Repositioned Koreatown Complex Commands $17M

Robin Ossenbeck of the Los Angeles office of Hendricks & Partners tells GlobeSt.com that the sale is one of the few such deals in its price range this year. "I'm fairly certain that, for 2008 year-to-date in the City of Los Angeles, this is only the second or third sale over $15 million," says Ossenbeck, who was the listing agent for the seller, along with Karoline Sauls of Hendricks & Partners in L.A.

Ossenbeck says that apartment deal flow has slowed dramatically because buyers are wary of paying too much and sellers have not yet adjusted to where the buyers are. "We've had a bid-ask gap for six or seven years now, but it's always been bridged by the buyers stepping up," Ossenbeck observes, but this time the buyers are not stepping up.

Nonetheless, a number of factors made this a good deal for Decron, which bought the property through NF Hawaiian Gardens LP, Osssenbeck says. She explains that the buyer was in a 1031 exchange that this property fit very well. The complex includes units set aside for median-income renters, and Decron also owns and operates other affordable housing, so that also made the deal a good fit. In addition, the property came with financing of more than $10.2 million in place that the buyer was able to assume, Ossenbeck points out.

Built in 1988, the 737 S. Kingsley complex was 93% occupied at the time of the sale; its 83 units include 59 one-bedrooms of approximately 650 sf each and 24 two-bedrooms of approximately 990 sf each. Paul Daneshrad, chief executive officer of StarPoint, says that the company "saw an opportunity to reposition this complex into a class A property to cater to young professionals looking for the urban experience that is now available in Koreatown." He notes that the location is just blocks away from the Redline MTA station, as well as a host of restaurants and other amenities.

Some 20% of the units at 737 S. Kingsley are set aside for median-income tenants under a regulatory agreement with the California Housing Finance Agency that extends to the year 2019. This fits with Decron's business plan because the buyer is a long-term holder, Ossenbeck says.

"The property is already cash-flowing, they are very long-term owners and they know that it will do well over time, and they know that they don't have to do anything to it or worry about unexpected capital repairs because of the renovations that StarPoint did," Ossenbeck adds. The renovations included upgrading the exterior and common areas as well as the lobby area, leasing office and the pool and gym. In addition, the majority of the units were upgraded to include luxury touches such as travertine floors and granite countertops.