Record demand is driving record numbers at Passco Cos.
The Irvine-based real estate developer has been benefitting from investor demand for opportunities in the multifamily sector, the company’s bread and butter.
That interest contributed to a 32% surge in revenue over the past two years, earning it a place again on the Business Journal’s ranking of the county’s fastest-growing private companies, large category (see list, page 38).
It ranked 14th on the annual list with $900 million in revenue for the year ended June 30.
President Larry Sullivan said that growth should continue, with new product lines on the way and no hint of a pullback in consumer and investor demand in sight.
Tenant in Common
The company was founded by Chief Executive Bill Passco, known as one of the first real estate investors to use the tenant-in-common investment structure, whereby a collection of smaller investors pool funds together to buy commercial properties. He made his first acquisition in 1976 when he bought an Anaheim apartment project.
The company has since invested more than $4 billion in properties with a portfolio that includes 56 properties in 18 states.
Passco buys apartments and commercial properties, with the bulk of its portfolio in Florida and Texas, where it has 12 and seven assets, respectively.
California holds the majority of the company’s industrial and land holdings, totaling nearly 1.5 million square feet.
Senior Push
It’s now targeting a new niche: senior housing.
The sector, specifically for active seniors in the 65- to 80-year age group, is drawing consumer and capital demand, according to Carey Levy, who rejoined the company in April as president of Passco Companies Development. He previously held the title from 2007 to 2013.
“Communities that cater to independent and active seniors are becoming an increasingly attractive option to developers and investors alike, presenting a long runway of opportunity ahead,” the company said in a statement.
Passco has partnered with Newport Beach-based Avenida Partners LLC to develop its first two senior apartment complexes in Palm Desert and Germantown, Tenn.
The partnership “will provide the in-demand lifestyle desired by today’s 55-and-up residents, who value activity, luxury, and convenience,” said Levy.
Avenida Palm Desert and Avenida Watermarq at Germantown will each have 161 units and resort-style amenities, such as a pool, yoga studios, a theater, and outdoor gathering places.
Construction for the projects are slated to wrap next summer.
“We look forward to furthering our acquisition opportunities in core real estate and seniors housing, specifically with active seniors properties,” said Levy.
Housing First
Last year, Passco spent more than $600 million in apartment deals alone, the most in the company’s 19-year history.
It expects to top that again this year, anticipating north of $800 million in acquisitions by the end of the year.
Results have been aided by a “track record of strong performance—9% [returns] on full cycle transactions—and an unwavering dedication to doing what is in the investor’s best interest.”
Passco currently has more than 13,500 units in its portfolio.
“Investor demand for alternative investments is growing and real estate, especially multifamily, is a beneficiary of that macro movement,” said Sullivan.
The company, which has 53 local employees, doesn’t foresee a recession, with consumer and investment demand holding up despite ongoing news of a looming downturn and the trade war.
“We are going to stay the course and capitalize on the alternative investment space demand and for real estate, in particular,” said Sullivan. “Our product focus will continue to be housing centric.”
