Why we’re sticking to our knitting

Regularly get asked the following questions: Are you planning to venture out to other cities? Start doing other product types (office, retail, etc.)?

The answer to both is that I would love to branch out. Aside from the intellectual stimulation that comes from learning new things, expanding the pool of potential projects would allow us to put more capital to work, which would be good for Adaptive.

But we’re pretty unlikely to expand to other cities or product types any time soon.


It comes down to “circle of competence”, the range of potential deals were our existing skills and knowledge give us an advantage over competitors.

When it comes to fixing up apartment buildings in Los Angeles, I can say, with no exaggeration, that our organization is the best. We know, with great certainty, how much we can pay, what we’ll do with a building, where the potential pit-falls lie, what kind of rents we can expect, how to finance the deals, etc.

Are we perfect? No way. This stuff is really hard and we make plenty of mistakes. But I’m confident, because we’ve fixed up ~80 buildings over the past 10 years, we know what we’re doing.

This is utterly not the case when it comes to buildings in, say, Austin. Or office buildings, even in the submarkets we know well.

Now, if we were in the midst of a down-cycle, when everything gets cheap and you can depend on subsequent rent / price increases to bail you out if you screw up, I would absolutely be looking to try new cities and/or product types.

But, since we’re in a pretty hot market, where we need to pay top dollar for assets, we’re going to stick with the type of deals we truly understand, even if it means I get a little bored of looking at hundreds of apartment buildings every day.