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9/23/22
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A private investor from Los Angeles paid $2.99 mil for an eight-unit ($373.8k/unit) apartment property in Santa Monica. The property, located at 2327 2nd St, is in a prime location just one block from Main Street and two blocks from the ocean.
Built in 1924, the single-story, two-building property features all bungalow-style units that consist of four one-bedroom units and four studios. The units feature private entrances, private patios, spacious kitchens and baths, hardwood floors, and built-in cabinetry.
Kimberly Stepp with Stepp Commercial represented the buyer and the seller, Los Angeles-based Surf Realty Inc. The cap rate was 1.4%, based on rents far below market value.
“Highly walkable and located in one of the most desirable rental areas in Santa Monica, this rent-controlled property had rents that were 108% below market rates, providing the new ownership the opportunity to add significant value,” said Stepp. “During escrow the soon-to-be owners negotiated buy-outs with five of the eight tenants, providing an immediate upside in value.”
“In this rising interest rate environment as well as overall economic uncertainty, buyers in prime Los Angeles area locations have an elevated interest in value-add apartment assets like this one,” noted Stepp. “Investors are averse to acquiring an asset at market rents as it means they are most likely losing money right out of the gate.”
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