196-Unit Complex Commands Nearly $24M

Smolen and Ron Harris of Marcus & Millichap were the listing agents for the property, which they described as "a unique opportunity to acquire a newer, thoroughly upgraded apartment community in Orange County well below replacement costs and with a strong in-place yield." The complex was built in 1990 and fully renovated in 2006-2007 with luxury improvements to the units and common areas. Smolen tells GlobeSt.com that the deal closed at a moving forward cap rate of 6.7%, based on raising all of the rents to market levels.

The complex was 86% occupied at the close of escrow and has been running at roughly 85% to 90% occupancy. It includes 12,222 square feet of ground-floor retail shops that were 25% occupied at the close of the sale, a two-level subterranean parking structure with 246 spaces and 1,412 square feet of storage and office space. There was no finance contingency in the escrow, so the deal was essentially all cash, but the buyer placed new financing. Michael T. Elmore, SVP and senior director of NorthMarq Capital Inc.'s Newport Beach office arranged for a 10-year 80% loan-to-value loan with a fixed interest rate at 5.98% from Freddie Mac. "Every deal that we've worked on that has sold with financing has been with a GSE, either Freddie or Fannie," Smolen notes.

The Court at Artists Village comprises 105 one-bedroom, one-bath units of 671 square feet each that rent for $1,371; 82 two-bedroom, two-bath units of 973 square feet that rent for $1,820 and nine two-bedroom, two-bath units of 1,025 square feet renting for $1,875. The complex is a block from the Ronald Reagan Federal Building and the Santa Ana Civic Center, directly adjacent to the pedestrian promenade known as Artists Village.

Rick Julian, president of Advanced Real Estate, points out that the Artist's Village in Downtown Santa Ana is "a vibrant emerging community with a very lively restaurant and entertainment scene."ARES is actively acquiring apartment communities in Southern California with a large base of privately placed equity and a track record spanning nearly 30 years, he notes. Advanced Management Co. will take over running the day-to-day operations of the property. The privately held Lake Forest-based company owns approximately 6,000 rental units and 200 acres of developable land in Southern California.

Harris describes the complex as "the true definition of urban infill development," pointing out that tenants "enjoy immediate access to the bohemian-style, urban-chic establishments of Artists Village," which features high-end restaurants, the Santora Building of the Arts --a local museum and studio--the Grand Central Theater and other attractions. The sale ranks among the largest multifamily deals that GlobeSt.com has reported in Southern California this year, including a number in Orange County that institutional investors have sold.