MHN Interview: Beach Front Properties’ Kyle Kazan
- Jan 08, 2014
By Leah Etling, Contributing Editor
Long Beach, Calif.—Real estate brokers don’t reach for the phone to call Kyle Kazan when they’ve got a fancy Class A Southern California apartment community as a new listing. Instead, Kazan gets the call when a Class C building in Anaheim, with multiple residents in eviction and a shrine to a gang member killed onsite in one corner, goes on the market.
And that’s just the way he likes it.
“A good B or C quality building, like a nice quality used car, doesn’t lose value. It’s in high demand, and if the majority of people are your target market, I think you’re in the safe spot,” said Kazan, whose firm has been recognized regionally for their efforts to turn around troubled units. A former policeman and inner city school teacher turned successful owner-manager, Kazan operates in real world property management.
“With all due respect to my friends out there in some of the big REITs that like to stick to Class A and sinking to Class B is not where they want to be, I feel like I am right in the sweet spot of society,” he said.
His company, Beach Front Property Management, is based in Long Beach, but Kazan travels the globe to oversee assets on behalf of his investors. Back in LA, he can slip back into police officer mode and lead a team to throw out drug dealers or other troublesome tenants. It’s that skill that prompted recent calls from brokers about a very troubled apartment building in Anaheim, not far from Disneyland.
“The previous owner had a stroke and had been overseeing the property himself. He had six units not paying rent, and a police shooting had killed a gang member on the corner of the property. There was a gang shrine where his friends would come and pay their respects by dumping out their 40 (oz. beers). It came on the market, and I got several calls saying: ‘This is right up your alley. This is what you do,’” Kazan recalled.
Three months after escrow closed, new residents were in place in the delinquent units, a new roof and decking had been installed, and most importantly, the shrine had been removed without insulting the deceased’s mother–who continued to live in the neighborhood (or immediate vicinity–if you’d rather), but had scared off her son’s former friends in exchange for a small plaque, marking where he had fallen, that she could visit quietly.
“It wasn’t obvious to everyone what happened there, but she could still mourn her son. One of my managers knew just how to approach that woman in a respectful way,” Kazan said.
It’s all in a day’s work for the team at Beach Front, which has grown from 10 people when Kazan went full-time in property management in 1999 to nearly 200 today. The majority of those staff members are bilingual, to better serve Southern California’s diverse rental marketplace.
Kazan shared his insights on working with challenging properties and achieving success with MHN.
MHN: What are your best practice tips for owner/managers dealing with troubled properties?
Kazan: If you are the management company, be diligent about screening your residents. Go into every unit at least once a year.
Make sure either you, the owner, or good people on your management team stay in tune with your community. Even with the best resident screening practices, you may find that a tenant who has been there five years might have started with a son who was an 11-year-old sweet kid, but now five years later is a 16-year-old gang member. Usually that doesn’t happen overnight. That’s a process that takes some time.
Even in rent control areas where it’s harder to remove a tenant, most of the time there’s a way to work things through. You can’t go to sleep on your buildings. I know anybody reading this will say: ‘Of course, you don’t go to sleep on your buildings,’ but it’s more than that. It’s being diligent and caring about what it is going on at the properties and to the residents. If you don’t care about them, they’re not going to care about you, or your property.
MHN: How do you train your team to deal with an eviction or criminal situation?
Kazan: For us, it has mainly been trial by fire. When we were much smaller and just a few people, it was like going out there with a SWAT team. I would even enlist some of my police friends to join me in going out when it came to the takeovers and different operations as we were executing a plan to rid a building of the criminal element.
My core group was trained that way. We’ve added new people to these missions as we’ve grown. It’s a little bit like a police department mentality: We bring in the rookies and have veteran training officers show them the ropes.
My graduate school education was in special education—there’s no (real estate) school anywhere where they say: ‘OK, here is how you rid an apartment building of drug dealers and gangsters. Who, by the way, are profiting very nicely from being where they are, and are not going to want to leave because it will up-end their lives and their business.’ You have to deal with that, and the desperation that may come with it, because this resident can’t go to the police or the courts.
It helps that having been a police officer and an inner city school teacher I was used to working with folks in trying circumstances. Over time, we’ve created our own education system. Thus far, we’ve not failed in turning around one building.
MHN: Can the police help, or are they too busy with more serious incidents?
Kazan: You might try to turn it over to the police departments, but we’ve managed properties in seven to eight states and in other countries. All over, police departments are getting squeezed. They don’t have the budgets and resources they did. I’m still good friends with a lot of active duty law enforcement officers all the way up to chiefs, and they don’t have the community officers like they used to that are out taking care of business. Instead, they’re very reactive. They will assist you if you have a plan and know how to talk the talk and work with them, but at the end of the day, you have to be the laboring oar. You need to plan, execute and use law enforcement as a tool.
MHN: Tell us about one of your building takeovers.
Kazan: One significant turnaround we’ve been recognized for by the Apartment Association of California Southern Cities was the clean up of The Karnak, a beautiful old property in Hollywood that was built in the 1920s. The exterior design was inspired by King Tut’s tomb, which had been discovered in 1922.
Well, The Karnak had been taken over by members of the Mara Salvatrucha, MS-13, which is a notoriously dangerous El Salvadorean gang. These guys used fear and intimidation tactics against the other residents, who were very nice people.
We basically went in there, garnered good support from the LAPD, and went out there for some focused chats with the guys. We came to an understanding that their lives and mine would both be better if we separated.
I have a really good solid team of people who have worked with me for a long time. They are the foot soldiers. I just come out and oversee the direction and have chats with some of the gangsters that are a little scary.
MHN: How do residents help in these types of situations?
Kazan: They have to trust you if you’re going to be successful. Most people want to live in a safe community. They don’t want their kids or grandparents around dangerous people. Most people are law abiding citizens, they recognize trouble and they’re scared. They don’t want to get targeted by these people. You have to facilitate trust and you have to facilitate the understanding that we’re not going to go away, and we’re going to win this battle. The best sources we have are not only our own eyes and ears, but the good residents that support what we’re trying to do.
MHN: You describe yourself as a “contrarian investor.” What does that really mean?
Kazan: Typically we have invested in most markets at a contrarian time. When we started in the 1990s in California, there were more sellers than buyers. The same thing when we went into Berlin, Shanghai, Austin and Atlanta.
When the market is flipped on its head and we as the buyer are in the minority, and that usually makes me very happy. In Southern California right now, that is not the case. In that case we try and find deals that others would try to get away from, because of crime issues, because of massive vacancies, because of any number of items that would scare the majority of investors away.
You’ll never find me in a bidding war for a property in a great market that’s already been turned around and someone’s looking at like a bond investment. That’s never going to be my deal. Mine is always going to be something with hair on it. Most people don’t want to play with a Rubik’s cube, which might seem impossible at first, but that’s what I like and it has allowed my investors and me to profit handsomely.
Editor’s Note: Read more about Kyle Kazan and Beach Front Property Management on the Yardi Corporate Blog.