SB 684/1123 Fee Simple
Subdivisions

The Reasoning

A change in state law turned a multi-year political process into an administrative one. That is the whole opportunity.

SB 684, expanded by SB 1123, created a ministerial approval pathway for small-lot subdivisions on multifamily-zoned land. Ministerial matters enormously: it means approval is administrative rather than discretionary — no public hearing, no discretionary environmental review, no neighbor appeal that can add three years and kill a project outright. Entitlement stops being a political risk and becomes a schedule item.

The arbitrage this opens is a valuation mismatch. Multifamily-zoned land is priced on the income approach — what a rental building on that site would earn. SB 684 lets the same site deliver individual homes sold to individual buyers at for-sale pricing, which on a per-square-foot basis is materially higher than income-based value. We are buying land at one valuation basis and exiting it at another.

The fee-simple structure is what makes the exit work. Each home sits on its own legal lot with its own APN, so buyers use conventional mortgage financing rather than the specialized loans a TIC or condo-alternative structure requires. That widens the buyer pool to essentially every qualified homebuyer in the price band — a decisive advantage over structures that ask buyers to accept unfamiliar financing.

Being early is a real and temporary edge. Few operators in the region have executed this pathway; The Culver VI at 3850 Westwood was the first ministerial (tentative tract map) approval in Culver City. While the field is thin, sites can still be acquired at bases set by the old rental-value assumption. That window narrows as the statute becomes better understood.

SB 684 / SB 1123 Site Criteria

What Makes an
SB 684 Site Work.

These are infill lots in the flats, usually with a dated single-family home on them, big enough for at least six new fee-simple homes. We prefer multifamily-zoned parcels on the Westside, in Class A, A− and B+ neighborhoods, and every site has to clear the tenant-history and hazard rules in the law. Agents and owners can send us a site that fits.

• Location: infill lots in the flats. Westside markets first, in Class A / A− / B+ neighborhoods: Culver City, Mar Vista, Palms, West Los Angeles, Sawtelle, Del Rey, Santa Monica, Venice and Marina del Rey (outside the Coastal Zone), Beverly Grove, the Fairfax District, Westchester and Brentwood. We also buy infill sites in the South Bay, San Diego County, Orange County and Santa Barbara County, outside the Coastal Zone, where the new homes can conservatively achieve strong per-square-foot resale. See every target neighborhood.
• Lot size: 5,000 SF minimum, 6,000 SF or more preferred. The bigger the lot, the better. The site needs to fit at least six fee-simple single-family homes, each with at least one parking space.
• Lot shape: corner and street-to-alley lots preferred. Two street frontages make for a better site plan and access. We still consider mid-block lots.
• Price: scales with the number of homes. For a six-home site we typically pay $800,000 – $1,500,000; for eight homes, $1,500,000 – $2,200,000; for ten homes, $2,000,000 – $3,000,000. The stronger the neighborhood and the resale value of each home, the more we can pay, so higher prices are possible in top neighborhoods.
• Existing home: owner-occupied, or no recent renters. An owner-occupied single-family home, or a single-family home with no rental history in the last 5 years.
• No Ellis Act filings on the property in the last 15 years.
• Not in a high or very high fire hazard severity zone. This rules out most hillside lots.
• Clear of the law’s other site exclusions: earthquake fault zones, special flood hazard areas and floodways, wetlands, protected habitat, hazardous waste sites and conservation easements.
• Zoning: multifamily preferred. Multifamily-zoned lots (up to 5 acres) have the clearest path to qualify under SB 684. Single-family-zoned lots (up to 1.5 acres) qualify under SB 1123 only if the lot is vacant, which can include a lot whose only structure is abandoned and uninhabitable; they also need room for at least six homes.
• Not already split under SB 9 or SB 684.

A screening summary, not legal advice. Final eligibility depends on the local agency’s review of the specific site.

What Can Go Wrong

The Risks We Underwrite Against.

Every strategy has a failure mode. These are the ones specific to this one — the complete risk disclosure for any investment lives in its offering documents.

• SB 684 is a recent statute and jurisdictions interpret and administer it differently. Processing timelines, plan-check standards, and local implementation vary, and the law itself could be amended.
• Affordable-housing obligations apply on these projects and are disclosed per deal.
• Sellout is absorption-dependent: each home waits on its own buyer and financing, so selling every home individually may take longer than modeled. Pricing at the entry level of the fee-simple market, where the buyer pool is deepest, is how we manage that risk.
• Three of the active projects carry construction cost above current loan commitments; each requires a construction refinancing, and investor-level return projections are intentionally withheld until that capitalization is reconciled.