avalon and Anaheim (which Kazan considers to be “the corner of Main and Main”) in the port city of Wilmington, CA. This is a unique property dating back to 1923 with classic architectural features that fit the community. It is now being updated with contemporary retail and commercial loft spaces that range between 200- and 800-square-feet; rents start at $600 per month. The property is conveniently located near to Los Angeles Harbor College, Pacific Coast Highway, and the 110 Freeway.
Kazan considers the building to be a win-win for the community and his investors. “Amazingly, we were able to purchase this nearly empty bank-owned property in 2014 for $1.9 million, while the other three corners of the intersection were fully occupied with great tenants.” After a $500,000 renovation, with a focus on substantial upgrades and hands-on tenant management, the Wilmington Building was ready for occupancy, with plans calling for increasing occupancy rates each year for three years.
Graffiti on an interior wall at purchase. View of a newly painted 2nd floor unit
The Oasis Building
Just off of Hawthorne Blvd. and Imperial Highway in Hawthorne, CA, sits a 49-unit, gated apartment community at 4431 West 118th Street which now lives up to its new name: “The Oasis.” But, in 1996, when Beach Front bought this 1957-built property for $1 million, it was a wasteland – a perfect example of a dilapidated “C” property that scared away both good tenants and most potential investors who told Kazan that he was crazy to even think about it. They couldn’t see his vision of it as an oasis. What they saw was a drive-through, attracting drug dealers and prostitutes who could sell directly to their buyers and endangering children playing outside as they sped in and out of the property. What Kazan saw was a prime opportunity to create an attractive, safe oasis for responsible tenants, conveniently situated near the 105 and 405 freeways, as well as shopping, restaurants and one of the best charter high schools in the area. Finally, a few of his investors decided to put their faith in Kazan, who pitched a 15% return rate if they could raise rents to $550 and maintain just a 85% occupancy rate.
Through his connections, Kazan was able to meet Tim Rose, a Harvard-trained architect, who scribbled the plans for the “promised land” on the back of a napkin over dinner. Utilizing these “plans,” Kazan was able to further use his connections to hire an inexpensive contractor to completely renovate the wasteland, a $300,000 dollar job for only $130,000.
In the meantime, while he was still a part-time police officer, Kazan would stand guard at the property during his off hours. Utilizing his years of experience as a police officer focusing on gangs and drugs, Kazan excelled at convincing the dealers it was time to move on. Working closely on-site with his manager, Kazan was able to handle problem tenants and push through evictions.
With a new gate, interior remodeling, improvements to landscaping, a refurbished laundry facility and assigned parking, the tenants could feel that The Oasis was home. Not long after The Oasis began to live up to its name, Kazan was visiting with members of his team. An older woman and longtime tenant emerged and threw her arms around him. That’s when he knew they’d hit a home run with the property.
To-date, The Oasis has seen a 426% return on cash and has consistently maintained 97% occupancy with rents averaging almost $900 per month, returning a substantial profit to investors.
In 2013, Beach Front and its investors were presented with an opportunity to buy a troubled, two-building, 12-unit apartment complex in Anaheim, CA, near Disneyland. The property is ideally located for the many wage earners who keep Disneyland and the surrounding hotels and restaurants going but who cannot afford the high prices elsewhere in Orange County. The neighborhood was also occupied by tough gangs who claimed it as their own turf. In addition, five units were not paying rent and the tenants needed to be evicted. Since Beach Front has owned nearby properties since 1998, the team was comfortable in repositioning and managing this one.
One other problematic issue was that the corner of the building had become a shrine to a gang member who had been killed by an Anaheim police officer. His fellow gang members would come on an ongoing basis to pay their respects by dumping out 40 oz. cans of beer on the shrine and hang around at all hours of the day and night.
The previous owner, who had purchased the buildings in 2004 for $1.78 million and managed them himself, had recently suffered a stroke and his family wanted to sell as soon as possible. Beach Front was able to acquire the complex at a significant discount to market value, putting it under contract for $1.275 million and negotiating a credit of $75,000 for a net price of $1.2 million. “We were able to get the deal because a couple of sharp brokers, with whom I have an excellent relationship, found it on the multiple listing service and called me since they know I can buy quickly and without a loan,” says Kyle. Beach Front purchased 90% of the property and the brokers, who believed in the deal and Beach Front’s management so much, decided to roll in their commission on the deal to claim the remaining 10% of ownership on the property.
Beach Front cleaned up the buildings significantly, made many repairs, and installed new roofing and decking. Three months after escrow closed, there were new residents in the delinquent units. During this time, Kazan called on the mother of the deceased boy to pay his respects. He offered to replace the shrine with a meaningful plaque or memorial that she could visit quietly. This new arrangement discouraged his friends from their destructive behavior. The local community was also satisfied with the handling of the situation and the results. Peace returned to the neighborhood.
One year later, the appraised value of the properties had climbed to $1.7 million – a 57% increase, against which Beach Front was able to borrow $1.104 million.