The seller built the property and owned it for more than 30 years, broker Robin Ossenbeck of Hendricks & Partners, who represented both parties in the transaction, tells GlobeSt.com.Ossenbeck says the buyer is expected to add value to the property both through renovations and by raising rents to market level at the building, which was built as HUD subsidized housing but has been converted to a market-rate complex.
"West Covina is a very hot market right now," Ossenbeck tells GlobeSt.com. She explains that the city's location, convenient for driving into to Los Angeles County as well as the Inland Empire counties of Riverside and San Bernardino, appeals to renters working in those counties.
"This is definitely a value-added deal," Ossenbeck tells GlobeSt.com. "When this building is renovated and the rents are up to market level, I expect they will have close to a 9-cap deal."
She notes that West Covina is part of the San Gabriel Valley market, where a recent Hendricks & Partners report shows average rents of $1,022 for apartment complexes of 50 units or more, up from $947 a year ago, while the vacancy rate increased to 3.4% from 2.7% a year ago.
Demand remains strong among prospective buyers of apartments in the San Gabriel Valley as elsewhere in Southern California, Ossenbeck says, but relatively little product is for sale compared with the demand.
"People aren't selling because they can't find anything better to replace the cash flow they're enjoying," Ossenbeck tells GlobeSt.com. "Lots of people might like to sell their properties if they could find something with better cash flow, but that's hard to do unless they're willing to go into other markets in other parts of the country."
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