“Mission Valley is the heart of San Diego and presented a rare opportunity to acquire a core coastal asset in a region where projects like this rarely trade,” adds Mulhern, adding that only 11 properties with 100-plus units sold in the first half of 2017. “This area presents a safe investment with upside potential, given its ideal location and the strong apartment demand in the area.”

CBRE Research reports that Mission Valley is the largest retail and most popular shopping district in San Diego, and the area is also a primary office market. The department also reports that San Diego multifamily fundamentals overall remain exceptionally strong, with apartment occupancy at 96% and expected rent appreciation of 3.7% this year.

We spoke with Mulhern about the transaction and how common leasehold-interest sales are in the San Diego market.

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GlobeSt.com: What stands out for you about this transaction?

Mulhern: What was most unusual about it is that it's a leasehold. The other thing is that this property was built about 10 years ago, when mixed use and transit-oriented development were a new idea. Those types of properties barely existed, and in places like San Diego, they didn't exist at all because of the lack of mass transit. This property is located on a rail trolley line on land leased from MTA, the ground lessor that provided the site. This allowed the previous owner to get the site developed with parking into a train-station stop, and there is also retail 18,000 square feet of retail there, which is a fair amount. They had 185 apartment units developed there, and the idea was that residents could get on the trolley to Fashion Valley Mall, the stadium and down to work. Now, 10 years later, the options are about to get really diverse. I can see all the construction going on with the trolley line right outside my window in UTC; this is a gamechanger. What really struck me is I remember going down and seeing this project when it first came on line, and I barely knew what to make of it. It seemed pioneering at the time; now it seems just before it's time: a well-conceived, well-executed project.

GlobeSt.com: How common are leasehold-interest sales transactions in the San Diego market?

Mulhern: In general—not just in San Diego, but in most places—leasehold transactions are relatively infrequent. There are certain places where they happen more frequently, like Downtown La Jolla and Marina Del Rey (where land is leased from the City of Los Angeles), but it's not common. The buyer pool changes, so you typically end up with thinner buyer pools—not necessarily different buyers, but a thinner pool.

GlobeSt.com: How would you characterize the multifamily investment market in Mission Valley?

Mulhern: First, Mission Valley is viewed as one of the top three or four multifamily-investment markets in the county. It's robust, mostly with larger projects and almost all institutional ownerships like the Irvine Co. and H.G. Fenton. Most of the multifamily projects in Mission Valley are of very high quality and service. In addition, there is a significant number of new developments, and it's also a retail hub, with Fashion Valley Mall and a couple of other centers. There's more retail footage in the Valley than anywhere else in the county. And Mission Valley is also kind of dead center in the county and a connection point for almost any freeway in the county—the 163, 5 and 8 all converge in the Valley, so it's a major transportation point. It's also close to the beaches and Downtown, all connected by rail. I would generally characterize the demographics in the Valley as the younger, 18-to-35-year-old market; there's almost no single-family inventory in the market, and there's very little in the way of schools. Once families have children of school age, they tend to migrate out of the Valley. It's the type of environment energetic Millennials are attracted to, and all retail feeds in to that.

GlobeSt.com: What else should our readers know about this transaction?

Mulhern: The buyer is planning significant renovation to this property, and I'm sure it will be transformational.

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SAN DIEGO—A rare leasehold-interest sale for the Village of Morena Vista is indicative of how Mission Valley is growing into the transit-oriented submarket it was envisioned to be more than 10 years ago, CBRE SVP Kevin Mulhern tells GlobeSt.com. Mulhern and CBRE's Rachel Parsons recently represented seller Morena Vista Development LLC in the sale of the multifamily complex to Fowler Property Acquisitions for approximately $65 million; Fowler represented itself.

The property, built in 2007, is located at 5395 Napa St. in San Diego's Mission Valley neighborhood and features 185 apartment units as well as 18,814 square feet of on-site retail, including daily-needs vendors including a national coffee chain. The complex is situated on the Morena/Linda Vista Trolley Stop and within walking distance from the University of San Diego.

Mulhern calls the property “a groundbreaking type of complex and one of the first transit-oriented developments with a mixed-use aspect to be delivered in Southern California. Developer William Jones of City Scene Management was a visionary and a catalyst for this pioneering project.”

The Village at Morena Vista was built on leased land from the Metropolitan Transit Development Board. The new owner has renamed the complex to “Arrive Mission Valley” and is planning a comprehensive renovation.

“Mission Valley is the heart of San Diego and presented a rare opportunity to acquire a core coastal asset in a region where projects like this rarely trade,” adds Mulhern, adding that only 11 properties with 100-plus units sold in the first half of 2017. “This area presents a safe investment with upside potential, given its ideal location and the strong apartment demand in the area.”

CBRE Research reports that Mission Valley is the largest retail and most popular shopping district in San Diego, and the area is also a primary office market. The department also reports that San Diego multifamily fundamentals overall remain exceptionally strong, with apartment occupancy at 96% and expected rent appreciation of 3.7% this year.

We spoke with Mulhern about the transaction and how common leasehold-interest sales are in the San Diego market.