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.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.