Stewart Weston
HUNTINGTON BEACH, CA—In a region where many multifamily owners held onto properties for a long time before selling, there's now a huge opportunity in renovating class-B properties to appeal to people seeking the new Huntington Beach lifestyle, IPA executive director Stewart Weston and Marcus & Millichap's first VP investments Joe Berkson and tell GlobeSt.com. As we recently reported, the two executives, along with IPA senior directors Christopher Zorbas and Alexander Garcia, Jr., director David Sperling and associate director John Montakab, recently represented the seller and procured buyer Saratoga Capital Inc. for the sale of Casa Monterrey, a 208-unit apartment community here. The $60.25-million sales price equates to nearly $290,000 per unit. A true generational investment opportunity, the asset had been owned and operated by a local family office since 1974.
We spoke exclusively with Berkson and Weston about the Huntington Beach multifamily-investment market and how developers, lenders and investors are viewing this market.
GlobeSt.com: How would you characterize the Huntington Beach multifamily-investment market?
Weston: Huntington Beach is a high-demand submarket for private and institutional multifamily investors alike. Because of the intrinsic qualities of the location, growing rental demand and job growth, apartment rents have been rising at a rapid pace. This is a trend we anticipate will continue for the foreseeable future. Estimates for 2016 to 2020 project occupancy levels in the submarket to average 96%, with average rent growth of 4.3% over the same time period. Here's the bottom line: investors see this as a market ripe with opportunity not only to ride the overall wave of rent momentum, but also to capture additional rent growth through upgrades and renovations.
Joe Berkson
GlobeSt.com: With things heating up there with new Class-A multifamily and commercial developments, how are investors and lenders viewing this market?
Weston: For the reasons I just stated, Huntington Beach, as with all of Orange County, is a prime target for both investors and lenders.
GlobeSt.com: Which types of multifamily projects are investors most interested in in this market?
Berkson: Whether they are value add or turn-key projects, we see intense demand throughout the spectrum, from private investors buying duplexes to institutional investors seeking class-A properties. Unfortunately for investors, demand is far greater than the supply of properties for them to purchase. Fortunately for sellers, this imbalance of supply and demand has pushed prices to record highs.
GlobeSt.com: What else should our readers know about this particular transaction?
Berkson: Even with more than $4.2 million in upgrades since 2007, due to its premier location, proven rental upside, and its current position within the competitive set, we believe the opportunity remains for further value-add upgrades at Casa Monterrey to elevate its standard of rental living and potential rents. We believe that additional upgrades to the common areas and interiors will position the property move its rent structure into that middle ground that currently exists between the older class-B communities and the newer class-A communities with which it competes.
The marketing of Casa Monterrey was a cooperative effort between Institutional Property Advisors (Marcus & Millichap's institutional-property division) and Marcus & Millichap. Working together, our two teams were able to expand the scope and intensity of investor demand by reaching deep into the private-client and institutional-investor pools throughout the US.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Carrie Rossenfeld
Carrie Rossenfeld is a reporter for the San Diego and Orange County markets on GlobeSt.com and a contributor to Real Estate Forum. She was a trade-magazine and newsletter editor in New York City before moving to Southern California to become a freelance writer and editor for magazines, books and websites. Rossenfeld has written extensively on topics including commercial real estate, running a medical practice, intellectual-property licensing and giftware. She has edited books about profiting from real estate and has ghostwritten a book about starting a home-based business.
