The property is the nine-story, 37-unit Buena Vista Apartmentsat 75 Buena Vista Ave. East, an Art Deco complex that was built in1931 and had not been on the market in 70 years. The locally basedMannion Trust, one of nine prospective buyers who made offers onthe property, bought it for $6.8 million from the Stirling Family,which had acquired it from the original developer in 1931.

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Devincenti explains that the cap rate was unusually low fortoday's market primarily because expenses at the building runhigher as a result of its master-metered utilities, meaning thatthe building owner pays for the utilities. The buyer was willing toaccept the lower cap rate in part because Devincenti explained tohim that he will be able to increase rents and lower expenseswithin the next 12 to 24 months by understanding the rent controllaws and measures that can be pursued to increase the NOI generatedby the building.

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For example, the rent control laws permit the new owner toconvert the electrical system to individual unit metering, whichwill lower his expenses. Although the new owner will not be able topass through electricity costs to existing tenants via theindividual metering, he will be able to do so when new tenants movein. "We showed him that 43% of the building had turned over duringthe past 24 months, so if that pattern of turnover continues, hewill be able to shift the utility costs to the tenants," Devincentisays.

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Another unusual aspect of the deal was that the sales contractrequired that any units that became vacant during escrow, as threedid, would be left vacant because the the owner wants to renovatethe units with a goal of raising rents.

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The 75 Buena Vista's 37 units include 22 studios, 14 one-bedroomunits and a penthouse on the top floor. Rents at the close ofescrow ranged from $597 to $1,737 for the studios and $766 to$2,050 for the one-bedroom units. The penthouse unit was one of thethree that were delivered vacant. "We projected it to rent at$3,000," Devincenti says, and the new owner rented it at thatfigure soon after closing.

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The 75 Buena Vista building is unusual in that it is one of onlytwo high-rise, concrete-and-steel apartment buildings on the BuenaVista loop, which faces Buena Vista Park―San Francisco'soldest park―at one of the highest point in the city. Thelocation provides "phenomenal views" of the park, the Golden GateBridge, the Bay Bridge and the Downtown San Francisco skyline,Devincenti notes.

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Devincenti tells GlobeSt.com that the details of the deal willbe of significant interest to those who track the San Franciscoapartment market. "People are interested in seeing what such dealsare trading at versus REO and distressed deals," he says. Unlikethose properties, this building had been owned debt-free for years,he points out.

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