$15M Purchase Previews Condo Conversion

Leon tells GlobeSt.com that the new owner acquired the property from Laguna Beach-based private investor Jim Hardy, who sold the complex in a 1031 exchange and plans to acquire another property to complete the exchange. Hardy had owned the property for about seven years, having acquired it in a transaction brokered by Leon. The buyer will probably begin construction of the new condominium units in about six months, Leon estimates. He says the new owner plans to raze the existing 65 units, which are all two-bedroom apartments and were 100% occupied at the time of the sale, and will build all-new condos. The 5.1-acre site is entitled for up to 120 units. The transaction underscores the demand for apartment properties for conversion to condominiums, a trend that has gained momentum in Orange County and other parts of Southern California as a result of rising multifamily prices and the demand for for-sale housing. The property's location in Tustin is in the middle of an Orange County apartment market that exhibited "strong demand in the second quarter," according to the latest research report by Hendricks & Partners. The report noted that, "Apartment construction through the opening half of 2004 has surpassed last year's overall volume." Although "demand fell moderately short of supply in the past 12 months," the Hendricks report says, the apartment market continues to benefit from "a healthy influx of new residents and a prohibitively expensive housing market."