Meet John Orcutt. John is a financial guy, and a successful entrepreneur. The financial label comes from 40 years at UBS, heading up one of its strongest private wealth management groups in the Los Angeles area.
The entrepreneurial part comes from recognizing opportunities and being bold enough to invest in them when the timing is optimal. This was exactly the case in 2011-2012, at the tail end of the Great Recession.
Orcutt saw firsthand the impact of the Great Recession on the real estate market in Tucson. Prices on properties were down about 40% to 60%. The inventory of properties looking for buyers was dramatically up. Owner investments in properties had declined, leaving many properties in disrepair.
Wearing his entrepreneurial hat, John saw an opportunity. Though the recession hit a lot of people hard, the resulting impact on real estate offered growth potential and the opportunity to improve the market on a large scale.
John was fortunate to have the resources to take advantage of this opportunity. He jumped in, deciding to build a business around investment rental properties. John’s business model had two specific criteria that needed to be met.
- Properties needed to be within walking or biking distance of the University of Arizona.
- The price on a property needed to be below replacement cost for the property.
Specifics that drove these criteria were a shortage of student housing, rents beginning to rise again, and a growing enthusiasm and excitement surrounding the downtown Tucson marketplace, immediately adjacent to the UA.
Beginning in 2011 Orcutt invested in properties, and Dana Cole joined him as his property manager. Together, they built financial models, researched neighborhoods, found properties, hired contractors and began to improve neighborhoods.
Within 12 months they acquired 100 “beds” within the geographic specific market John identified. In 2012, Orcutt’s purchases represented 38% of the transactions within his geo-specific market.
One could look at this and consider it just opportunistic investing, especially considering the impact of the recession. Orcutt’s perspective was longer term. As John said: “My protocol was to create value. I looked for properties needing repairs. Purchasing them below replacement cost allowed me to help improve neighborhoods and create value in housing, for me and for the community.”
A perfect example is a property known as The Station, at Ninth Street and Euclid Avenue. When John first saw them, they were apartments in desperate need of some tender loving care.
Orcutt took the leap, and The Station is now a rental complex that meets all of the standards that Orcutt established for his properties. They are safe, clean, contemporary and current in terms of infrastructure; upgraded plumbing and electric, new flooring, new kitchen appliances and granite countertops, new paint and an upgraded pool area.
John is one of many entrepreneurs and organizations who have contributed to Tucson’s growth. Here is their collective impact:
- Property values today are greater than replacement costs.
- Per-square-foot prices today are $150-$170; they were $60-$85 in 2011-2012.
- The new UA resident towers were built for a cost of $275-$300 per square foot, and they are “A” quality properties.
- The presence of better properties throughout the area is spurring “C” & “D” quality properties to upgrade.
The reach of Orcutt in the Tucson community goes beyond his business. He and his wife, Marcia, are active in several philanthropic ventures. John is on the board of the 162nd Air Guardians, and they are also active in several University of Arizona community efforts.
Since its beginning eight years ago, John has built his business to 227 “beds.” His rental profile is 70% students and 30% young professionals. According to Dana Cole, the young professionals are primarily graduate students and recent graduates who want to stay connected with the exciting downtown dynamic going on in Tucson.
The strength of the real estate market today means that John has not purchased a property in two years. Vacancies are way down. Property values are way up. He’s not sitting idle, though. Next phase is development. And there is no better bellwether for a growing marketplace than investments in new developments.