Urban real estate development is being innovated by Scott Choppin, founder of the Urban Pacific Group of Companies.
"Scott oversees all operations of the Urban Pacific family of companies, including business development, capital acquisition, and strategic planning.
Prior to forming Urban Pacific, Scott was Director of Land Acquisition for the Multi-Family Development Division of Irvine-based Sares-Regis Group. In that position, he was responsible for all land acquisition activities for the development of luxury, market rate, and senior rental communities throughout California, Colorado, and Arizona." Real Wealth Through Real Estate podcast
Seth Ferguson: Welcome to another episode of Real Wealth through Real Estate. I'm Seth Ferguson. Make sure you hit the subscribe button so you don't miss more interviews with successful Real Estate Investors and I've put together the top seven key market drivers, I look at when analyzing a real estate market. Go to top market drivers.com to download your free copy.
Our guest today founded his company in 2000 and focuses on workforce rental housing in California and the Western US. He is proud to have delivered a 22.66% IRR on equity. Scott Choppin is the CEO of the Urban Pacific group of companies.
Scott, Welcome. It's great to have you on the show.
Scott Choppin: Great to be here, Seth. So appreciate it.
Seth: We're really looking forward to this, right now where I am in Toronto; we just have a huge snowstorm yesterday.
Seth: I'm sure. You have some nicer weather.
Scott: No snow, no snow snowstorms here, but we love snow, but it's different living in it versus, being able to have, go have fun in it
Seth: 100%. So let's kick things off. Tell us about your real estate goals right now. Where are you looking to go with real estate?
Scott: We are a Real Estate Development Company, so we build new construction apartment projects and have really done that since I started the company in 2000, like you, eluded to him that in the bio that you read. We really have been ramping up this new type of housing that we created called, Urban Townhouse or UTH. And that's a type of workforce rental housing. And it's differentiated because we build a three-story townhouse with five bedrooms and four bathrooms, which is intended to serve multi-generational families. So think like a working-class family. And then also recently during the pandemic, roommates, professional roommate groups has been a big accelerated part of our business plan, and really the story of UTH is about economic sharing. So in other words, groups in a family or groups in our roommates are able to share housing costs across multiple earners.
And that really has a major effect in, in what we call recession resilience, meaning our product is where people go in a downturn, and accelerates while we're in a downturn in the economy, this is where people would shift to and we're, we're seeing that now. And so to answer your question really we're, we have two main things going on right now. One is where, raising equity on a $30 million equity fund, we call UTH workforce housing fund one, and that will be a fund, that will, the equity source about 15 different projects. And we're going to basically, finish the fundraise, accelerate through this, phase of projects probably do more funds after that as, you may have seen it in the news, but workforce housing and the need for affordable housing has been a need, particularly in California. But I think in places like Toronto and big city, you have this income and housing gap. Wages and housing prices are divergent. And so we're just looking to accelerate.
So, ultimately we want to raise this and several more equity funds. And then our goal ultimately is to build a portfolio of about 5,000 of these UTH units really focused on California, because the undersupply and the demand characteristics are so, positive for future demand that we think there's plenty of business to do. And then we've just such a firm believer in housing, working families that really want to focus on this for the foreseeable future at the company.
Seth: And like you said, having that multi-generational aspect or the roommate that really plays into the push for instant intensification in these cities where they want to limit the sprawl and really intensify. So, I guess one of the questions I would have is how does rent control in California impact you? Because we always talk, in Ontario where I live, we've got very strict control. What, what sort of impact does that have on your business model? And, if at all.
Scott: It does, I mean, in, in a, in a general like high-level sense. So in California, at least the way the laws work now is that a city can implement rent control or not. So each city is different. So the city of Los Angeles, where we're based in Southern California has rent control city of Long Beach where we're headquarters doesn't but what happens in these sort of economic environments, both in rising housing costs, relative stagnant incomes, and in a recession, when people are, less or unemployed, rent control really starts to become a more standard or common narrative, meaning it's happening and talked about more. People are under pressure. And in fact, usually rent control happens right at the peak of a market. And then housing costs fall in a recession. And then sort of like the logic for rent control reduces, as a downturn happens and the recession like in San Francisco, they have rent control, probably the most aggressive rent control ordinance in California and rents are off like 27%, at least in certain sectors of the city.
So, the logic for rent control starts to reduce. Although for San Francisco and the city of LA, a lot of these rent control ordinances were created in the sixties and seventies when we had, a past housing peak, and the political winds blew that way. So anyway, so we are differentiated or we're expected differently depending on what city we're in. We tend not to focus on rent-controlled cities for one of those purposes, but also, under most regulations. And there's a state law that basically exempts new housing for 15 years and so that basically is our main, like go to like a relief valve for rent control. Now, obviously, you heard me talk about, building this portfolio, we want to own these things really long-term, we're really in perpetuity ultimately. So we're going to, we're going to run into that challenge at some point, but of course, then that's where the choice of city to not have rent control then comes into play.
But the future who knows California is in this weird dichotomy of, we still have the most undersupplied housing market in the United States. I think incomes are stagnant in many, if not most urban, cities throughout North America and then we're in the midst of a recession and, at least in some sectors, multifamily rents are dropping. So we're, we're sort of doing this, we're, but to me, the recession is a temporary situation. Like at some point we're going to recover. Peaks and troughs in the economic cycle are fundamental. They're always there. It's just the timing is different from cycle to cycle. But what I can speak to is the supply story, meaning our description on housing production, California is decades in the making and there's new, like a new political environment for, trying to increase production of housing, like, at the state level, but it's going to take several decades for us to like build our way out of it. I mean, we're, we're so under-supplied that, we're, we're not going to catch up in the near term. So that's a very fundamental tenant of our UTH programs that, we're delivering a type of housing that really nobody else is at least at scale. And we're delivering into an under-supplied market with families that can be helped by this, economic sharing, unit type.
Seth: And when you founded the company back in 2000, were you always on the development side?
Scott: Yes. I have a family background in Real Estate Development. So my uncle Mike and my dad, Carrie were both developers. So I grew up around the business. Wasn't necessarily going to be my career choice when I was very young. But about 18 or 19, I worked before going back to college, did a lot of reading, and sort of like came to like an epiphany that Real Estate Development. Now I understand it from a deal-making standpoint and I now know what my dad and my uncle did to produce profitable projects and take care of their families. So that became my career choice and really I've worked in the development. And I worked professionally for a few years for other companies and then form or civic, we've always been developers, always built new construction.
I have never ashamed to say, I've never like went and bought an existing apartment building. We do invest in our own deals, but they're our own development deals. I've always just been like the idea of creating new housing. To resolve this supply issue, the center supply issue, but also the great advantage of being a developer is I get to pick the site location. I get the pick the product type. So like we do five-bedroom, four-bathroom units right now; which is fairly extreme on the spectrum of product offers right in the development industry. And so I get the choice to produce that and I can change it, by the way, maybe next year we go want to do three-bedrooms or something, different, whatever the market is wanting to whatever it tracks tenants in the marketplace and also tracks capital from investors.
Like that's the, we live in that interstices that space in between those two but if you buy value-add, you're like basically buying the existing program and maybe have one and two-bedroom units. Maybe it's a distressed asset. And then you've got to look at it totality and go, if I buy two bedrooms, is that the main competition in this market or that market, like in Southern California, the most common unit type is two bedrooms. Like we won't develop like less than very special cases, a two-bedroom unit, because there's so many of them already.
Now we have advantage, we have new units. Brand new, new systems, new countertops. We build all of our units with a two-car garage. It's, purposely designed and built to rent, but lives like a house. That's how we describe our UTH model.
Seth: What would you say is besides Coronavirus because I'm so sick and tired of talking about Corona and who….
Scott: I totally with you.
Seth: And just for everybody listening, like we're recording this at the end of January and 2021. What would you say besides Corona is the biggest challenge right now in your business?
Scott: I think in the multifamily development business and, and real estate generally, we're in like the story of what's the recovery look like, and, and in this recession, different real estate sectors were affected differently. So, hotels and retail and movie theaters were very heavily punished in the pandemic. Multifamily was relatively stable, for-sale housing, boom, industrial boomed, things like tech, data centers. They're, they're going crazy. So those are different effects of the pandemic and the recovery right now that puts us in a story of inflation.
So, we and I'm not sure how you guys are doing it up North in the US I mean, we're pumping massive amounts of stimulus money into the economy. I don't remember the stats, but it's something like 40 or 50 or 60% of all the money in the economy came into the economy in the last like year or two. Like in others, the amount of money now in the economy is historically higher than it's ever been in the history of the United States. And so you start to think about what is the effect of that? And certainly, the first place people go is inflation.
And so from a developer standpoint, because we're building a new building, we're subject to commodity markets, so lumber, copper, steel, those kinds of commodities that go into a building. As an example, lumber is at triple the price, it was say at the beginning of 2020, it was like 300. This is per board foot price, 300 and it's now at like 8 or 900. So like the costs of lumber tripled. Now that's supply chain disruption from coronavirus, but also, just in all the people that I follow for, we do like deep economic analysis on a weekly, monthly, and quarterly basis.
I have several sources that I vetted of economic information. People that don't have some agenda, they're not trying to sell gold or whatever and so somebody described what they call it, a secular bull market and commodities. In fact, there's a person named Lynn Alden. Who's on feast, lookup, Lee… Lynn Alden on B, on YouTube, she's sort of a big crypto, but very good macroeconomists, like super smart. And she was talking about secular bull market and commodity. So, copper's up, steel's up. So we have in this, that time period, when we build the building, we have exposure to that inflation. As long as we're not building and there's no exposure. And then when we're done, then the exposure to that commodity, inflation, ceases, and then for apartments or any income-producing property, as long as we have fixed-rate debt and inflation starts to become an advantage. As long as the inflation rate is above our fixed-rate debt rate, then we're in a positive, inclined for, for debt. Like, the way, you basically collect future dollars that are inflated and pay debt that's fixed from, when you did it originally.
So, any income property that's fixed-rate debt and rising rats relative to the rate of inflation. Rents would track inflation, also asset value as well. So we're, prior to even trying to do this you UTH portfolio and fund, we, we knew that inflation would advantage multi-family assets, and now we seem to be right at like a good time to produce as quickly as we can, several assets, several thousand units of, of new apartment buildings, and then own those for a period of time. That would take us through that inflationary period.
Now that's consensus and thinking of certain economists. And I really sort spent a lot of time to sort of weed out all the BS, economists that have some book to sell or some agenda that they have that they don't talk about, but their logic and an economic advice, space biased on that. So really the future to us is an inflationary, economy, massive stimulus. We're also in a conversation just, about the US dollar, ceasing to be the world's reserve currency. We're firm believers in, in, in Bitcoin. In fact, one of the things I'll share with you that sort of a future move, although it's, it's real-time happening now, is that in the blockchain and crypto world, people are starting to use blockchain and tokenization to finance real estate projects.
So, you would raise equity like you normally would for any project, meaning you have a project, you go find capital that capital comes into the deal, and then you complete it and own it for a period of time with the investors. Well, now we're making a move to do, what's called an STO or a security token offering. And that's basically tokenizing the ownership of a real estate asset for our ownership and the investors' ownership, which then basically puts that on the blockchain. But really, as the future in our minds of equity and real estate finance is tokenization like the involvement of cryptocurrencies, tokens like an Ethereum token and blockchain. And then the interesting thing for us and that is that having a token allows investors or anybody who holds that token that is backed by the asset, the real estate asset, they can then go trade that on a secondary exchange.
So, we'll produce in our minds, the people we talk to that are way smarter than this than us, that there will be the capability to trade on secondary markets. What traditionally would be a very illiquid offering. Like if you put equity into a deal and you're in that for six years, it's hard to go sell your LP shares to some other buyer, like in the traditional sense. And it's not impossible. It's just not a liquid market. There's not look people looking to buy three years into a six-year investment, like as much as we would want, and as much as two to be like an immediate liquidity event. So these exchanges will give, this traceability and liquidity to really what traditionally is an illiquid asset. And that, us is absolutely the future. And so we're working on our first deal, with a tokenization company based in Israel that we're pairing as standard capital raise with this STO structure.
Seth: That's going to be such a big change in over the next decade. Let's say
Scott: Let me a point there. So I, a guy I really trust, he said, ‘Hey, buy Bitcoin a long time ago. And I didn't take him up on it. And I wish I had,
So he came back and he was telling me about STO, which I had done a little bit of research, but he's like, this is the future Scott. And not only is it is going to be much faster. So to your point, you said 10 years, this guy's like, no, it's really like three to five years. He thinks that something like five years out, you may not even be able to like trade a real estate asset without being, a token or tokenized. And so the point he was making is not only is it the future, but the future is accelerated and compressed. Like we saw it in the pandemic with virtual work using Zoom to do meetings.
What should have taken three years to six months? And so we're anticipating he and I, that this is going to happen much more rapidly than people anticipate. And so we got all these cross-currents, we've got the US economy, we got pandemic, we've got the world economy, we got shifting of reserve currencies from the US to something other than the US. And so we've got just crazy, crosscurrents acceleration, complexity, rapid change. And so that's something we need to track that also creates huge opportunities. And so the point is just this acceleration, I think, is going to happen much faster than most of us can anticipate.
Seth: And traditionally real estate has been a very slow-moving animal when it comes to change.
Scott: Exactly. Super old school backwards, I mean, and we're still building buildings on a technology that's from, a hundred plus years ago stick framing.
Seth: So let's, let's move on to a Keystone deal. So a deal that made a big impact on you and your business, is there one that comes to mind?
Scott: So I'll talk about, so this project that I'll talk about as the address is 1029 South Montebello, it's in the city of Montebello, which is in Southern California, sort of central LA County. People might think of it generally. And this was the fifth of our UTH business plan. So we did four projects in the early phase, really is our experimental phase. I called it… we needed to test the model. Can we collect the rents? Can we build it for a cost? Can we sell it or value it at what we need to produce profitability to ourselves and investors? So the first four deals really proved that in fact, the fourth deal, we is now complete and leased up, and we're going to hold that and that'll go into the fund, but the fifth deal was the Montebello deal. And that was a key deal for us because it really sat on the margin between our experimental phase and our production phase.
So it's not a big project, it's 15 units, but the early projects were even smaller than that. Like, my story was, I wanted to do small projects so that if they were a failure or had breakdowns like it wouldn't like… we would be, it would be okay. As a company, like they, they wouldn't affect us hugely like the experiment, if it failed, wouldn't ruin us. And, and in fact, they turned out to be way better than we expected, which is great. So Montebello is a transitional deal is the first of our production phase really got us into the mode of bigger project or back to bigger project production, and really starts to be like a representative example of what the future of the UTH model looks like. Right now, we want to do, let's say 15 to 90 unit projects.
That's in our production phase, we call it, that'll be the second deal that goes into the fund and it starts to be the base for how we both grow our, our business plan grow our production capacity. Like our internal team and practices and systems that we need to have in place to execute efficiently cause. Because development is find the deal, find the strategy that you think can make money, raise the capital. And those are key components, but then there's this thing called execution. You actually got to build it and lease it up. And that really is to me, like as I watched people in development business and, we've even had it ourselves where like you get punished in that phase, if you don't really have your practices, you're the standard actions you're in every day, down that's where your team really, shines or fails. Like project coordination, project management, field staff, construction, asset management, property management. And so we have, in fact, part of the reason for the experimental phase was to grow that capacity. So Montebello is a prime deal. And I know you would like to talk about specifics on numbers. So tell, tell me where we can start on that, and happy to answer all those.
Seth: Well, I think one of the questions we get a lot is from people who have done some value-add before, and then they are, they become interested in the development side. So maybe let's approach it from the angle, what should let's, let's highlight the steps and maybe the challenges involved in developing that deal and how you overcame those. Just to give people a good idea of that framework.
Scott: So there's lots of common ground between investing in existing assets and development. We're still building apartments, we're still renting units. We're still funding loans and holding and managing. So those things are common. What's different for development is sort of what we talked about before. We're finding an empty piece of land and we're creating a building design and building a building out of whole cloth. Like you got a clean slate if you were to think about it and that's where most people who transitioned from value add to development, really, I think get hung up. In fact, I have a way I think about it, this differential between value add and development, like transitioning from one to the other is I call it my three buckets system, just a name I gave it.
So the first bucket is underwriting apartments, apartment rents markets? Like sort of strategic decisions about, do I like one-bedrooms or do I like three-bedrooms or whatever the choice that you would make and, and both value-add a new construction, have to assess those, like you got to underwrite, rents, conservatively and, and, and you're, you're producing good value in the marketplace. That's bucket one underwriting, its call.
Bucket two and these are sort of go on order by the deal order by the way. Bucket two is your, your planning and zoning and new construction design phase. And that's really the big differential. So you have to go through political processes. Maybe you go to the planning commission, cause you need a zone change for your site would be like an example of something that no value-add person would ever want to do.
In fact, most when they look at it and go, wow, that looks super complicated. I was on Michael blogs podcast and we talked afterwards and he's like, I've looked at some development deals, but frankly, development looks just super complicated. It's I think even use the word sort of scary. And it is right because it's like, zoning is not like a common knowledge, domain, politics, it is zoning law. And then you get into, you have to direct an architect to design a building and work in that. And then you have to build a brand new building. So the way I think of a new construction development, it's like the ultimate form of value add. Sort of taking the existing building, upgrading it, we're taking an empty piece of land and building a new building and then renting it.
So you got this like bigger process. So that's bucket number two. And then bucket number three is just, again, back to what was common between the two, which is, your valuation and your profit production. Buy low, sell high. So in an apartment out value, add, you'd buy distress acid discount. You upgrade it, you'd raise the rents, you fund a new loan and then you have a more valuable asset.
Development is the same way we just happen again, buy an empty piece of land, design a building, build it and then rent it. And then we're into that same value domain, which is what do you sell it for? Is it profitable? Or if you're going to hold it, you get an appraisal in a perm loan funding process. And did you produce again the valuation to support the appraisal for a perm loan in this case?
Like just general steps and development is, we'll come up with our strategy. We find land that fits that strategy. We design, the new building from whole cloth and including the, what unit type is strategically good versus, two-bedrooms versus five-bedrooms. You'll, you'll build the building, lease it up, stabilize it, fund a perm loan and then own it if you're in a long-term scenario. Again, several overlaps between the two deals when you're going through the deal process, we just have this section in the middle. That's why I put it in the middle bucket of this, empty land, new building, design, new construction of an entire project. And then back into the lease-up phase. So to me, those are the big differences between the two.
Seth: With your Keystone deal. What was the capital stock like? Because one thing I've seen with, I guess budding developers is, they are, they don't stack a stock it properly, and then let's say they get delayed due to a political issue, like you mentioned, or something happens that basically wipes, wipes them out because they haven't taken that into account.
Scott: It's a great question. It definitely disrupts or can disrupts and we deal with that everyday, and in fact, on the Montebello project, we ran into this where it issue not weird, but the coronavirus pandemic affected lots of bureaucracies, like cities think like planning departments, building departments, and plan check, but also like utilities, like, locally here at Southern California Edison, we had a huge delay over like staffing reductions at the utility to connect our electrical supply. Our perm power, we call it and you can't open the building and rent the city, won't give you your certificate of occupancy to, to… so we had, we had a really big challenge to work through the system and work through their bureaucracy. And you would never have that on an existing asset because your power's connected.
Maybe you're doing some upgrades in the units for plugs and switches and that kind of thing, but it's not utility level type of interaction and need. And so that stuff constantly comes up, and I would say like 99 out of a hundred times or 90 out of a hundred times, we, we know these things can be disrupted. We make plans and underwrite it to anticipate possible disruption. We have contingency plans. And then really what it comes down to ultimately is that we just do a ton of problem-solving. So, a lot of what I do daily with our project management project coordination teams is I'm just, they ran into this issue. Maybe they personally have never experienced this disruption or this delay.
I went to the building department, the guy wanted to show me the permit cause, he says he needs this other thing and I can't get that thing and nobody will call me back. And so that's where I usually come in on our weekly meetings. I go. Call this guy, call his boss, call him more. Send them a letter, write whatever fact that the saying I have to people I learned from when I was working professionally for other companies, I worked for a guy and then project management had this great like analogy. He said every project and as it's like a series of walls that are like put in front of you and it's your job as a PM to figure out how to get to the other side. And he said, the key is not to get stuck on one method. We always got a ladder and climbed over the wall. But sometimes you go around the side of the wall, maybe you dig underneath it. Maybe you drive a tank through the wall. Maybe you blow the wall up.
I've added methodologies over the years, but it was sort of like over, around under like whatever it takes. And that's really like a, a, a key component of what we teach. And as we have bring on new project managers, is just follow-up skills and like being creative and problem solving because ultimately that's where projects get stuck.
Your delay, you talked about, it's just functionally. And I see this in new developers. They just, they, they get hung up on the planning department, told them this. And so they got really fixated on that. And then they're stuck and they keep calling this person and the person will like do what they want. And so the part of it is just the creativity of maybe knowing the systems and the methodologies of how to work this, which help comes with time. And knowledge to work around it. Part of the way we solve the Edison problem on this Montebello project. So we had to hire a lobbyist. At some, fairly expensive rates to go like pull, political favors in, at high levels at Edison to get them to call the person who was plan checking our plans to tell them, to get the heck going. Put this project to the top of the list. Because we were number eight and he wasn't getting to us anytime soon. And we were already like a year into the process and it was crazy. It's the most complicated Addison process I've ever had.
So then next time we go, we better start even earlier. Normally we start that process. we start construction. Then we start the Edison process. I've already got on our next project. I've already got the Edison. We submitted early, we paid their fees early. We, we really stay close to the plan checker for Edison. They do their own plan check of the utility design and the installation process that we have to go through. And so we're now on our next project. Addison's already fully approved.
Now, they haven't installed yet because we're not we'll wait until construction starts, but these are the sorts of adjustments you're constantly making. So it's a combination of sort of having tactical flexibility. Your overall strategy is still the finish the building, and lease the units up. So that doesn't change. But the tactics change, like how you change the situation, I'm stuck. I got to go call this guy's boss. Or I got to call my city council member or I call the city manager or hire the law, whatever. I mean its infinite number of like choices in that. And so what I coach people sometimes when they bring me deals and they need help, this is where I go with them. I go, don't get stuck on that one thing. So I didn't answer your capital set question, but I can do it real quick.
Our capital stack is very traditional. In fact, this is interesting, one of the interesting components about UTH is we're pairing private capital with workforce housing. So it's a version of affordable housing. It's not government-sanctioned. We don't have government subsidy, but it does produce a middle-income housing offer, like naturally occurring. Some people call it new construction, which nobody else is doing that. Like, like we're a really unique offering that. Our equity is 25% of costs and our debt, 75% of costs. And that's it. And we fund a perm loan when we're done to take out the construction loan, sometimes that adjusts the equity, but it's very, maybe it's 70/30 at the perm loan, but it's really straightforward. We don't have any complicated financing mechanisms. You sometimes see an affordable housing. We will do sometimes maybe 10% of the units is affordable. And we do that to get relief from zoning code, setbacks, or parking standards sometimes, or overburdening the design of the project.
So we'll get relief from that. And then what we've been doing recently is, we'll pair that, formal housing unit with a section eight tenant, which is, a public housing voucher, they call it, which is transportable to a new project. And we're a pretty unique offer because we're able to rent a five-bedroom townhouse to a section eight tenant, which is very challenging. If you have a big family and you have a section eight tenant, your only option really is houses like, for rent because nobody's doing five bedrooms at least at scale. And so we're really excited. In fact, our first project in Fullerton has our first section, eight tenant, in the affordable housing unit where we did this structure and we're probably going to do it, almost. All of our projects will have some affordable component. And then that just increases the social impact. I mean, this is workforce housing naturally like our regular unit. And then we just sort of juice the affordability with 10% as affordable. And, then encouraging section eight tenants to come on live in our units.
Seth: Your long-term planned in terms of the social impact, all the, I guess, the immediate impact of having the intensification and all that. I think that's a really cool project you're working on.
Scott: Thank you. We are excited. In fact, we're only going to do UTH in the future, that’s all we're going to do. We won't do any other kinds of products.
Seth: That's really cool. How has your success on the development side impacted your lifestyle and your life? How have things changed for you?
Scott: Do you mean like over the 20 years that really I've been doing this for 35 years, but our company for 21 years actually this year, or do you mean like more immediately?
Seth: I would say more, more immediately, let's say the past decade because it ramping up even more.
Scott: So the past decade, really the first half of that decade was recovery from 2008. I mean, 2008 was great financial crisis. Everybody knows about it. It was the most impactful recession in my career around the real estate sector. Now, of course, anybody who's in the hotel business now says, dude, I'm getting killed right now. So it's worse for me. So maybe I might qualify and say it was the worst residential real estate recession, mostly houses. At the time we were doing a fair amount of urban infill condo product and we traditionally done mostly apartments, but we did some projects condos, and now like we won't do condos ever again because of 2008, but also we were really a big firm believers in this rental taking care of family’s model. And for sale product does take care of families, but it's a different thing. And particularly we look at it from a realities operation standpoint. Incomes are stagnant and housing prices are generally going up. And by the way, that inflation that we talked about, that's going to raise housing prices.
In fact, that's, what's been happening for like the last 30 or 40 or 50 years. The value of the dollar is going down on a graph. Well, that means cost of goods and services and housing is becoming higher relative to your, to your, to your currency that you hold. Your currencies devalued and your goods and services become more costly? Those are both versions of inflation or they're the reciprocal of inflation, maybe the way to say it. So we learned a lot of lessons in 2008. I mean, I'll be the first to Italia. I mean, we stuck around; we basically managed through the recession. We did everything we could to like complete projects. And we did, we did all we could to take care of banks and, I knew people who basically had projects that went bad in the recession and they like just left town and we didn't do that. And it was hard. It was really tough. So we carried a lot of lessons out of that.
In fact, UTH as a product type and an innovation is a direct response to what we learned in the 2008 recession. What I mean by that, as in about 2016, we had finished a series of really big institutional-grade apartment assets that weren't UTH. These are more standard apartments, some podium, some on-grade, but all like one and two-bedroom, sort of gen Z, millennial product. And in 2016, we sold all of our assets.
We had this little gap in time to look at the market and go, what do we want to do? We did really well on these projects. Everybody made a lot of money, but we don't necessarily know that we keep doing more of what we just finished. I mean, we didn't say no to that, but we also didn't assume that that was, just keep going. Development, developers are famous for just keeping going, like even when the signals made described to because our projects are two, three-year life cycles. It's hard to, if you're in a year and two-year cycle, you can't just quit that project. Some people do. I mean, you can, I mean, there's nothing stopping you, but most people have to finish the asset to produce the ultimate value of a rental project.
Several things that we do, so UTH was a contrarian move? So we're renting to under-supplied, family groups and multi-earner households, and multi-center roommate groups. We're doing a, you sort of talked about, densification, we're a middle-market offer, so we're not high-rise or podium, and we're not single-family. We sort of sit in the middle, people call it missing metal from a design standpoint; we're also serving middle-income families. So right now in the marketplace, we're very bifurcated. We have luxury high-end market-rate housing, and we have affordable housing. People that are on section eight or welfare, or just have low incomes. And again, we're in the middle of between these two. The other thing we're doing is we're serving the middle between your high-rise lifestyle and your single-family lifestyle.
We're a middle-density product from a living style. In fact, the new part of the marketplace that people describe this as built to rent. And built to rent is basically a sector of the multifamily market or multifamily type that is renting units that aren't traditionally rented like the big sector. And that is single-family homes like master-planned community subdivision at homes that people will build 200 units of homes, detached, single-family, but they rent them instead of sell them. That’s built to rent, our UTH, and is an attached products. I think like row homestyle units attached, one to another, that's just a different version of built to rent and really responsive to the California marketplace. Our land and construction costs are too expensive to do detached housing there's places in California that can like the inland empire, like further inland in the state where land is cheaper and construction costs may be slightly lower, but if we want to develop really our product focuses, not in urban locations like downtown X, or downtown Y, but we're, we move outside of the downtown into what I call urbanized suburbs.
So there's still a suburban model when you look at the neighborhoods and the style of housing and, other real estate commercial and other things around it's very much a suburban model. It just happens to be close in maybe two or three neighborhoods outside of the CBD or California; it's famous for its sprawl. Almost the entire LA basin and Orange County is sprawl, which is suburban. It just happens to be, it was suburban and new in 1950. Now we're 70 years later or whatever the math is, That it's still a suburban form, but it's urbanized. It's older, it's, the city sort of crapped and moved around it and beyond it, we're not the traditional, like sort of Greenfields, detached, single-family type of development. And that's been a major advantage. That's part of the reason we've seen the acceleration is that you're hearing people moving from urban to suburban.
And that's true, but it's not as literal as people think. It's not like moving from downtown Toronto to the newest master-planned community way on the periphery of, whatever, the peripheral development is in a place in a major urban Metro like LA or Toronto. What people are doing is they're moving and they're, we like 20 minutes away. Some people, not everybody 20 minutes away, and they're now in a suburban neighborhood, but it happens to be closer to their job if they're not, working virtually, which a lot of our people do because their service workers are they're blue-collar. But also, there's roommate groups, during the pandemic, we're finding what I call location agnostic, professional roommates. So there may be 30, 30, five, 40 single, they're living in a roommate group, but that their companies are released them from working geographically. And so they can work and live wherever they want.
They're agnostic to location in that sense. And then they're starting to form what I call affinity groups. So they're like maybe they were roommates in college and they love living in those four roommates and they go, cool, Hey, you guys are all released from, let's go live in X or Y or Z city because it's cool. Or it's there's stuff going on or the weather's better or whatever. And, so our units have actually advantaged been advantaged by that change because we have the five-bedroom unit, which really is not available in a rental apartment sense. With the shorter term, there are single-family rental houses available, but they're just less of them. And in Southern California, they're very expensive for the most part. And you were usually priced below that and also they'll rent three people to a five-bedroom unit and they'll use the two extra bedrooms as their work from home space, which, we couldn't have anticipated that, but our…we knew the recessionary model would have people want to combine together. In these economic sharing lifestyle modes. And it's just been that plus, an anticipated in additional accelerants like these roommate groups.
Seth: Well, Scott, this has been an awesome interview. You have shown so much stuff
for everybody listening where can people get in touch with you if they're looking to get in touch?
Scott: So for your listeners, I'll make this offer. If they go to our website, www. urban pacific.com/eBook. We have an eBook available for folks called how to survive and thrive in a recession, which I think is the timely eBook. And it's lessons learned from that 2008 era that we talked about, several, several ideas of not only how to anticipate, and plan and design your business plan to anticipate a recession, but also when you didn't plan and you get stuck in it and anticipated, then what do you do? How to prepare your family? How much money to save to be prepared? When the what hits the fan, because the reality is being a real estate entrepreneur, but particular developer we're like exceptionally exposed to economic cycles. High risk, high reward.
Like as you've heard everybody say, so go get our eBook. When people are on the website, if they want to go to our investor education section, we have a ton of videos, articles, other eBooks available, a lot of economic cycle tracking. Like, we take basically what we do internally on this weekly, quarterly review of economic cycle tracking. And we're just getting it out into the, under the public domain. So, anybody who signs up for our e-blasts and or reviews our investor education section, we'll see all that, like that's, freely available to folks. And then our contact page has all our email addresses. So if anybody wants to reach out, they can email us.
Seth: That's great. And we'll put the link right down below so everybody can get to it.
Scott: Appreciate it.
Seth: So, Scott, once again, thanks so much for taking the time this was a fantastic interview. So thank you.
Scott: Great to be here. Thank you.
Seth: It was my pleasure. And to you, our listeners until next time, happy investing.
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