Managing to Turn Properties Around

When Cary Hall took over in January as manager of the Park Place apartments, he recalls, rent was being collected from only half of the units.

Besides that, “‘you had drugs, shootings and knifings. . . . You had crack and cocaine being moved in and out,” Hall said. “We had to take this place back.”

Working closely with law enforcement agencies, Hall--himself a former Washington police officer--transformed the sprawling four-story building at 301 W. Second St., just south of the Santa Ana Civic Center. His company, Corporate Property Management Inc., is now collecting rent from 192 of Park Place’s 196 units, and the building, now profitable, is in escrow for purchase by a real estate investment trust.

“There’s been a tremendous turnabout,” said Lt. Robert Helton of the Santa Ana Police Department. “The area was like a bad toothache. It took a major effort on everyone’s part to get it cleaned up.”

Corporate Property Management has carved a niche for itself by taking a hands-on, community-based approach to rescuing troubled properties across Southern California.

“They’ll go after stuff I wouldn’t touch,” said Scott Morrison, regional property manager in Irvine with Lincoln Property Co.

His firm, based in Dallas, is occasionally solicited to renovate blighted buildings but doesn’t aggressively pursue them, Morrison said. “When I go out to look at a complex, if I feel physically threatened in any way, I just say, ‘Thank you very much.’ ”

That can be frustrating for absentee corporate owners such as banks and insurance companies that acquire buildings through default or merger, only to discover that real estate values are plummeting in neighborhoods splashed with graffiti and plagued by drug dealing, car theft and gang warfare. And, because of the region’s real estate downturn, the amount owed on a run-down building is often more than the property is worth, said Tim Gamache, regional manager at Corporate Property.

Companies like Gamache’s offer absentee owners a way to fix up such properties so that they can be sold at a profit.

Such make-overs aren’t cheap. Corporate Property Management spent about $115,000 on Park Place, company officials estimate. Still, that is a small investment considering that it increased the apartment building’s appraised value by about $500,000, Gamache said. In the deal now pending, he said, the property will bring about $6 million.

Park Place is only one of Corporate Property Management’s successes in Orange County. The company, based in Long Beach, renovated the Pepper Tree apartment complex in Garden Grove and the Fann Street Apartments in Anaheim. It also manages about 10 apartment complexes in South Central Los Angeles.

Community organizations, too, are involved in fixing up run-down neighborhoods so that clean, safe housing is available at rents that lower-income families can afford. But absentee property owners anxious to save their assets from further erosion typically turn to real estate companies to make improvements quickly.

“We encourage property management of these bad buildings, these little cancers in the neighborhoods, even if it means tough property management,” said Barbara Zeidman, assistant general manager at the Los Angeles City Housing Department.

“They are a property manager acting responsibly,” she said of Corporate Property Management, “and I wish more private companies did this. Nobody has the right to destroy a neighborhood by dealing drugs.”

At Park Place, the first step was to improve what Police Lt. Helton describes as “an unwanted environment for the people who lived in that complex.” To do so, Corporate Property Management hired a private security firm and put guards on duty around the clock. The company also invited officers who work at a small police substation across the street to park at the apartment complex for free, thus gaining a highly visible law-enforcement presence.

The company then evicted tenants who were months behind on their rent or living in overcrowded apartments that in some instances had as many as eight people in a one-bedroom unit. It put in new carpeting and appliances and, when the face lift was completed, raised rents from $575 to $605 for one-bedroom apartments and from $705 to $775 for two-bedroom units.

A factor in the project’s success was residents’ support and help. The new management company sent letters to tenants notifying them that all apartments would be inspected and explaining new procedures for collecting rent.

If “we come in like the new sheriff in town, all hell breaks loose,” property manager Hall said. “But we don’t have a cowboy attitude.”

Making a property marketable is painful, of course, for tenants who can’t pay the higher rent or who had been living in overcrowded apartments because that’s all they could afford. Such people may be forced into the street.

At the same time, “most low-income urban dwellers are just as anxious to have a safe place to live as anyone else,” said Amrita Daniere, associate professor of urban and regional planning at UC Irvine.

At Park Place, most of the tenants welcomed new management.

Samantha Bonner, a resident for four years, said she was skeptical at first but soon began seeing improvements at the building. “It was kind of like a battle zone where we were watching to see who would win,” she said.

Bonner especially noticed a difference at an adjacent park where “a sea of bodies” once slept. Now, she said, “you can see the grass.”

Park Place still faces challenges. Because the surrounding neighborhood has a high crime rate, a security guard monitors the property from 5 p.m. to 7 a.m. And new graffiti appears on the walls almost daily.

But manager Hall diligently sends someone out every morning to paint over the graffiti, and that effort is discouraging the taggers.

“It’s frustrating for them to see us paint it out every morning,” he said. “They’d rather go down the street where it’s going to last for a while.”

Turning around areas that otherwise might be lost to crime and gangs requires an active approach to property management, Hall said.

“You can’t have someone sitting there eating popcorn, watching a soap opera, waiting to get rid of the last two units,” he said. “If you take your eye off this place for six weeks, it will be right back the way it was. But if you help keep your eye on it, it’ll run like a Swiss watch.”