Meet the Brothers Turning Los Angeles’ Housing Crisis Into an Investment Opportunity

• Affordable conversions: LA investors are turning aging apartments into affordable housing as new construction stalls.

• Back to office suite: Microsoft is returning to the office, signaling a larger shift that other industries are sure to follow.

• No stress for distress: Cottonwood has closed $1 billion for yet another fund focusing on distressed properties.

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Urban Development

Meet the Brothers Turning Los Angeles’ Housing Crisis Into an Investment Opportunity

Los Angeles is a city in desperate need of affordable housing, but building new projects has become nearly impossible. With most of the city zoned for single-family homes, combined with rising labor costs and insurance premiums, the economics of ground-up affordable development rarely work. Instead, a growing group of local investors is finding opportunity in older buildings, converting them into affordable units that both preserve housing stock and create financial returns.

K3 Holdings, run by brothers Nathan and Michael Kadisha, is one of the firms leading this effort. Their strategy centers on buying aging apartment buildings and turning them into subsidized housing without displacing tenants. By tapping into city incentives like Measure A, which funnels sales tax revenue into homelessness and housing initiatives, they’ve been able to upgrade properties, secure affordability designations, and keep middle-income residents—like teachers, nurses, and police officers—housed in LA.

This kind of model requires patience and long-term commitment. Upgrading older buildings is expensive, especially with outdated infrastructure and new cooling mandates adding costs. But if firms like K3 can prove it works, they may inspire more purpose-driven capital to follow. For Los Angeles and other cities struggling with affordability, conversions might be the most pragmatic way forward in a market where new construction can’t keep pace.

Overheard

More Distressed Funds Pop Up as Loan Delinquencies Climb

Cottonwood has closed a $1 billion real estate “special situations” fund aimed at buying troubled commercial properties at a time when distress is spreading. Delinquency rates in commercial mortgage backed securities have climbed past seven percent this year, with office loans nearing eleven percent. The combination of refinancing challenges and weaker demand is creating the kind of market Cottonwood was waiting for.

The broader trend is clear. Rising defaults are not just confined to office but are also hitting retail and lodging, sectors still struggling to regain pre-pandemic footing. Each uptick in delinquency expands the pool of assets likely to be re-priced, giving opportunistic capital new targets.

Cottonwood is not alone. Brookfield, Oaktree, and other investment managers have been raising multi-billion-dollar distressed funds in anticipation of more fallout. Cottonwood’s billion-dollar raise might be smaller in comparison, but it underscores a growing conviction that what looks like pain for many owners will translate into long term gains for those with patient capital. What makes Cottonwood’s raise notable is the timing, it signals conviction that dislocation, not downturn, is the opportunity.

Microsoft Leads a Broader Post-Pandemic RTO Wave

Microsoft will begin requiring employees to work in the office at least three days a week starting in early 2026, beginning at its Puget Sound headquarters and rolling out nationwide before reaching international teams. Executives frame the move as a push for collaboration and cultural connection rather than downsizing.

The scale of Microsoft’s office holdings makes this especially notable. Its Redmond campus alone covers more than 500 acres with over 8 million square feet across 80-plus buildings, making it one of the largest corporate campuses in the world. On top of that, Microsoft maintains sizable offices in New York, Atlanta, Silicon Valley, and major international markets like London, Beijing, and Hyderabad—where it just leased an additional 264,000 square feet for AI development. In total, the company operates in over 120 countries with hundreds of office locations, a reminder that its real estate presence is as global as its products.

Other major employers are making similar moves. Amazon has tightened its office requirements, JPMorgan Chase expects managing directors back five days a week, and Paramount recently announced a full-time in-office mandate. The return-to-office movement is being led by tech and finance, but these sectors have a way of setting norms that ripple outward. As Microsoft and its peers double down on physical space, it could set a template for industries still undecided about what the future of work should look like.

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