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Monday, May 29, 2023

Maximum Multifamily

After a record-breaking year for multifamily sales in 2019, a variety of factors point toward a continuation of the trend for the current year.

“The demand for multifamily in L.A. and Southern California is as strong and active as I’ve ever seen,” said Dean Zander, an executive vice president at CBRE Group Inc. “It’s a combination of the strength of the multifamily sector, the affordability of single-family homes, and the renters that dominate the market today stay longer and aren’t as quick to go and buy a home.”

Attractive financing driven by interest rates that are low — and possibly headed lower — are another factor moving the market, according to Zander.

In 2019, nearly $9.5 billion was spent on apartment buildings in L.A. Over the past 10 years, the multifamily category has seen sales volume jump 574%, according to data from Newmark Knight Frank.

And investors are interested in more than just the Westside and downtown.

Of the top 12 sales by purchase price from Sept. 1 to March 1, according to data from CBRE, the top five were located in Westlake, Koreatown, North Hollywood, Glendale and Little Tokyo.

“They are going to where the properties are,” Zander said of the areas attracting investor interest.

Central LA

Central L.A. saw a surge in sales volume during the last six months. The 606-unit Sofia Los Angeles in Westlake sold for $272.5 million, the largest sale in that time frame. Also in Westlake, 29th Street Capital purchased The Collective Apartments, a 192-unit property, for $48.3 million.

Nearby in Koreatown, Cityview sold an equity stake in the 346-unit The Pearl on Wilshire, which valued the property at nearly $171 million.

In downtown, the 240-unit Wakaba in Little Tokyo sold for $115.8 million, and MetLife Inc. bought out UDR Inc.’s 50% ownership in five buildings, including 717 Olympic.

In Hollywood, the 283-unit 1600 Vine Apartments was recapitalized, and in Miracle Mile, Sares Regis Group purchased The Preston Miracle Mile, which has 169 units, for $86.8 million.

“The higher-priced sales have primarily been projects that are newer construction, and the majority of the construction in Southern California has come from places like Glendale where you can’t build now — (along with) downtown, Koreatown and Hollywood, and a good amount in Santa Monica,” said Kitty Wallace, an executive vice president with Colliers International Group Inc.

Wallace added that these areas have had high rental growth and are surrounded by jobs and transportation.

Nick Griffin, executive director of the Downtown Center Business Improvement District, said investors have been interested in multifamily properties because demand for housing is outpacing supply statewide, and in downtown specifically, as the region’s popularity continues to improve.

“Downtown as a place to live has proved itself to be very appealing, and the rate at which properties are able to lease up is why investors feel like that’s a good, solid investment, and there’s continued opportunity for that investment,” Griffin said.

Zander added that some investors are being more cautious when it comes to downtown due to the large amount of construction in the area, but rising construction costs make product that is already built desirable.

Griffin said that despite the number of units coming online, they are leasing up quickly. Anything that has been on the market for more than a year has occupancy rates of roughly 95%, he said.

‘Abundance of capital’

Experts agree that 2020 will be another strong year for

multifamily sales.

“We’re going to see even more of a heightened demand,” Zander said. “There’s an abundance of capital.”

He added that there is a variety of investors interested — from institutional capital to real estate investment trusts.

Griffin said some sellers in areas like downtown are developers who complete a property, lease it up and then sell it and move on to the next property. Some of the sales are happening because the high prices the properties are selling for make it more desirable for developers to sell them rather than be long-term holders.

“For the developer, if that institutional capital is interested in paying a premium, opportunistically you’ll often have developers exit the project and move on to the next one,” Griffin said.

Some investors, Zander said, are focused on high cap rates while others are looking at safer investments with lower rates, making a large variety of products desirable.

Wallace added that uncertainty in the global market will continue to make L.A. attractive for investors who see the area as a relatively safe bet.

“We’re going to continue to be very busy,” she said.

Top Multifamily Sales in the Past 6 Months

1. Sofia Los Angeles

Sofia Los Angeles

The Carlyle Group purchased the 606-unit Sofia Los Angeles in Westlake for $272.5 million.

Address: 1106 W. 6th St.

Buyer: The Carlyle Group

Sellers: North America Sekisui House and Holland Partner Group

Price: $272.5 million

2. The Pearl on Wilshire

The Pearl on Wilshire

Developer Cityview sold an equity stake in the 346-unit The Pearl on Wilshire in Koreatown to Hankey Investment Co. that valued the property at nearly $171 million.

Address: 687 S. Hobart Blvd.

Price: $170.9 million

3. The Weddington

The Weddington

Global Asset Capital Inc. purchased the 329-unit complex in North Hollywood for $169.2 million.

Address: 11058 Chandler Blvd.

Buyer: Global Asset Capital Inc.

Seller: The Carlyle Group

Price: $169.2 million

4. The Griffith

The Griffith

Greystar Real Estate Partners purchased the 220-unit Griffith in Glendale for $118.5 million.

Address: 435 W. Los Feliz Road

Buyer: Greystar Real Estate Partners

Sellers: AFL-CIO Building Investment Trust Corp. and PNC Realty Advisors Inc.

Price: $118.5 million

5. Wakaba

Wakaba Apartments

The 240-unit Wakaba apartments in Little Tokyo sold for $115.8 million.

Address: 232 E. 2nd St.

Buyer: JPMorgan Chase & Co.

Seller: Sares-Regis Group

Price: $115.8 million

6. 1600 Vine Apartments

1600 Vine Apartments

The 283-unit 1600 Vine Apartments in Hollywood were recapitalized. Hearthstone Housing Foundation and Klein Financial brought in Divco West Real Estate Services as a joint venture partner.

Address: 1600 Vine St.

Price: $112.2 million

7. The Preston Miracle Mile

The Preston Miracle Mile

Sares-Regis Group purchased the 169-unit apartment building in Miracle Mile.

Address: 630 Masselin Ave.

Buyer: Sares-Regis Group

Seller: Heitman

Price: $86.8 million

8. Harborside Marina Bay Apartments

Harborside Marina Bay Apartments

Jackson Square Properties purchased the 205-unit Harborside Marina Bay Apartments in Marina del Rey for $86 million.

Address: 14015 Tahiti Way

Buyer: Jackson Square Properties

Seller: AvalonBay Communities Inc.

Price: $86 million

9. Pico Lanai Apartments

Pico Lanai Apartments

Pacific Reach Properties purchased the 174-unit complex in Santa Monica.

Address: 2501 Pico Blvd.

Buyer: Pacific Reach Properties

Seller: Raintree Partners

Price: $58.6 million

10. 717 Olympic

717 Olympic

MetLife Inc. bought out UDR Inc.’s 50% ownership in five apartment communities for $323 million, including 717 Olympic in downtown for $55.1 million.

Address: 717 W. Olympic Blvd.

Buyer: MetLife Inc.

Seller: UDR Inc.

Price: $55.1 million

Hannah Madans Welk
Hannah Madans Welk
Hannah Madans Welk is a managing editor at the Los Angeles Business Journal and the San Fernando Valley Business Journal. She previously covered real estate for the Los Angeles Business Journal. She has done work with publications including The Orange County Register, The Real Deal and doityourself.com.

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