Dunleer Keeps a Tight Focus to Drive Growth

Company relies on mid-range residential properties

Published By: Los Angeles Business Journal

Beverly Hills-based Dunleer has rapidly expanded since it was founded five years ago. The company, started by BJ Turner, now has 35 to 40 properties in Southern California, mainly apartment buildings as well as a sprinkling of industrial properties.

"We're sharpshooters. We focus on specific neighborhoods that we fell have supply constraints and growing demand," Turner said. So far, that has been in areas of Northeast L.A. including Silverlake, Echo Park and East Hollywood.

The company started 2020 in a big way, selling three apartment properties with a combined 32 units for $12.2 million to a local investment group. The largest property was the Pepper Tree Ranch in East Hollywood. Turner said the availability of cheap debt financing made it "a good time to take a number of deals to market."

In February, the company had nine deals in escrow. Six have since closed, but three didn't for reasons related to Covid-19, Turner said. "A number of those deals that did transact were deals I would submit were properties that we bought earlier in the company. They were slightly smaller, on average eight to 25 units. What buyers really appreciated about those assets was that we had curated a lot of character and a lot of charm," he said.

With its properties, Turner said, Dunleer is "trying to satisfy the missing middle," adding that in L.A., there are a lot of Class A luxury buildings with lots of amenities and C product that is undercapitalized. Dunleer is instead interested in something in the middle - older properties that have been well renovated and thoughtfully upgraded.

The company invests in properties with 20 to 60 units, while many institutional owners in L.A. want 75 units or more. "They have a very different cost of capital, and they are able to afford those buildings,... We try not to compete against them," Turner said.

After acquiring a property, he said, Dunleer upgrades the plumbing, electrical, roof and common areas to increase functionality and safety. The company is also interested in industrial properties. "It's a really, really interesting asset class right now. Pre-Covid, industrial was already one of the most sought-after asset classes, and a lot of that was driven by e-commerce." he said. And e-commerce, he added, is still driving industrial demand.

Turner said brick-and-mortar shops being shut down, along with the rise in food and grocery delivery, are fueling further growth of industrial properties. Industrial and apartment buildings, he said, would be "winners coming out of the pandemic."

Before the Covid-19 pandemic, a lot of capital was allocated to hotels. Turner said the sector is riskier now, which could lead some investors to safer asset classes like industrial. And Dunleer does plan on investing more in industrial going forward, specifically in Souther California. "There's been a massive change with the pandemic. We are trying to remain flexible and remain nimble to see ourselves through any opportunities that may present." Turner said.

"The apartment sector remains interesting. There's some near-term regulatory hurdles that have got to cleared with how the state and the city of Los Angeles are setting up the framework for landlords in Los Angeles," he added. "We remain incredible bullish on Souther California and California in general and continue to see the influx of employment drivers into Los Angeles and Southern California, and ... we feel good about the long-term outlook."