Highly differentiated product is still in high demand, despite the economic upset caused by the coronavirus pandemic. An fully renovated 8-unit property in Silver Lake traded hands in a popular deal on March 10, at the onset of the crisis; however, those involved say that the transaction wouldn’t look much different both in terms of pricing and interested parties if the deal closed today.
“It closed on March 10, which many would consider the early stages,” BJ Turner, founder of Dunleer, the seller in the deal, tells GlobeSt.com. “Deals are still happening for multifamily assets, especially assets like this one that are turnkey, well-located and have a historically high occupancy rate.”
The neighborhood, which has grown substantially in recent years, attracted strong interest, with a local Southern California investor winning the deal. “We had strong interest on the property for a few reasons,” says Turner. “To start, Silver Lake remains one of the hottest submarkets in Los Angeles and perhaps the West Coast. Furthermore, the location was accompanied by attractive neighborhood amenities and a high walk score.” Nearby amenities include Sqirl, Melody and The Virgil.
The specific site, known as the Monroe Apartments & Bungalows, has two buildings totaling 4,900 square feet and was originally built in 1926. Dunleer took the property down to the studs in 2016, completely updating the interior units and renovating the exterior. “The way the site is perched on a hill affords many units unobstructed views of the Hollywood Hills and west to Santa Monica,” adds Turner. “Finally, the physical attributes of the site are significant differentiators—beautifully manicured outdoor spaces, old fruit trees, great lighting and modern floor plans.”
While Turner is confident that the deal would have gone similarly today, his advice to sellers in this climate is to bring highly differentiated product to the market for sale. “I would only bring to market highly differentiated product,” he says. “There are 1031 exchange buyers who need to place capital and will look for safety in well-located product that is renovated / turnkey and has a strong history of performing. If the product isn’t highly differentiated, then it needs to be priced accordingly or wait and see. If it is mediocre product that needs to be aggressively priced by the seller, it would likely be worthwhile to hold off in order to better understand how COVID-19 unfolds.”