Can't Build in LA? Buy in LA - Paul Schon - SDG

In this episode of Deal Flow Friday, David Moghavem sits down with veteran Los Angeles developer Paul Schon of SDG to discuss why the current market favors buying existing multifamily properties rather than pursuing ground-up development. After more than 15 years and 30 projects, Paul explains why rising construction and financing costs, extended timelines, inspection delays, Measure ULA and operational challenges have forced many experienced developers to pause new projects.

Paul shares the details of a particularly compelling acquisition: buying back a property he originally developed and sold in 2021 for nearly 30% less than the previous sale price—and below what it cost to build before the pandemic. David and Paul break down why newer Los Angeles multifamily assets can now offer attractive going-in yields, positive leverage and limited new supply, despite the city’s political and regulatory risks.

The conversation also explores the importance of in-house property management, the operational challenges of co-living, the risks surrounding ED1 affordable-housing projects and the difficulties of underwriting an exit without established comparable sales. Paul also offers advice for aspiring developers, including starting with smaller SB 9 or ADU projects, learning property operations and bringing valuable opportunities to experienced developers as a potential partner.

Chapters

00:17 Introduction: Paul Schon - SDG

01:30 Waving the White Flag on Ground-Up Development

05:18 Where are the Bottlenecks in LA Development?

08:37 Buying Back His Own Building at a Discount

13:21 The Bull Case for LA

20:33 What Went Wrong With Co-Living?

24:59 Breaking Down ED1

30:44 SB9 (The ADU Play)