Published Jan. 31, 2021 in the San Antonio Report
As investment companies from Austin and elsewhere trade apartment complexes in San Antonio at a blistering pace, efforts to boost profit margins have created what residents say are problems and even dangers.
The buyer expanding the fastest in the city, according to real estate data, is an Austin-based investor-landlord company called Shippy Properties.
The stated strategy of David Shippy, the company’s founder and CEO who wrote a 2019 book detailing his wealth-building formula, involves buying up working-class apartment complexes, slashing maintenance costs and charging tenants new fees.
“I like to think of each apartment complex as a cash machine,” wrote Shippy in his book Money Matters for Financial Freedom: The Fast Path to Abundance in Life and Business.
For the tenants that live in the more than 4,000 units he owns in San Antonio, these cost-cutting measures come with a price.
Sarah Mattier lives with her daughter and 10-year-old granddaughter in the Star Club apartments, a complex built in 1975 at 8800 Starcrest Drive in Northeast San Antonio. Shippy Properties bought the complex in 2018.
In Mattier’s unit, water seeped from the closet and from under the sink, her family says. Her daughter, Mercedes Merritt, said she told the complex about the water problems, but nothing was done. Then on a rainy afternoon on July 10, Mattier and her granddaughter were napping when the ceiling collapsed on them, she said. Her son dug them out of the debris.
“We almost died in the accident,” said Mattier, who continues to get medical treatment for her injuries. She’s most worried about her granddaughter, who she said suffered injuries on her neck and back but largely hasn’t been treated. “She’s not understanding that when she gets older, it can really bother her,” she said.
The family says it is pursuing legal action.
Mattier is not the only tenant who has had problems with Shippy Properties’ management. Around the same time her ceiling collapsed, KENS-TV reported that residents at the same complex said management was unresponsive in the face of hot water cutoffs, leaks and electrical issues. Another tenant told KENS her apartment flooded so many times the roof caved in.
Roberto Bernal, Shippy Properties’ director of operations, said the company strives to improve the quality of its apartments, some of which “need TLC.”
“We do a lot for the residents, but it’s never a done deal,” he said.
Under Shippy Properties, there were other maintenance issues at the complex. County records show that a painting contractor had filed liens against it for nonpayment. The liens were resolved weeks later.
The City of San Antonio’s Development Services Department has cited the property for lack of repairs to a building after a fire that killed a woman in October 2020. More than a year later, the building remains vacant and derelict.
Two months after the KENS story aired, Shippy Properties sold the complex in September 2021 to another Austin-based real estate company. It is now seeking to evict Mattier and her family over an alleged failure to pay rent — which Merritt disputes.
The Star Club’s new owner, GVA, was the second-biggest buyer of apartment units in the city last year after Shippy, with 1,551 units, according to commercial real estate analytics firm CoStar.
GVA did not respond to requests for comment.
A focus on working-class apartments
Data show that last year’s top apartment buyers, including GVA and Shippy Properties, focused on cheaper and older apartments — so-called “Class B” and “Class C” apartments that are typically rented by firefighters, teachers and blue-collar workers. Data from real estate analytics firm Yardi Matrix show these kinds of apartments made up 89% of the units purchased for 2021’s top four buyers.
Their focus on apartments rented by working-class tenants stood in contrast to broader market trends. Below these top four buyers, newer and more expensive apartments rented by professionals — “Class A” complexes — made up slightly more than half of all units purchased.
These trends played out last year as an unprecedented volume of apartment deals took place in the city, as the San Antonio Report previously reported, where investment companies traded billions of dollars alongside ownership of roughly 1 in 7 apartment units. Driving this investor interest — which is happening across the country — is the fact that the renter class is growing but there is not enough new apartment construction to match. For every three new leases signed, there was roughly one apartment unit built and ready to rent.
Out of the roughly 18,000 units sold last year — a doubling of the pre-pandemic volume in 2019 — less than 4% went to firms based in San Antonio, according to the Yardi Matrix data. Austin-based companies led the charge, followed by companies based in New York.
The ‘fast path’ to wealth
Shippy Properties’ interest in older, lower-rent apartments is one of many business practices outlined in founder Shippy’s book, which describes how he formed the company a little more than a decade ago with his wife, Leslie.
David Shippy writes that Class B and C property deals for him have always delivered “well over double-digit returns.” It’s not just because of the cheaper purchase price but also because of the tenant base — “households that are living in Class B and C properties typically can’t afford to own a house or to live in a Class A property. So, you have a captive audience.”
One way to cut expenses, he wrote, is to try to do all maintenance in-house rather than hire contractors and “to shop around and find the lowest prices for big-ticket items like appliances, lighting fixates, plumbing fixtures, and paint.”
The approach appears to have paid off for Shippy. “Apartment investing had changed our lives,” he wrote. “We now lived in a multimillion-dollar house, had an additional new house on the beach, drove brand new Mercedes and Porsche cars, and took exotic vacations with our family several times a year.”
Shippy also writes that his philosophy is to “fix everything and make apartment units into homes and build safe and quality communities.”
But the tension between this philosophy and Shippy’s other advice — such as buying the lowest-priced maintenance equipment — is illustrated through the problems described by tenants of the Vista Del Rey apartments.
Water cutoffs and no mailboxes
Shippy Properties has owned and operated the Vista Del Rey apartments in Leon Valley since April, when it bought the complex for $46 million from GVA, which itself bought the property only two years earlier for $38 million from a New Jersey investor. The property is old — built in 1979 — and big, at 453 units. The complex is the Northwest Bexar County municipality’s third largest property taxpayer, according to county records.
Liana Calderon and Miguel Martinez, two Amazon workers, stood outside their sandbag-lined home with their young daughter. The couple said when the rain is strong enough, water flows out of their toilet and floods the apartment with several inches of water. Someone from the front office came by the first time it happened, they said, but nothing has been done. Their apartment has little furniture except for a wooden dining table and some chairs, as anything nicer with fabric is quickly ruined. “What’s the point in buying furniture?” Martinez said.
The couple said at first they wanted to move units, but management demanded a fee. Now they just want out.
Across the complex, a small group gathered outside the leasing office with eviction notices they say have been filed in error.
One resident, Crystal Hale, said she was confused because last month she was approved for renter’s relief payments, which is given to landlords with the intention of halting eviction proceedings in the wake of the pandemic. Hale said the ceiling in her bathroom, which had long dripped, recently collapsed on her cousin, revealing mold.
Ryan Barrios joined the group with his own notice for delinquent payment, and he was fuming. “Paying this is not the issue. I can pay this,” he said. “But how am I supposed to speak to them if they don’t answer the phone or come to the door?”
Many tenants described a property staff that is overwhelmed, unresponsive and subject to frequent turnover.
Barrios said he wanted management to address the property’s lack of functioning mailboxes, which tenants say has been the case for nearly a year now. The mailboxes are so damaged they do not allow for the “safe delivery of mail,” according to a local spokesperson for the U.S. Postal Service. The spokesperson suggested tenants pick up mail at the nearby Leon Valley Post Office.
Leon Valley Police Chief David Gonzalez, who oversees code compliance, said in an email to the San Antonio Report that his department has received complaints about the mailboxes, as well as other conditions. “The complaints have been or are in the process of being addressed,” he said.
The damaged mailboxes are a complication for many tenants.
Michael Lopez, a disabled combat veteran, said he has to pick up his medications from the Veterans Affairs Department at the front office. Cassandra Edwards said her new job sent her first paycheck to an unsecured mailbox, where it was stolen. Kiki Mercedes, who just moved to the complex, said she’s still figuring out how she’s going to continue mailing out products for her home jewelry business. She also said her unit had one less bathroom than stated in the lease she signed.
Bernal, Shippy’s director of operations, said his office ordered new mailboxes for the complex around the end of last summer but there have been shipping delays.
Work is ongoing at the complex, Bernal reported, such as plumbing repairs and landscaping. There are six maintenance positions at the complex, he said, but not all may be filled at times because of current hiring difficulties.
Not all Vista Del Rey tenants are fighting their evictions.
Carlton Manigault, a construction worker who lives at the complex with his girlfriend and their special needs child, was moving boxes into a car in preparation for a move. He said water service is frequently interrupted at the complex — at one point for two weeks, during which time he said some tenants resorted to boiling the complex’s pool water.
Five-gallon jugs of water were visible on some porches and in windows.
Another resident in the process of moving, Larry Bertrand, sat out-of-breath in a truck while younger members of his family helped pack boxes. He said they are leaving behind a new sofa and other new furniture because it had become too infested with roaches.
Bertrand said he and his wife first moved to the apartment about a year ago because it was advertised as a “second-chance” apartment — meaning it was open to tenants who had an eviction, broken lease or other problematic history, provided they pay a nonrefundable “risk fee.”
But problems soon emerged. Bertrand said for the first two months, he couldn’t wash dishes because the sink leaked so badly. He said management fixed it only after the ceiling caved in on his downstairs neighbor.
Then, after Bertrand’s period of discounted rent ended, the rent was far higher than he anticipated because of fees that went “on and on,” he said. (Shippy’s book advises landlords that assessing fees for late payments and administrative costs helps boost revenue.)
Now at the end of their lease, Bertrand is leaving for what he hopes is a better apartment complex. But even then, he said, he was offered the opportunity to stay at his Vista Del Rey unit without a lease for $3,000 a month.
“I can’t deal with these vultures.”