Investor Trades Up into Long Beach

The property is located on 5 acres, adding to its inherent value.

LOS ANGELES—Patio Gardens, a 127-unit garden-style apartment complex in Long Beach, has traded hands in one of the largest 1031 exchange transactions in the market’s history. Jaison Robinson traded 10 multifamily properties to buy the single Long Beach asset for $35.3 million. The total transaction, including the purchase and the dispositions, was valued at $70 million. “The buyer sold several properties solely to get Patio Gardens, but had no guarantee of getting patio gardens,” Robert Stepp , a principal at Stepp Commercial , tells GlobeSt.com. “The property is really unique. It is on five acres in a very desirable area of Long Beach, where very few properties trade hands because the vacancy rate is so low. The market is very strong both in terms of rent growth and occupancy. Plus, it is a central location near the airport and the 405 Freeway. For some investors, that market is as desirable as being close to the beach.” Stepp represented the buyer in the transaction, while Ronald Z. Harris of Marcus & Millichap represented the seller. The property is located in the Traffic Circle neighborhood near California State University, Long Beach, and is marked by low vacancy rates and rising rents. The risked 10 properties in his portfolio to purchase the rare asset , but wasn’t alone. There was massive competition for the deal. To win, the buyer relied on speed and security, providing a high and non-contingent offer from day one. “We knew that a lot of our competition was going to have a lot more capital and therefore a lot more red tape,” says Stepp. “So, we knew that we may not have as much money as some of these groups, but we could at least move quicker in terms of due diligence and contract. We made our offer with $1 million non-contingent from day one, which is pretty amazing. We did that without inspections.” Stepp was able to be this aggressive because the buyer’s equity partner had been involved in purchasing the property four years earlier, and had already completed the due diligence on the property. “They had already done all of the inspections and environmental reports, so we had a reasonable expectation that the property was in good condition,” adds Stepp. Other buyers offered all cash and a higher purchase price, but the aggressive offer from Stepp’s client proved the most compelling. “He would have had an $8 million capital gains tax if he was not successful at getting this property,” says Stepp. “This was the only property that he wanted, and his whole purpose in selling most of his portfolio was to buy Patio Gardens. There was a little bit of pressure to say the least.” The buyer plans to invest an additional $700,000 into the property to renovate the unit interiors and the common areas. Stepp says that he will hold it for at least several years.