251 S. Walnut Ave.

SAN DIMAS, CA-The sale of a 164-unit, 55+ apartment complex here generated 19 offers, a number of them near the winning bid of $15.15 million, in a transaction that illustrates the strong demand for multifamily properties even when the property is age-restricted, according to the brokers who negotiated the deal. Warren Berzack and Stephen Geiger of Encino, CA-based Investment Real Estate Associates, who represented both the buyer and the seller of the property, tell GlobeSt.com that San Diego-based Strata acquired the complex from a partnership of a large institutional investment bank and a state pension fund.

The complex, called Sunnyside Senior Apartments, is at 251 S. Walnut Ave., was built in 1984 and was 96% occupied at the time of the sale. Its 164 units, 75% of which are one-bedroom and the remainder two-bedroom, include 20% that are set aside for low-income and very-low-income residents under the bond financing for the property.

Berzack

Berzack tells GlobeSt.com that the age restriction discouraged some potential buyers who might have bid on the property, but the complex nonetheless attracted strong investor interest, primarily from private equity groups and syndicators. "The seller was amazed by the activity that we were able to generate," Berzack says. "The fact that so many parties were interested in the property shows you that the apartment market, even for an age-restricted building, is still very vibrant."

Berzack pointed out that the seller was disposing of the asset in a portfolio adjustment that involves selling non-core assets. Geiger added that the seller was "one of the world's largest institutional investment banks," and a very significant property owner.

Geiger

The property sold at a cap rate of approximately 7% and a gross rent multiplier of approximately eight. Berzack and Geiger note that in addition to the winning bid, a number of the other bids were close to the $15.15 million sales price.

Although the property is large enough at 164 units that it might be expected to attract REITs, Berzack says that the age restriction and the San Gabriel Valley location were the primary reasons that REITs did not bid on the asset. He explains that REITs generally prefer primary markets and more coastal locations.

The new owner acquired the property for a long-term hold and financed it with a 75% Freddie Mac loan. Units at the complex range from 450 square feet for the one-bedrooms to 650 square feet for the two-bedrooms, with rents averaging $920 for the smaller units and $1,100 for the two-bedroom apartments.