Dean Zander, CBRE’s new multifamily institutional sales expert, says that activity from institutional capital, both foreign and local, is strong in Los Angeles.
Los Angeles is fast becoming a favorite market for institutional multifamily buyers. Capital from local, domestic and foreign buyers is attracted to Southern California for both direct acquisitions and local partnerships. With many experts predicting an extended runway, Dean Zander, executive VP of CBRE capital markets and an expert on multifamily institutional sales, says that the activity is poised to grow over the next year.
“I think the activity is going to accelerate. There are institutional caliber assets and institutional caliber clients, and I think that the capital that is being attracted to Southern California, particularly to L.A. and the surrounding counties, is looking for a safe harbor. L.A. is viewed as a safe place for investment, particularly in the coastal regions. We are seeing a strong flow of capital coming into the Los Angeles market, predominately from local and Southern California-based buyers, and then from West Coast-based buyers, then we track throughout the country,” Zander tells GlobeSt.com. “Then, we are seeing enhanced interest from foreign buyers as well, weather that is Chinese, German, Canadian. The CB brand is perfectly suited to attract that capital.”
In recent years, major developments and investments from Asian investors, mostly from China and Korea, have made headlines. While there is a lot of capital from Asia, Zander says that Germany, Canada and Latin American countries are also major players in the market. “I think it has been more Asian dominated in the press,” says Zander. “That has gotten more attention, especially with some of the specific development sites in Downtown Los Angeles, but the Canadians have actually been much more active, but maybe not as news worthy because they are so local.”
This capital is chasing institutional-quality assets, but L.A. is known for its family ownership. Where there are no institutional-quality assets available, this capital is creating local partnerships. “We are absolutely seeing institutional-backed sponsors entering suburban markets with the idea of doing a deep value-add program to a B or even a C class asset,” adds Zander. “The institutions will typically find a local sponsor that has experience rolling up their sleeves and spending $25,000 to $40,000 per unit to renovate this product.”
IEC, a Bay Area-based discretionary fund manager, has purchased Warner Center Townhomes, a 27-unit res property in the western San Fernando Valley community of Woodland Hills, for $11.5 mil ($426k/unit). Built in 2005, the property is located at 6737 De Soto Ave, within the upscale Warner Center submarket.
The seller, an entity associated with Pacific Crest Realty, purchased the property several years earlier for $9.8 mil and had cosmetically enhanced all common areas.
“When we purchased the building, The Village at Westfield Topanga was still in the planning stages and now with its enormous success, it is reinforcing Warner Center’s position as the new Downtown of the San Fernando Valley,” commented Dan Tenenbaum, President of Pacific Crest. “The marketing effort attracted the attention of over 100 capital sources from active investors including private individuals, sponsored equity groups, and value-add experts.”
Dean Zander with CBRE represented both parties in the transaction.
“This closing is further proof of demand in the “value-add” space for well-located urban infill properties,” noted Zander. “Warner Center has experienced substantial growth and development highlighted by The Village at Westfield Topanga as well as continued expansion with developments including the Promenade 2035 and Uptown at Warner Center, located just west of the property.”
Warner Center contains over 6 msf of Class A office space. The submarket supports over 200,000 jobs. Major employers include Sun America, Unitrin County Mutual Insurance, Farmers Insurance, Blue Cross, Life Care Assurance, Morgan Stanley/Smith Barney Health Net, Intuit, United Online, Viking River Cruises, Universal Music Group, and Wells Fargo.