(Read more on the multifamily market.)
LOS ANGELES-Santa Rosa Developers Ltd. of Corona has acquired the 117-unit La Fayette Heights apartment complex from the Irvine-based Bascom Group for $18 million in an all-cash deal and stands to realize significant upside by upgrading all of the units, according to Hendricks & Partners. Dave Casper of the West Los Angeles office of Hendricks & Partners tells GlobeSt.com that the buyer plans to take all of the units in the complex "to a much higher level of finish and produce a value premium of an additional $7 million within three years."
Casper and Karoline Sauls of the West Los Angeles office of Hendricks & Partners represented both the buyer and the Bascom Group, which had owned the property for about four years. "The buyers made a bold move paying all cash for the deal. However, they'll be justly rewarded when they convert the existing 41% loss to lease into spendable rental revenue," Casper comments.
La Fayette Heights, located at 274 S. La Fayette Park Place in the Mid-Wilshire/Koreantown district, was built in 1972 and consists of a "California Chateau" façade, three-story wood-frame and stucco complex measuring approximately 98,262 gross sf. Its 117 units include three studios, 105 one-bedrooms and nine two-bedrooms.
Casper tells GlobeSt.com that eight of the units at the rent-controlled property were vacant at the time of escrow as the result of a buyout plan by the seller and that 20 units are now vacant, which will enable the new owner to move the apartments up to market rates quickly. He says that market dynamics will allow the owner to "take 62% of the units up to a basic level of renovation and generate a five-year yield close to 20%."
The Mid-Wilshire/Koreatown district enjoys high demand and low vacancies and is in the midst of a development boom, Casper notes. Sauls calls the location "one of the top three hottest in-fill markets within the city," with fundamentals that "will provide strong, long-term rent growth potential to a buyer familiar with the area and with the subtleties of rent control.
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