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2/19/18
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A 16-unit multifamily property in Pasadena, CA has traded for $5.06 mil, or $316k/unit. Built in 1961, the property is located at 95 N. Michigan Ave, east of Lake Ave between Colorado Blvd and the 210 Fwy.
George Yessaie, CCIM, with Lee & Associates-LA North/Ventura, represented the buyer, a private investor. According to Yessaie, the investor, SOMA Realty LLC, was looking outside of Southern California for its 1031 Exchange upleg because pricing in this market is considerably higher. Ultimately, the investor wanted to stay in Southern California where it believed it could achieve the highest equity growth, whereas other markets offered mainly cash flow and more moderate growth in equity.
The property attracted several offers, requiring the buyer to place a full-price offer in order to prevail, Yessaie noted. However, because the rents were more than 30% below market at the time of sale, the buyer felt justified in offering full price.
The acquisition strategy was to purchase the property and bring the rents up to market, allowing the buyer to take advantage of an earn-out financing strategy whereby it could finance up to 65% of the value of the property once rents were increased.
In 2017, Pasadena asking rents rose 4.3% year over year to $1,936, and effective rents rose 4.1% to $1,866 for the same period, according to Lee & Associates.
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