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Waterford Residential Spends $30 Mil on Rare Multifamily Asset in the Dover Shores Area of Newport Beach

1/09/19

Waterford Residential purchased Dover Heights Apartment Homes, consisting of 66 residential units in the Dover Shores area of Newport Beach, for $30.55 mil, or $463k/unit. This purchase, along with a previous acquisition between the same buyer and seller in 2018 of an 18-unit building, directly adjacent to Dover Heights Apartments and facing Westcliff Dr, provides the buyer with an assemblage of 84 units that are situated on 10 separate parcels and have never before been offered for sale as a portfolio.

This offering was rare, as it is the first time all these properties ever have been on the market in a single offering. The assemblage is significant, as most rental housing stock of this size and larger in Newport Beach is institutionally owned. The seller had owned the property for over the past 27 years and the offering of nine adjacent, contiguous lots is historic as only a few multifamily opportunities of this size will ever be available in Newport Beach or anywhere along Southern California coastal apartment submarkets from La Jolla to the Central Coast. Dover Heights Apartment Homes represent all but two ownership entities facing Bedford Lane, so this acquisition represented basically a “city block” in Newport Beach.

Dover Shores is one of the most coveted, popular, and expansive Newport Beach neighborhoods. The community is steps from trendy restaurants and coffee houses as well as upscale boutiques along the 17th Street retail corridor. This area is rapidly re-gentrifying with remodeled apartment homes, office, medical office, and retail buildings.

The buyer is planning significant renovations to the interiors and exteriors of the property; in part by adding washer/dryer hook-ups in the units without that amenity already, and by activating vast common area spaces by adding outdoor communal resident retreats. With these extensive upgrades, the community is expected to be one of the top multifamily communities in the submarket.

Steven Brombal and Josh Rhee with Kidder Mathews represented the buyer, a subsidiary of Waterford Property Company, owned by Sean Rawson and John Drachman, and the seller, a local private investor.

“There are nine individual parcels comprising this sale, and at any time an exit strategy could be to selectively and strategically sell individually to separate owners capitalizing on a “smaller building” offering with significantly higher fundamentals of price-per-unit and compressed cap rates coupled with a larger pool of potential investors,” said Brombal. “Typically, that exit strategy is simply not available in a community of this size,” he said.

With new multifamily construction in and around Newport Beach and the Irvine Business Complex logically being higher-end luxury complexes, this portfolio offered investors the ability to provide a more entry-level workforce housing alternative to Class A communities in coastal locations serviced by upscale retail, dining, and entertainment. In these submarkets, comparable rents are anywhere from $3.00-$5.00 plus per square foot.

Multifamily market fundamentals are beginning to change, interest rates are continuing to rise, and irreplaceable and generational real estate assets are coming to market infrequently – or in this case and most likely, once in a lifetime. There is still a strong demand amongst savvy investors who understand the areas constraints and are willing to pay for the opportunity to add significant value through repositioning these assets.

“Over the last 27 plus years, I worked with the seller to assemble this portfolio of contiguous parcels. During that time, I had only one of the buildings formally listed, all others were from owners I had either sold the property to or had cultivated relationships with over many years. At one time, prior to this seller acquiring this assemblage, there were seven different owners of these 66 units,” said Brombal. “This assemblage is one of, if not the, largest contiguous privately held multifamily portfolios in the City of Newport Beach. The property is on nine adjacent parcels totaling 2.24 acres and 64,420 net rentable square feet of improvements. The amassing of these separate adjacent buildings over 27 years is really historic and unprecedented. We fielded multiple competing offers during the marketing period,” he said.

“This location is main and main in the Newport Beach area and offers residents the ability to walk to the Back Bay or across the street to some of the trendiest eateries and coffee houses,” said Rhee. “There are nine separate floor plans. This portfolio offers large townhomes with front and rear yards, large one-bedroom units, and two-bedroom/one-bath, and two-bedroom/two-bath flats with fireplaces, balconies, and large private yards,” he said.





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