Multifamily Pricing Holds in Los Angeles

Multifamily pricing has remained stable during the pandemic, according to sell-side brokers at James Capital Advisors that have closed two deals in Los Angeles. Mike Hanassab and Elliot Hassan closed two transactions in Los Angeles totaling $22.9 million, and both assets achieved near flat pricing compared to pre-pandemic valuations.

“We thought the majority of transactions we were going to see were going to be 1031 exchanges. However, after the first month or so, lenders continued to be active, and that allowed investors to get into the market,” Hassan, a senior director at James Capital Advisors, tells GlobeSt.com. “That has definitely helped. Rent collections are also better across the board, and that has helped as well.”

The duo sold a 57-unit apartment building at 5480 Quakertown Ave. in Woodland Hills and a 44-unit apartment building in Van Nuys. Both transactions came to market and closed during the pandemic. “With regards to Quakertown, we had priced it six months before the pandemic,” says Hanassab, a senior director at James Capital Advisors. “The owner reached out to us right at the beginning of the pandemic, and said the family was ready to sell and asked if we could get the same price. We paused, but when we looked at the asset, we felt pretty confident. We took it out at the same price as pre-COVID evaluation.”

The property was a prime candidate for strong pricing during the pandemic because rent collections exceeded the national average. “In this particular deal, the property had 98.5% collections throughout the pandemic, and I think that was a testament to the ownership and the quality of the tenants in the building,” says Hanassab. “Ultimately, an investor paid 98% of the original list price.”

The Van Nuys property, on the other hand, performed markedly worse during the pandemic; however, the value came in close to the pre-pandemic market. “Alternatively, on our other closing in Van Nuys, there were five vacancies and seven additional tenants weren’t paying rent due to the pandemic. Income in the property was completely off,” says Hanassab. “The buyer snuck in before it went to market. He wasn’t concerned about the loss of income, and he still was able to get a 70% loan-to-value. We think that it could have traded for $500,000 more if it had gone to market.”

However, the two properties alone aren’t indicative of a trend. “Every property is a case-by-case situation, based on location as well as operations and rent collections. Properties with bad operations are not going to be able to get top dollar, but well managed properties are still going to go out there and do well based on collections,” says Hassan. “Owners need to look at their building and what is going on.”

But overall, valuations have note yet changed. “You are still getting pre-COVID values for a lot of properties, depending on the real estate and operations. That is the opposite of the perception,” says Hanassab. “That is important to know, and it is important to educate clients so they understand the market dynamics.”