GLENDALE, CA—A Los Angeles-based private investor has purchased a three-property, 43-unit multifamily portfolio in Glendale at a 3.57% cap rate, the lowest cap rate in the Glendale submarket over the last 12 months, from a Burbank-based private trust. The property portfolio sold for $13.5 million or $314,000 per door. The investor plans to implement a value-add strategy and push rents upon completion.
Although there was a low cap rate for the market, the property received ample interest and multiple offers from investors. "The properties were fully marketed. There was a lot of interest," Albert Shilton, senior managing director with the Charles Dunn Co., tells GlobeSt.com. "Within the first three days, I had 60 or 70 requests for marketing packages. A lot of investors were taken back by the cap rate, but most took the time to analyze the asset and saw that there was a lot of potential. That made the difference. There were nine offers, five of which were local Glendale investors who were reluctant to step up to the price. Then, there were Westside buyers, who, compared to what they were accustomed to when purchasing properties in West Los Angeles and other prime areas, this was a good opportunity."
Although this was the lowest cap rate in the Glendale submarket, it is still significantly higher that cap rates in high-end submarkets on the Westside. "Cap rates on the Westside are even lower," says Shilton. "Depending on the age and size of the property, we are looking at properties in the high 3% and low 2%. This property is a pretty dramatic difference, but it is also driven by interest rates. The buyer secured a loan at an interest rate around 3.25%, which gave him the leverage he needed to justify the price."
This property offered a unique possibility to push rents because there has been limited to no development in this pocket of Glendale since the early 90s. "This property is located in an interesting pocket of Glendale because there seems to have been very limited development since the 1980s and early 90s," adds Shilton. "Unlike Wilshire and Hollywood and areas where there is significant new construction, there wasn't a lot of new construction in this particular area and it was in a pretty good location, so there was an opportunity to raise the rents without competing against new buildings."
The seller disposed of the property as part of a 1031 exchange, and traded the capital into a triple net property.
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