SAN FRANCISCO-An apartment complex here has traded at a cap rate of 4.82% in a deal that provides a window onto the local multifamily investment market, according to Marcus & Millichap brokers who negotiated the deal. Marcus & Millichap SVP James Devincenti, who was the listing agent for the property along with vice president Brad Lagomarsino, tells that the sale was unusual in a number of respects―including the fact that it was one of the first high-rise apartment buildings to sell in the past 18 months or so that was not lender-owned or otherwise under distress.

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

Devincenti explains that the cap rate was unusually low for today’s market primarily because expenses at the building run higher as a result of its master-metered utilities, meaning that the building owner pays for the utilities. The buyer was willing to accept the lower cap rate in part because Devincenti explained to him that he will be able to increase rents and lower expenses within the next 12 to 24 months by understanding the rent control laws and measures that can be pursued to increase the NOI generated by the building.

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