(To read more on the multifamily market, click here.)
WEST HOLLYWOOD, CA-Although the local apartment market is limited with rent control issues, value-add investors and developers with affordable housing elements are making deals work, according to Tony Solomon, a vice president with Remax Commercial Brokerage.
A private New York-based equity firm recently picked up Hacienda Tropicana--a three-story building located just South of Sunset Boulevard and East of La Cienaga Boulevard--for $9 million, which represents a 4.3% cap rate and $200,000 per unit. The property received multiple offers, Solomon tells GlobeSt.com and the New York-based owner plans an extensive rehab of the property to bring it up to class A standards.
Solomon, along with Ray Croney of Team Solomon, represented the buyer and seller of the 45-unit property. The sellers were private investors who had held the property for 20 years.
Solomon tells GlobeSt.com that the deal was an important one in the area because a "lot of investors are shy of investing in West Hollywood. They're unsure of getting market returns, due to the rent constrictions."
Artificial rent control is holding many property owners in the area from upgrading properties, according to Solomon, due to a lack of cash flow. "The artificial rent control has placed an unfair burden on the owners in the area," he says. "Costs to run properties have gone up exponentially in the last five to seven years. Utilities have gone up 20% to -30% in that timeframe, but rents can only increase marginally in that market." He placed that rent increase at 1% to 2% per year.
The local multifamily market received another boost earlier this month with the approval of Regent Properties' 152-unit multifamily development project. As reported on GlobeSt.com, the West Hollywood City Council unanimously approved the project, which will be called Greenwich Place.
The development will include townhouses, condominiums and affordable apartments. The site is nearly three acres and known locally as the Sherbourne Triangle. According to Doug Brown, managing partner of Regent Properties, the design will "provide a much-needed boost to the housing stock" in West Hollywood with its combination of market rate and affordable units. It will be designed by the architectural firm of Van Tilburg, Banvard and Soderbergh.
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