LWK Partners, Cypress, Sabal Acquire L.A. Workforce Housing Portfolio for $30M

Cypress Equity Investments, LWK Partners and Sabal Investment Holdings have acquired a 75-unit workforce housing portfolio in Los Angeles as the first transaction under the firms’ new joint venture, Commercial Observer can first report. 

As part of the $30 million transaction, executed utilizing a line of credit provided by lender Ascent, the partnership plans to develop 52 additional units at the properties. 

Leveraging recent California legislation, the partnership is leaning into the opportunity to add workforce housing throughout Greater Los Angeles.

The legislation, called SB 1211, increased from two to eight the number of accessory dwelling units (ADUs) — a separate living unit on the same land as an existing multifamily property — allowed on a property, making it easier for developers to create additional housing in supply-constrained areas. 

“SB 1211 presents what we like to call opportunity window 3.0 for ADUs,” Matt Carney, co-founder and partner of LWK, told CO. “The way that people traditionally think about ADUs, the way the landscape has evolved and expanded in California to address the housing supply shortage, has been: ADU 1.0, basically granny flats behind single-family homes, which was a non-institutional endeavor; ADU 2.0 from 2016 to 2024, which was  focused on garage conversions, which presented some challenges in terms of desirability to the renter — from natural light, unit layouts, and so on and so forth — and we did not participate in that window; and now SB1211, which gives us carte blanche to create new apartment buildings on the excess land of existing assets.” 

As a result of that freedom, “we’re buying existing assets for the cap rate generated by the stabilized building and implicitly getting the land for free. Then we’ve partnered with designers and architects to create a meticulous and repeatable approach to deliver new units that are desirable, efficient and well priced,” Carney said.

With $150 million of buying power under its belt today, the new partnership has a first-mover advantage, Carney said, and is already off to the races. Since the fourth quarter of 2025 alone, the JV has acquired 15 properties and added 100 units to its growing development pipeline. 

Austin Nissly, co-founder and partner of LWK Partners, described the recent 75-unit acquisition as “a transaction of scale to kick off the partnership, and one that allows us to add significant density.” 

“We’re adding 50 units to 75 units,” he said. “You rarely see that kind of density. This is a transaction where you have really great yield going in, but you also have a development component, which I think is rare to see.”

Bearing in mind, this first deal is “scattered site.” 

“It’s not one 75-unit building, but rather seven different buildings, each with unique character to them,” Nissly said. “Most units have natural light and outdoor space. They’re in low-density neighborhoods, and they’re high-quality assets where we can add density.” 

The partnership was formed last year, kicked off by LWK Partners who then brought in Cypress Equity Investments (CEI)  as a co-general partner (GP). By the third quarter, Ascent had provided a $100 million credit facility and Sabal had joined as a JV equity partner. 

Forming the partnership made sense in order to deploy institutional capital at scale in the lower middle market — which is typically populated by less institutional, less well-capitalized or less sophisticated operators — Carney told CO. 

“Given that such an important part of our strategy is developing deeply undersupplied workforce housing across coastal markets, what we had to solve for was being able to develop new units across scattered sites at scale,” he said. “To give capital allocators comfort that we would be able to do this, we ran a process to find a co-GP, and given Cypress’ 20-plus year track record, 21,000-plus multifamily unit development experience, primarily in Southern California, the combination of our sourcing funnel and their development expertise made a lot of sense to take this all together.” 

“The only thing I would add to that is a little more of just the personality side of it,” said Mark Lecocq, managing director at CEI. “Austin and Matt and their other partners are amazing. They have great boots on the ground. They know these neighborhoods in and out in ways that a firm of Cypress’ scale just can’t. I like to say that they needed us for certain reasons, and we needed them for certain reasons — and that makes a good partnership.”

It’s also a full-circle moment of sorts for CEI as Michael Sorochinsky, the firm’s CEO, founded the company with a strategy very similar to what the JV is now pursuing, and grew from there, Lecocq said: “So there was that additional connection between us, as the first several real estate deals that Michael was doing when he founded Cypress in 2000 were very similar to the types of deals that we’re now doing with Austin and Matt — with the caveat that we’re taking advantage of this recent legislation that allows us to add density and workforce housing.” 

In terms of site selection for the L.A.-area ADUs, “We wanted to play into some of the gentrification that’s been happening in West Adams, and in Mid-City,” Carney said. “Austin and Andrew [Altman, co-founder of LWK] both came from CIM Group, and CIM had invested about $200 million in retail and multifamily across the West Adams neighborhood over a long period of time, so we own about 19 buildings in that submarket. It’s a very established workforce housing community that attracts a diverse base of renters.” 

Since the first transaction closed, the JV has also bought an asset in Santa Monica, has a transaction in escrow in Pasadena, and has bought a six-building portfolio in North Hollywood. “We’re expanding across the greater Southern California submarkets,” Carney said. 

And, the long-term vision is to continue to expand, Lecocq said. 

“We’re focused on executing our current partnership, but we want to be partners with LWK for many, many years after that,” he said. “There is a deep pipeline of these types of assets in the L.A. metro area and in Southern California than in all of California. There’s a chronic lack of affordable workforce housing in the state of California that is not going to change anytime soon. So, we’ve got deep opportunities and deep demand, and we’ll keep doing this for as long as that opportunity still exists.” 

The transactions are sourced from long-term broker relationships, with some of the properties experiencing what Nissly calls “quiet distress.” 

“From 2019 all the way through 2022 buyers were getting five-, seven- and 10-year fixed-rate debt between 3 and 4 percent, and so as you go through 2025 through 2027 that debt is switching to floating-rate,” Nissly said. “Once that debt switches to floating it trips their [debt service coverage ratio] covenants, and what’s happening is it creates opportunities where sellers have to sell. Even if the lender doesn’t take the asset back, the owner doesn’t want to operate an asset that’s generating cash flow at 1x DSCR as they’re not making any cash flow.”

Further, due to insurance requirements, owners need to upgrade their electrical panels, which is a huge capex outlay that doesn’t increase rents. “But we need to spend capex anyway due to the nature of these ADU developments,” Nissly said.

When the time comes to close, the new partnership has already established a track record and prides itself on certainty of execution. 

“We’re known at this point to have streamlined access to capital, and that gives brokers and owners a high degree of certainty on our ability to execute and close quickly,” Carney said. “And so I’d say the majority of the transactions that we spend time on are either processes that are pre-empted, where a broker has shown it to us before taking it to market on an exclusive basis, or we are in a dialog directly with an owner, oftentimes one that we’ve bought from in the past.” 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.