FROM WESTERN REAL ESTATE BUSINESS NOVEMBER 2018
By Dean Zander, Executive Vice President CBRE
The ratio of homeowners to renters across the nation has been on a steady decline over the last several decades. This has been particularly evident in Los Angeles and Southern California – and that is good news for multifamily REITs.
In predicting the future, Dean Zander, executive vice president with the brokerage firm CBRE, looked at previous opening waves and existing Downtown buildings. He noted that some properties offer concessions for new tenants, but not on renewals.
The retention rate for buildings a year after opening was 60%, he said, higher than in many other parts of Los Angeles. Zander said the vibrancy of Downtown, including a busy nightlife scene, is keeping many new inhabitants in the neighborhood.
“What’s kind of exciting about it all is when developers try to out-amenitize each other,” Zander said.
“Seacrest was already achieving very competitive rents within the submarket but by articulating and clearly defining a value-add strategy, we were able to demonstrate considerable upside,” said Zander. “Various investors underwrote a renovation ranging between $25,000 and $40,000 per unit or more in order to position Seacrest as the truly best-in-class housing option for a coastal Orange County location.”
High-rise living, once a rarity in Southern California, is gaining new favor as reviving urban centers such as downtown L.A. and Hollywood attract thousands of new residents in search of neighborhoods with a big-city feel.
Los Angeles has especially encouraged dense development near transit hubs like train stations, which has led developers to build skyward to increase the number of residences they have for sale or rent.
Such towers are expensive to build, so they have to be luxurious enough to attract well-heeled residents, real estate broker Dean Zander of CBRE said. Occupants may be empty-nesters, wealthy people in search of a pied a terre or working millennials with roommates.
FROM LA TIMES | With 35 stories and a block-long video display, the Circa complex gives DTLA a Times Square vibe
Downtown’s apartment market is in a peak frenzy of development, with more than 6,000 units expected to open there this year, said apartment sales broker Dean Zander of CBRE.
He expects that number to fall dramatically in 2019 and 2020 as rising construction costs and new city regulations intended to help pay for affordable housing drive up the price of apartment development.
Demand for new downtown apartments has proved strong, Zander said.
Abacus Capital buys West Covina apartment complex for $34M
There's high demand for investment in the area with high barrier to entry
By Gregory Cornfield
In a sign of mounting demand for investment in the area, a New York-based firm bought an apartment complex in West Covina this week.
An affiliate for New York-based Abacus Capital Group, LLC, bought the Atrium Apartments at 1829 E. Workman Ave. for $33.9 million, CBRE said. It was the firm’s first purchase in Southern California.
San Diego-based MG Properties Group was the seller.
The 138-unit property in the San Gabriel Valley features two- and three-bedroom apartments, which each have an average of more than 1,000 square feet. The property includes three swimming pools and a fitness center. It has averaged less than 4-percent vacancy since 2016.
The West Covina area has been a “submarket with extremely high barrier to entry,” said Dean Zander with CBRE, who represented MG Properties Group. Earlier this year, CBRE also represented a partnership associated with Landmark Properties in the purchase of another West Covina multi-family complex for $18.8 million.
In August, StarPoint Properties sold an apartment complex in West Covina for $74 million. And in March, Goldrich & Kest Industries bought a 182-unit complex at 1234 W. Cameron Ave. for $44.8 million.
A lack of supply and the strong demand have buoyed rents and kept occupancies high, according to CBRE research. Only one conventional market-rate property, with 450 units, has been built in the West Covina/Covina submarket since 1990. No new projects are planned.
LOS ANGELES -- Xenon Investments, a local multifamily operator, has purchased Las Palmas Villa Apartments, located at 2039 N. Las Palmas Ave. and 2026 N. Highland Ave. in Hollywood. Berk Investments sold the property for $28 million.
The 67,700-square-foot asset features a mix of studio/junior one-bedroom, one-bedroom and two-bedroom units, controlled access, a swimming pool with sundeck, courtyard with fountain, parking, laundry facilities on each floor and elevator access to all levels. Unit amenities include spacious floorplans and air conditioning, with many units featuring a balcony or patio.
The buyer plans to upgrade all common areas, including the building façade, and completely renovate all unit interiors with state-of-the-art amenities and conveniences.
Dean Zander, Stewart Weston and John Montakab of CBRE represented the seller in the deal.