LOS ANGELES—A private investor has purchased a 71-unit multifamily property in the Miracle Mile submarket for $23.5 million from an affiliate of Hillstreet Realty. The seller spent nearly $2 million upgrading the property, including a third of the interior units, since purchasing it two years ago for $14.6 million.  

“The seller did an extensive renovation program to all of the pipes, roof and commons areas, so it is virtually a turnkey new building in terms of the systems,” Richard Ringer, first VP at Marcus & Millichap, tells GlobeSt.com. “During their renovations, they were fortunate enough to get out some tenants and renovate a third of the interior units. In their model, it was a good opportunity to sell, not only because of market conditions but because they were able to demonstrate very strong rents, and having turned a third of the building, it seemed like an appropriate time to sell.” Ringer represented the seller in the transaction, while his Marcus & Millichap colleague Jeff Benson, VP, represented the buyer.  

Located at 5700 West Olympic Blvd. in Los Angeles, the three-story property has a swimming pool, barbeque area and fitness center as well as on site parking. The interior units are nearly all 700-square-foot one-bedroom apartments. Approximately 21 units have been renovated with new floors, appliances and in-unit washers and dryers. The renovations, along with rising rents in the area, have increased the renovated unit's rental premium by 35%. The buyer will continue the renovation process on the remaining units as the leases turn.

Ringer received a lot of interest from potential buyers, but he says that one buyer really stood out. “We had a situation where it was the right buyer at the right time, although it was exposed to a number of candidates,” he says, noting that the buyer had a high net-worth, certainty of close and a strong offer.  

This property has traded hands frequently in the last few years. While this seller purchased the property two years ago, VR Capital purchased it in 2008 for $9.9 million. Today, the property's trade illustrates the decreasing cap rates for multifamily properties in top markets. “Product in B-plus and A markets is trading at a sub-four cap rate. So, from that standpoint, this sale is right in line with the market,” says Ringer. “Because the sellers have demonstrated strong rents, there was still a lot of meat left on the bone. It really justified all of the metrics.”