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WEST COVINA, CA-An 85-unit apartment complex called South Hills has sold for $20.7 million, a price that it achieved in part because of its rank as one of the lowest-density complexes in the area. At 16 units per acre, the property at 2900 E. Virginia Ave. was built in 1966 and is designed in a layout known as “prairie-style” apartments, according to Joe Leon of the Newport Beach office of Hendricks & Partners.

Leon and David Casper of the West Los Angeles office of Hendricks & Partners represented both the buyer and the seller. An AvalonBay affiliate called AvalonBay VAF Acquisition LLC acquired the property from MG South Hills Apartments LP of San Diego.

Leon says that the buyer is taking title to a property with significant upside potential because of a number of factors, including the high barriers to entry in the market. No new market-rate apartments have been built in the area in the past 20 years, rents have grown by nearly 23% over the past four years, and the apartment occupancy rate stands at 97% in the submarket, Leon adds.

AvalonBay plans an extensive renovation and repositioning of the asset “to exploit the unique unit mix and unit sizes,” according to the Hendricks & Partners brokers. Work will include common area and interior upgrades exceeding $51,000 per unit.

The South Hills complex consists of 19 buildings of two and three stories comprising 105,470 sf that is spread out over 5.3 acres. The apartments are oversized, averaging more than 1,241 sf with interior amenities such as vaulted ceilings with clerestory windows, wood-burning fireplaces and large patios and balconies.

South Hills achieved a record price for a West Covina multifamily property, $243,529 per unit and 4.91% actual cap rate, according to Leon and Casper. The two Hendricks & Partners brokers note that the asset attracted more than 25 tours by prospective buyers, generating 15 offers and four best-and-final offers. All of the latter were “very close to the ultimate strike price,” the brokers note.

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