Why things are slow right now

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For most businesses, the problem is demand. In other words, they can make an infinite amount of product; the issue is how much they can sell.

In our business, interestingly, it’s the total opposite.

There is a structural imbalance in LA between the number of apartments (growing slowly) and the number of people who want to live in them (growing rapidly).

So, if you have a decent apartment available at a fair price, it will rent.

Our problem is really on the supply side: There are very few buildings in decent areas we can buy cheaply enough such that, after doing the extremely expensive upgrades we do, we can still make a reasonable profit renting at a fair price.

For our business to really zoom, we either need prices to drop or else we need rents to increase much faster than prices.

The short term prospects for either occurring seem limited, to say the least.

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