Tustin Cottages includes 93 townhome residences in the heart of Orange County.

TUSTIN, CA-Nevis Homes has sold Tustin Cottages, a complex of 24 three-story buildings featuring 93 townhome residences here, to JB Matteson in a 1031 exchange for $37.9 million. The complex is the newest apartment community in Tustin, a very tight market for multifamily properties.

Tustin Cottages features gated access, a community pool, heated spa, barbecue area and an exterior fireplace. The 153.169-square-foot property is currently 92% occupied.

Jones Lang LaSalle‘s managing director Joe Leon and VP Javier Rivera led the team representing the seller in this transaction. “JB Matteson’s acquisition of Tustin Cottages is a great opportunity for them to capitalize on an extremely high barrier-to-entry market,” said Leon in a prepared statement. “As job growth in Southern California continues to boom, we expect multifamily demand for quality class-A assets to continue.” GlobeSt.com previously reported about job growth in Orange County, which has been remarkably strong, particularly in the mortgage and financial-services, banking, life-sciences and construction realms.

Leon tells GlobeSt.com that there hasn’t been a new apartment community built in Tustin in at least 15 years. “It’s a fairly tight market, and we’re just starting to see the jobs kick in. We’re already at extremely high occupancy, and that’s going to continue to rise and rents are going to continue to rise. It’s the perfect storm for apartment owners.”

This marks the third time Leon has sold this particular site, and he says it has an interesting background. The property originally sold for $3.7 million 10 years ago; then it sold about four years ago to Nevis Homes as condos for $15 million. The current price as a multifamily property is more than 10 times the first sale price.

Tustin Cottages contains all large three- to four-bedroom units, each with a two-car, direct-access garage—unheard of for an apartment product, says Leon. “The rent is higher than normal, and the sales price was over $400,000 per unit. It’s the highest sales price per unit in Orange County.”

The multifamily sector is not going to slow down at all if interest rates stay where they are, says Leon. “Lenders are willing to do shorter-term debt. When you go down as low as five years for the loan term, you can get it for 2.5%. Will these low interest rates continue? My crystal ball says yes because the federal government still has their hands full and will suppress rates for one to three years. It feels like that kind of environment.”

Leon adds that Orange County’s multifamily fundamentals are already so strong. “From a supply side, we don’t overbuild here. We have averaged adding 2,700 units per year, which is dramatically less than other markets. It keeps fundamentals so strong and solid. Even when we are in a down market, we’re still at 92% occupancy. Orange County attracts so many investors because it’s considered to be safe.”