$24M Buys Condo-Mapped Asset in Oceanside

OCEANSIDE, CA-Another condo-mapped apartment asset has traded hands in San Diego County, with a limited partnership established and controlled by San Diego-based MG Properties selling the Libby Lakes Apartments complex to Pacifica Hospitality Group Inc. for $24.1 million. The deal reflects how recent demand for condo-mapped product continues to push up values, as the seller had originally acquired the asset for $11.5 million in January 2002. “It generated what we think is somewhere between a $30,000 to $40,000 per unit premium over current conventional apartment value,” says Justin Smith, MG’s vice president of acquisitions. He tells GlobeSt.com that the partnership originally planned to hold the asset for five to seven years, but that the sharp rise in value created by the current condo conversion fervor was “too good to pass up.”Located on a 7.21-acre parcel at 596 Calle Montecito in Oceanside, Libby Lake Apartments is comprised of 150 apartment units that break down as one one-bedroom, one-bath floor plan; 60 two-bedroom, one-bath designs; and 89 two-bedroom, two-bath layouts. Each unit has private patios or balconies with storage closets, lighted ceiling fans, frost-free refrigerators and dishwashers, full-size washer and dryer connections, and walk-in closets in the bedrooms. The property also features a swimming pool, spa and covered parking. In the recent transaction, Pacifica Hospitality Group was represented in-house. Kevin Mulhern of CB Richard Ellis Inc. acted on behalf of MG Properties.Proceeds from the recent sale have been used in a 1031 exchange transaction that involved acquiring The Arches Apartments complex in Silicon Valley, which has given MG Properties the opportunity “to clear a sizable profit in a relatively short period of time and do it tax free,” Smith tells GlobeSt.com. The $49-million purchase allowed the firm to leverage its equity up and improve the cash flow return to the partnership, Smith notes, explaining that his company was “able to capitalize on taking out profits on what we think is a very, very inflated market from an apartment investment standpoint in San Diego and redeploy equity into a market that has been compressed in the past three years in Silicon Valley.” Although MG Properties is committed to the San Diego market long-term, they plan to invest more than $150 million in the target markets of the Bay Area; Seattle, WA; and Phoeniz, AZ over the next 12 to 18 months.