100-Unit Apartment Portfolio Trades for $13M

NORTH HOLLYWOOD, CA-A local private investor has acquired a three-property portfolio of 100 units in the NoHo Arts District called the Morrison apartments from Northern California-based Interstate Equities for $13.3 million. EVP Ronald Harris in the Downtown L.A. office of Marcus & Millichap, who represented both the buyer and the seller, tells GlobeSt.com that the buyer placed a new loan on the property with JP Morgan Chase in the approximate amount of 70% loan to value.

Built in 1986, the portfolio consists of a 44-unit and a 20-unit building at 11251 and 11265 Morrison St. and a 36-unit building at 5047 Bakman Ave. Among the three buildings, the property has two swimming pools, a fitness center, three barbecue areas, two spas, a playground, a sundeck, and a 1.33 parking space per unit ratio.

Harris says the acquisition “was an opportunity to acquire three non-rent-controlled properties in the redeveloping NoHo Arts District. The buyer plans on adding value by instituting a renovation program to upgrade the buildings.”

About 75% of the units are already moderately upgraded, according to Harris, who says that there is still ample room for a more extensive renovation program that could add significant potential value. He says the location also benefits from the improvement in the NoHo Arts District, which “has transformed in recent years into one of the more desirable districts in the City of Los Angeles.”

Harris says the property provides the potential to raise rents when the regulatory agreement governing it expires in August, 2018. The regulatory agreement calls for 20% of the units to be set aside as affordable for moderate income tenants. When the agreement expires, an investor will be able to immediately increase the rents of those affordable units to market levels, increasing the value of the property by approximately $1.6 million, assuming a 6% cap rate.