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Sign of Suburban Demand: Los Angeles Apartments Sell After Luring Almost 100 Offers

11/25/2020

Renters Drawn to Units Not Near Crowded City Core During Coronavirus

By Jacquelyn Ryan | CoStar News

Raintree Partners bought a portfolio that includes the 137-unit Canyon Drive Manor in Hollywood, California. (CoStar)

A local family that owned five suburban apartment complexes for decades has almost 100 reasons to show why rentals outside city centers are popular in the pandemic. In short, that's how many offers the sale generated.

Raintree Partners bought the properties in greater Los Angeles for $142 million after a bidding war for the portfolio that underscores spiking demand for rentals in less crowded suburbs.

The real estate investment company based in Dana Point, California, bought the properties in Camarillo, Canoga Park, Glendale and Hollywood from a local family that has owned them for an average of 34 years, according to CBRE Group, which brokered the deal.

Strong apartment demand has helped offset some of the worst effects of the COVID-19 pandemic on Los Angeles real estate, CBRE's Dean Zander, who represented the seller, told CoStar News. Apartments in L.A. suburbs such as Glendale in the San Gabriel Valley and Camarillo in Ventura County 50 miles northwest of downtown show better financial performance than properties in some of L.A.'s densely populated and expensive neighborhoods.

"The pandemic is having a ripple effect on both the office and multifamily markets because people just aren't inclined now to go into central business districts to live, work and play," Zander said. "People used to define quality of life as access to entertainment, nightlife and jobs in the urban core. We've seen a switch now to larger garden-style units, away from luxury high-rises. It's much more about the need for space, distance and quality of life now, and suburban areas are really benefiting more than ever before."

The properties received the almost 100 offers to buy either the whole portfolio or individual properties before selling to Raintree for an average cost per unit of about $257,713, CBRE said. That's well below the Los Angeles average asking price of $372,000 a unit, according to CoStar.

The sale and accompanying bidding war reflects the growing popularity of multifamily properties outside of urban metropolitan centers as renters seek more space and less expensive units on the outskirts of major cities during the pandemic, Zander said.

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Raintree Partners Buys SoCal Multifamily Portfolio for $142 Million

11/24/2020

Raintree Partners closed on the acquisition of the LAVVA Portfolio (Los Angeles & Ventura Value Add Portfolio) in a $142 mil transaction. The sale, consisting of five properties totaling 551 units in Canoga Park, Camarillo, Glendale and Hollywood, worked out to an average price of $257.7k per unit.

The properties were sold by a West Coast-based family investment entity that acquired four of the assets between 1970 and 1985, and the fifth property in 2009. The seller’s average property ownership tenure is 35 years.

The properties have been very well-maintained and upgraded over the years, but there is significant value-add potential. The buyer plans to take advantage of this opportunity through capital investment improvements. The properties in the portfolio are:
• Mountain View - 106 units in Camarillo, built in 1979
• Canyon Drive Manor - 137 units in Hollywood, built in 1973
• Perigee - 200 units in Canoga Park, built in 1985
• Imperial Manor - 64 units in Canoga Park, built in 1964
• Imperial Crest - 44 units, in Glendale, built in 1962

“The continued high demand for rental housing in Los Angeles has helped mitigate some of the negative aspects the COVID-19 pandemic has had on the local economy,” said Zander. “Despite an uptick in vacancies and some collection challenges, occupancy rates are still near historical highs, while rents appear to be holding up and showing signs of improving. Suburban areas, in particular, continue to outperform most urban locations.”

Added Weston, “Marketing the properties during the pandemic presented several challenges such as scheduling and conducting the many live and virtual tours for each property, as well as navigating the various ballot measures that could have materially impacted the success of the renovation plan. True value-add offerings continue to be highly sought by investors. Renovations ranging from minor cosmetic changes to major building upgrades allow investors to take advantage of strong rent growth.”

“This acquisition presents Raintree the opportunity to substantially increase our presence in east Ventura County as well as the Hollywood area and the San Fernando Valley,” said Mathew Barbiasz, Vice President of Acquisitions for Raintree. “With a host of well-paying jobs and entertainment options in each of these markets, the properties are well positioned for future growth.”

Prime Residential Acquires Agave Ridge Multifamily Community in San Diego for $107M

10/27/2020

SAN DIEGO — San Francisco-based Prime Residential has purchased Agave Ridge, a multifamily property located in San Diego’s Kearny Mesa neighborhood. Los Angeles-based Goldrich & Kest sold the property for $107 million.

Located at 7901 Harmarsh St., the 368,575-square-foot property features 369 townhome-style units in a mix of two- and three-bedroom layouts, with an average size of 1,000 square feet. On-site amenities include playgrounds, swimming pools and a fitness center. The property was originally built in 1959.

Kevin Mulhern, Allen Chitayat, Stew Weston, Dean Zander and John Montakab of CBRE represented the seller, while the buyer was self-represented in the deal.

San Diego Res Community Traded in $107 Mil Transaction

10/26/2020

Agave Ridge, a 369-unit townhome community in San Diego’s Kearny Mesa neighborhood, was acquired by San Francisco-based Prime Residential in a transaction worth $107 mil ($290k/unit). The asset was sold by Goldrich & Kest, out of Los Angeles.

Located at 7901 Harmarsh St, the 368.6k sf property was originally built in 1959. The unit mix is composed of all three-bedroom and two-bedroom townhomes, with an average unit size of approximately 1k sf. Amenities include playgrounds, pools and a fitness center.

Agave Ridge is located just south of the interchange between I-805 and SR 163, two major San Diego freeways that connect Kearny Mesa to the rest of San Diego. The property is directly adjacent to Sharp Hospital and Rady Children’s Hospital, two of the largest medical facilities in the San Diego area. It is also less than two miles from Convoy St, one of San Diego’s most popular dining corridors, and is in proximity to all major San Diego employment centers.

CBRE’s Kevin Mulhern Allen Chitayat, Stew Weston, Dean Zander and John Montakab represented the seller in the deal. The buyer was self-represented.

“Agave Ridge is an incredibly well-located community with all townhouse-style units that provide much needed housing for families in the area and has become even more desirable with the approval of the recently updated Kearny Mesa Community Plan,” said Mulhern.

Maximum Multifamily | Category continues record hot streak across LA's markets

3/16/2020

By Hannah Madans

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.

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Aragon Closes $1.9 Billion Sale

1/17/2020

By Hannah Madans

LARGEST MULIFAMILY DEAL SINCE 2006

Westwood-based Aragon Holdings has sold a portfolio of 36 apartment properties for $1.85 billion to Norfolk, Va.-based Harbor Group International.

The deal, spanning 36 properties and encompassing 13,243 units, is one of the biggest ever for an apartment portfolio.

The sale was announced Jan. 15.

“It’s monumental,” said Larison Clark, founder, chairman and chief executive of Aragon Holdings. “The largest multifamily transaction since 2016 and the fifth-largest ever. That’s a big deal.”

Clark, who founded Aragon Holdings as a private real estate investment and fund management company in 2008, said the time was right to make the deal.

“It’s the top of the market, and the only players that are buying these days have to be value-add and have to be able to improve this property somehow to make the property work,” Clark said.

The portfolio of properties stretches across several Sun Belt states, from Florida to Arizona. None are in California.

“The properties within this portfolio are in strong population growth markets with good employment drivers and overall good economic tailwinds,” Yisroel Berg, director of multifamily and managing director at Harbor Group, said in an email.

“The portfolio contains an attractive mix of markets where HGI already owns property in addition to new target markets for expansion,” Berg added.

The deal is part of Aragon Holdings’ sale of its entire $2 billion apartment portfolio. The company had sold a portion of its holdings prior to the Harbor Group transaction.

Clark said Aragon Holdings’ first batch of properties had mortgages coming due so the company sold them last year while seeking a buyer for the remaining portion of its portfolio.

Aragon Holdings said the suburban two- and three-story properties in the portfolio average 350 units each. Most are located near employment and transportation centers.

Harbor Group’s Berg said the company, “plans to invest a minimum of $90 million into the portfolio for a capital improvement and enhancement plan, equating to more than $6,000 per unit.”

Multifamily move

Dean Zander, an executive vice president at CBRE Group Inc., said the deal reflects the heightened demand for multifamily properties nationwide.

“We’re definitely still in an environment where multifamily is leading the pack as far as desirability from investors,” he said.

“(Aragon has been) in an acquisition mode since the middle of the 2000s and opportunistically looked around and saw they could refinance or sell at pretty attractive levels and let someone else take the properties to the next level,” Zander added. “It was well timed for them, and Harbor will do great with them.”

Newmark Knight Frank represented Aragon Holdings and helped secure debt financing for Harbor Group in the sale.

NorthMarq Capital represented the seller for debt assumptions and defeasance. Meridian Capital Group advised the buyer.

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Victorville Multifamily Community Trades at Record $118.8k/Unit

1/13/2020

Hanes Properties LLC, a Los Angeles-based real estate investment and management firm, has purchased Golden Sands, a 120-unit apartment complex in Victorville, for $14.25 mil ($118.8k/unit). The complex, located on just over eight acres at 15930 Nisquali Rd, was sold by Los Angeles-based real estate and property management firm Positive Investments.

The apartment community consists of 96 two-bedroom units and 24 one-bedroom units. The buyer plans to completely renovate the asset in 2020 with major enhancements to five large courtyards to include a 50-person gazebo, two large pavilions, cabanas at two pool/spa locations, a playground and tot lot, and a 77 fruit tree orchard-maze and sport court.

John Montakab, Stew Weston, and Dean Zander of CBRE represented Positive Investments in the deal. The listing received multiple offers from a variety of buyers, including private investors, exchange buyers and fund advisors. The property ended up selling at the highest price per unit for a building of this size in the city, according to CBRE

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Rent Cap Makes Sense Now, Multifamily Sellers Say, But There's Danger on the Horizon

12/5/2019

BY: Joseph Pimentel

California’s AB-1482, which takes effect in January, caps the amount landlords and owners of apartment buildings 15 years and older can hike rent to 5% plus inflation a year. The law ends in 2030, and was heavily promoted by Gov. Gavin Newsom.

The new law will also make it harder for landlords to evict tenants by using “just cause” criteria, meaning landlords must now provide a reason for eviction, such as nonpayment of rent or criminal activity.

In the months leading up to the passage of the bill, many stakeholders were sure of a doom-and-gloom outcome: building owners would start staking “for sale” signs in front of their property, and buyers would cancel deals.

But so far, that type of knee-jerk reaction hasn’t occurred, at least not in Los Angeles, Marcus & Millichap Senior Vice President Investments Jason Tuvia said.

“One thing we are not seeing are panic sellers,” Tuvia said. “We were expecting an uptick of sellers but we’re not seeing that. I don’t think the bill is as bad as they were expecting … I think people are taking a wait-and-see approach.”

CBRE Executive Vice President Dean Zander said he didn't think AB-1482 would disrupt the multifamily market, because the new law is balanced for both the tenant and building owners.

"AB-1482 provides a level of certainty moving forward," Zander said. "Five percent plus inflation is just about right for tenants. That it is not gouging, and for building owners, it is not too restrictive."

Come January, California will become the third state in the nation to have some type of additional rent regulation. Earlier this year, Oregon passed a bill limiting rent increases to 7% plus inflation a year. In June, New York passed its own rent regulation reform, which eliminated the vacancy bonus, allowing owners to hike rent to a new tenant when a unit is vacated. It also reduces the amount landlords can hike rent after making improvements to the unit.

AB-1482 also hasn't had an immediate impact on the sales listing side, a data analysis from CoStar shows.

CoStar found that there were 855 properties that were listed from Aug. 1, 2018, to Dec. 31, 2018, in Los Angeles. From Aug. 1, 2019 to as of Dec. 4, there have only been 580 listed, according to CoStar.

Bisnow asked to analyze the numbers starting this past August, when it became clear there was already a strong indication from the governor and political mood that AB-1482 would likely pass.

Unless more than 300 properties begin to list from today to Dec. 31, the number of building owners who have listed their property for sale in Los Angeles is actually down.

Universe Holdings Chief Operating Officer Jonathan Cohen said transactions usually slow down at this time of year. Universe has a portfolio of more than 3,000 multifamily units in Southern California, half of which are subject to rent control.

"We'll have to wait and see the transaction level in the beginning of the year," Cohen said. "Investors and syndicators are still getting comfortable with this law. It doesn't come into effect until next year. Everyone is proceeding cautiously. But as of right now, we're not seeing any major shifts in people's buy and sell strategy."

Cohen said the only impact that he saw during and immediately after the passage of AB-1482 were sellers asking for a small discount in the sales price. Universe Holdings, Cohen said, was in the process of acquiring an apartment building when AB-1482 was about to pass. When it did pass, Cohen said, they asked the seller for a slight discount.

"We had to take a step back and account for the new renewal rates," Cohen said, adding that their offer was accepted.

Tuvia said the apartment owners and prospective buyers he has spoken with say they can live with the annual 5% plus inflation rent increase. Cohen added that any legitimate operator can operate successfully with the new rent cap.

A separate CoStar analysis of multifamily properties statewide that are more than 15 years old found that the average annual rent increase was about 2.7%, far below the 5% plus inflation. In the last seven years, only 10% of those properties raised rent more than 5%, according to CoStar.
"[The new law] should provide some breathing room for concerned investors, as above-average rent growth can still be achieved in these older properties," CoStar Portfolio Strategy Senior Consultant Juan Arias said in the report.

For now, one of the biggest concerns is not the short-term impacts of the rent cap, but that the law will not solve the state's ongoing housing crisis, said Arias in a follow-up interview with Bisnow.

Without a way to incentivize new developments, Arias predicts fewer tenants will leave their older rent-controlled properties, essentially shutting out the very people AB-1482 was supposed to help.

"It does not do anything for the low-income households who are still looking for apartments to afford," Arias said, adding that low-income renters who have already found a rent-controlled home will only stay until they are eventually priced out. "This is not the solution to the housing situation. The rent cap law does not do much for them."

Apartment Association of Greater Los Angeles Executive Director Dan Yukelson said there is a far greater concern on the horizon: the hindrance of new developments and an increase in future rent regulations.

Housing Is a Human Right, the housing advocacy division of the AIDS Healthcare Foundation, has already qualified a new rent-control measure called the Rental Affordability Act on California’s statewide November 2020 ballot.

The Rental Affordability Act would allow cities and counties to enact or expand rent-control laws on housing built before 2005, as well as limit the amount an owner can charge when a new tenant moves in. In California, owners are allowed to bring rents to market when a tenant moves out.

"The fear is that this rent cap is going to ratchet up more and more rent regulation and tenant protection," Yukelson said. "You're already seeing it with all of these cities passing the [no-fault] eviction ordinances to pander to their renters. This is like a gateway drug for these cities. They are going to start implementing their own rent control. This is only the beginning."

Zander is calling the Rental Affordability Act "Prop. 10 2.0," a reference to last year's ballot initiative to repeal the Costa-Hawkins Rental Housing Act, which would have allowed cities to expand their rent control.

The multifamily industry raised more than $100M to defeat the measure. Voters rejected the initiative by a 59% to 41% margin.

Zander said while apartment owners and prospective buyers can live with AB-1482, a new rent-control law could really hurt the multifamily market. In Los Angeles, where job growth remains strong, operators under AB-1482 can still thrive.

"I'm hopeful that like last year's Prop. 10 failed, that this new version will also be unsuccessful," Zander said.

Roka Properties Buys Renovated Luxury Apartments in West Hollywood

11/21/2019

BY GREG CORNFIELD

The property traded for $856,000 per unit, a record for the community

Los Angeles-based Roka Properties has acquired a luxury multifamily property in West Hollywood for $20.6 million following an extensive renovation.

The Element WeHo at 1425 North Crescent Heights Boulevard includes one- and two-bedroom condo-style apartments, most of which feature an additional den or home space. Twenty-two of the 24 apartments were renovated.

Dean Zander and Chris Tresp with CBRE, which announced the deal, represented the seller.

Property records show the property was owned by two LLCs, including one tied to Eldad Blaustein, the CEO of New York-based IGI USA, which handles development in the U.S. for Izaki Group Investments. The LLC is also tied to Moshe Azogui, principal at Strategic Housing Partners. The owners purchased the property for $8.9 million in 2015.

“At $856,000 per unit, the sale of Element WeHo represents a record achieved in West Hollywood for a property of its size and vintage,” Tresp said in a press release. “Originally built in 1959, they were able to transform the 24-unit building into one of the premier, boutique-luxury multifamily communities in the submarket.”

Zander noted that West Hollywood is home to several expanding entertainment companies that provide “continuous demand for the high-end apartments Element WeHo offers.”

For example, CIM Group’s The Lot campus includes both studio and office space, and includes tenants like Oprah Winfrey’s OWN Network, actor Will Ferrell’s Funny or Die production company, and Showtime Networks, which signed for 50,000 square feet in January. In October, Live Nation’s Ticketmaster pre-leased all 98,000 square feet at the third and final structure that is under construction at The Lot campus.

Elsewhere in West Hollywood, a 1.9-square-mile city, Witkoff Group and Howard Lorber‘s New Valley Group landed a $300 million refinance for the West Hollywood Edition Hotel and Residences, which comprises a 190-room luxury hotel and 20 luxury residential condominium units. Also, Northwood Investors landed a $165 million refinancing of The London West Hollywood, a 226-key hotel.

Fully Affordable Central Coast Community Trades for $63M

11/7/2019

CBRE Affordable Housing’s Tim Flint and Jeff Kunitz, along with Stewart Weston and Dean Zander of the company’s Newport Beach office, arranged the $63 million sale of Vizcaya in Santa Maria, Calif. Buyer Kennedy Wilson acquired the 236-unit fully affordable asset. CBRE represented seller Vaughn Bay Construction in the deal.

In September, CBRE’s Flint closed the $48 million sale of an affordable community in Yonkers, N.Y.

Located at 1720 S. Depot St. in the greater Santa Barbara area, Vizcaya has a mix of one- to four-bedroom units, averaging 940 square feet. All apartments are kept affordable by an LIHTC Land Use Restriction Agreement, limiting residents to those earning no more than 60 percent of the area median income. Ten percent of the units are set aside for those making 50 percent or less of the AMI.

In addition to standard amenities including a swimming pool, playground and community room, the 28-building property provides after-school programs and licensed childcare to tenants free of charge. According to Yardi Matrix data, Vizcaya last changed hands in 2007. During the past three years, the property has maintained an occupancy of 98 percent.