(Mark Your Calendars: RealShare Apartments 2011, October 20 in Los Angeles).
LOS ANGELES-The sales of six apartment properties totaling more than 800 units in recent months illustrate a profound change in the market, Greg Harris of The Harris Group at Marcus & Millichap tells GlobeSt.com. The common thread that tied all of the transactions together, according to Harris, is that “Given the lack of product in the market, investors are clearly willing to stretch to buy assets that strategically fit in their portfolios.”
Harris, an executive vice president with Marcus & Millichap’s Institutional Property Advisors division and Kevin Green, associate director with IPA, brokered the deals on behalf of six separate sellers. The properties, all in Los Angeles County, ranged from 63 units to 220 units.
Explaining how the market has changed in recent months, Harris says, “Having management and operating expertise in specific locations is giving investors the confidence that they can outperform in their best markets. The difference now is that sellers are starting to reap the benefit of the upside they hadn’t yet achieved. This is profoundly different than even six months ago.”
The six properties included the 100-unit Beverly Arnaz at 467 S. Arnaz Dr. in Los Angeles, the 220-unit Pine Club Apartments at 2261 Valley Blvd. in Pomona, the Reno Street Apartments at 140 S. Reno St. in L.A., the Lindley Apartments at 5536 Lindley Ave. in Encino, the 163-unit Paragon at Old Town at 700 S. Myrtle Ave. in Monrovia and the 63-unit Bellerive Residences at 1929 Beloit Ave. in West Los Angeles.
In the $39.35 million sale of the Beverly Arnaz, Harris tells GlobeSt.com, “Its 30%-plus projected upside in rents made the property an especially attractive investment opportunity.” He points out that it is a core-plus, non-rent-controlled class A property in the upscale 90048 zip code and that the complex, built in 1980 and measuring 104,777 square feet, traded for $311 per square foot. IMT Capital acquired the property from General Investment & Development.
The $23.1 million sale of the Pine Club Apartments, for $134 per square foot, was an off-market deal in which Phoenix Realty Group acquired the property from MHE Inc. and Sussex Capital. “The sale of Pine Club Apartments marks one of only a few 100-plus-unit multifamily transactions in the San Gabriel Valley in the last several years,” Harris points out. He notes that the buyer “identified value through the implementation of a renovation plan and aggressive management.” Built in 1971 on 7.7 acres, the complex had a Fannie Mae adjustable loan that was converted at closing to a fixed rate of 4.5% for seven years.
In the case of the Reno Street Apartments, price was undisclosed. The Donald T. Sterling Corp. acquired the property from a private investor. “With a projected rental upside of more than 18%, the property presented a true repositioning opportunity,” Green says.
Constructed in 1970 on 1.5 acres, the property is situated at Reno and Second streets, a location that “provides residents with easy access to US Highway 101, Interstate 110, Interstate 10 and proximity to major education and employment centers,” Green points out.
The Lindley Apartments, a core class A asset in the San Fernando Valley, sold for an undisclosed price in an off-market transaction to apartment REIT Equity Residential, which acquired it from Western Multifamily LLC, a joint venture between CalPERS and GID Investment Advisers LLC. Built in 2004, the complex was “one of the few, core, institutional quality assets to transact in Los Angeles County on an off-market basis in several years,” says Harris. “EQR (Equity Residential) saw this as an opportunity to expand its Southern California portfolio in a prime submarket within the San Fernando Valley.”
The Paragon at Old Town, a mixed-use property that was built in 2010, sold for $58.6 million at $376 per square foot. Cornerstone Real Estate Advisers LLC acquired the property from Urban Housing Group in what Harris describes as “a rare opportunity to acquire a meticulously designed core asset in the Los Angeles marketplace.” The sale was co-brokered by Ron Harris an executive vice president in the Institutional Property Advisors division of Marcus & Millichap.
Greg Harris notes that the property is just steps away from the high-end restaurants and boutiques of Old Town Monrovia. Among its amenities are a 24-hour fitness center with cardio stations equipped with individual LCD televisions, a resort-style elliptical swimming pool with a spa, sun deck, and private cabanas.
In the sale of the Bellerive Residences, an institutional investor acquired the poperty from the developer of the property, Amoroso Cos., for an undisclosed price. The complex was built this year and represented “an exceptional opportunity to acquire a brand-new asset in a premier location that has a scarcity of land available for new development,” according to Green. He says that the new owner “can capitalize on the strong market fundamentals of the Westside submarket via multifamily lease-up.”
Adds Harris, “The buyer seized an opportunity to enter the West Los Angeles market by purchasing this core institutional quality asset from the developer. Rarely do Westside core assets come to market.”
Harris and Green note that the property is located in a pedestrian-oriented neighborhood adjacent to Brentwood and Westwood. The apartments are within walking distance of numerous restaurants and boutiques on Sawtelle Boulevard and within minutes of UCLA, the Westside Pavilion shopping center and the Third Street Promenade in Santa Monica.
Commenting on the six transactions and what they indicate for the market, Harris says, “Looking forward, it feels like we will be in a sweet spot in the market where investors will have inexpensive debt and rents continuing to rebound. With this as the backdrop, pent-up investor demand should keep values strong.”