When Fifteen Group acquired an apartment complex at 111 West 7th Street in Downtown Los Angeles as part of a larger portfolio buy last month, one tenant said in a text that he heard the buyer was an out-of-towner from Florida. What did they know about owning apartments in L.A.?
Turns out, a lot.
Though the firm is more of a name in Miami, where they’re active on the commercial real estate scene, they’re no stranger to the City of Angels.
The company, led by brothers Mark and Ian Sanders, bought its first 1,000-plus apartment complex in Boyle Heights in the 1990s, and has since amassed thousands of residential units across L.A. and Southern California.
Last month, the two scooped up a portfolio of more than 1,000 units across Downtown L.A. from Laguna Point Properties for about $315 million — 20 percent less than what Laguna Point paid about a year ago.
Laguna Point struggled with the portfolio, claiming it inherited a laundry list of defects from the previous owner, companies linked to Barry Shy. In February, occupancy had fallen to 87 percent, down from 97 percent last year, according to data from credit rating agencies. And Laguna Point was delinquent on the loan it used to buy the buildings.
Fifteen, which did not respond to a request for comment, is no stranger to acquiring troubled portfolios, but has failed to turn them around before. For years, it tried to redevelop a sprawling apartment property in Boyle Heights, to no avail. None of its other redevelopment projects in the city have come to fruition.
The question is whether it can do what Laguna Point couldn’t with this portfolio — hold onto it.
First swing
Mark and Ian Sanders formed the firm in 1992, a year after Ian, now 54, graduated from Northwestern University. Mark, now 57, had gone to Wharton and did stints at Fort Lauderdale-based developer Stiles Corporation and ADCO Group.
The two named the firm after the jersey number of Thurman Munson, the late Yankee captain and commercial real estate investor who died in a plane crash. (The company logo is the number 15 inside a home plate.)
Young, cool and scrappy, the brothers tried to market themselves that way — on the firm’s website in 2014, Mark said his favorite movie was “Fast Times at Ridgemont High,” the 1982 coming-of-age comedy classic. Ian’s favorite band was R.E.M.
The duo bought their first apartment complex in South Florida in 1996. Their first big purchase came three years later — a 1,175-unit multifamily development in L.A.’s Boyle Heights called Wyvernwood.
Built in 1939, the development marked the first garden-style apartment complex in the city of L.A. — more than 150 buildings across 74 acres, complete with sidewalks and greenery.
By the 1990s, property investor Samuel Mevorach owned the building, records show. In 1993, city health officials found lead-contaminated paint was strewn across the interiors and exteriors of apartments at Wyvernwood. Mevorach settled with the city for $1.2 million, and was under federal investigation for involvement with a corruption scandal involving a former L.A. city councilman, according to the L.A. Times. He had to sell Wyvernwood.
Fifteen swooped in with a lowball offer of just $25 million, or just over $21,000 per unit, according to the Los Angeles Business Journal. For context, before his troubles, Mevorach had earlier discussed a $91 million deal to sell the complex to the city.
In 1999, the firm bought a 1,520-unit apartment portfolio in South Florida for $61 million.
At the turn of the century, Fifteen was “almost exclusively on working-class apartment acquisitions,” the firm said on its website at the time. It had about 60 rental complexes across the county, totaling more than 18,000 units.
“We are looking for neighborhoods that are maturing, still finding themselves and have pockets of opportunity,” Mark said in 2012.
Redevelopment pitch
For nearly a decade, Fifteen left Wyvernwood as is — complete with crumbling sidewalks, peeling exterior paint and electricity issues.
“The electricity often goes off if you try to run a toaster and a coffee pot at the same time,” the L.A. Times wrote about the complex in 2008. “No cable TV, no high-speed Internet, no air conditioning.”
In 2007, knowing the complex needed serious repairs, the firm proposed to demolish the entire property and build a new $2 billion complex with more than 4,000 apartments and condos, plus retail space — think the eastside’s answer to the sprawling Park La Brea in Fairfax
The Sanders failed to win over the city or the complex’s residents, who staged a number of protests against the redevelopment. Former L.A. city councilman José Huizar, who pleaded guilty to corruption charges earlier this year, said he would fight any proposal to replace Wyvernwood.
Fifteen went ahead anyway, hiring lobbyists and donating almost $15,000 to city council and mayoral campaigns, according to city campaign finance data from 2004 through 2013. The group even submitted an environmental impact report, a key step in obtaining city approval.
In May 2013, the city approved its environmental report, planning documents show. But after that, Fifteen went silent on the plans, making no progress on the redevelopment. The city terminated the case in 2019, given there was “no activity” since June 2013.
The firm obtained a $155 million refinancing package for Wyvernwood in 2018, according to data from credit ratings agency KBRA. At the end of last year, the complex brought in $11 million in net cash flow, with an occupancy of 99 percent, according to KBRA.
The firm saw opportunity in Southern California, “particularly in unimproved land and abandoned development projects,” former Fifteen principal Justin Barth said in a statement in 2011. But since backing out of the Wyvernwood development, none of those projects have worked out.
In 2017, the L.A. city council chose Lincoln Property Company and Fifteen to redevelop the former Lincoln Heights Jail at 421 North Avenue 19 — a property that needs significant environmental cleanup, according to city documents. The firms have until 2024 to remediate the property and start development, or the city agreement will expire.
Fifteen is also planning to convert a warehouse in Vernon into 18 apartments — a plan that could actually become reality after the L.A. City Council voted to uphold its approval for the project in January.
With its acquisition of the Downtown L.A. portfolio, Fifteen is still trying to play the game, diving in on distress and hoping the firm scores big. But unlike Munson, the brothers’ hero, Fifteen is yet to prove itself as a winner.