Monday, April 26, 2010

Los Angeles Apartment Mkt 1st Quarter 2010: Trophy Hancock Park Buildings Trade at 11.4 GRM While Mid-Wilshire "Bread & Butter" Building Nets 7.5 GRM

The apartment market in West Hollywood, Hollywood, Hancock Park-Wilshire, Mid-Wilshire and Silver Lake - Echo Park during the 1st Quarter 2010 shows buildings trading from 7.5 - 12.6 GRM (and everything in between).

  • West Hollywood - 11.7 - 12.6 (B Class, A Class)
  • Hancock Park - 11.3 - 11.4 (A Class)
  • Hollywood - 8.8 - 11.4 (B Class, A Class)
  • Mid-Wilshire - 7.5 (B Class)
  • Silver Lake - 11.2 (A Class)
It's noteworthy that A Class buildings in A neighborhoods are selling in the range of 11.2 - 12.6 GRM. (Roughly 5.5 - 8% cap / capitalization rate).

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1285 n SweetzerIn West Hollywood, 1285 N Sweetzer Avenue sold for an 11.7 GRM. This building has 28 units, 22,804 sq ft of living area, and sold for $6.1 million with gross income of $520,000. 25 x 1 br, 2 x 2 br, 1 x 3 br. This large, well-maintained complex sets the bar for what investors can expect in an A-Class, A-quality neighborhood. It's interesting to note that the largest sale in Santa Monica during the 1st Quarter 2010 was also at an 11.7 GRM.

7733 Hampton7703 Hampton Avenue in West Hollywood sold for a 12.6 GRM. This building has 9 units, 6,594 sq ft of living area, and sold for $2,032,000 with gross income of $162,000. 9 x 1 br. The building has no deferred maintenance and low (3%) vacancy.

180 S SycamoreTwo sales in Hancock Park illustrate (1) what returns buyers can expect for a trophy/historic/architectural building; and (2) the consistency of returns in neighborhoods.

180 S Sycamore Avenue
in Hancock Park sold for an 11.4 GRM. This building has 15 units, 12,966 sq ft of living area, and sold for $3.4 million with gross income of $299,000. 3 x 0 br, 9 x 1 br, 3 x 2 br. The building is in a much sought-after Spanish style in the much sought-after Hancock Park neighborhood.
100 N Sycamore100 N Sycamore Avenue in Hancock Park sold for an 11.3 GRM (vs. 11.4 above). This building has 13 units, 16,588 sq ft of living area, and sold for $3,050,000 with gross income of $269,000. 9 x 1 br, 4 x 2. This historic building qualifies for Mills Act property tax reduction (typically 20 - 50%). LA investors know the value of these prestige buildings (1920-30s), which never go out of style with renters.
5703 La MiradaTurning to Hollywood, we also find an 11.4 GRM for an A-Class building in an A-Class part of the neighborhood. 6824 Camrose Drive has 10 units, 7,478 sq ft of living area, and sold for $1.5 million with gross income of $131,000. 8 x 1 br, 2 x 2 br.

In urban part of Hollywood, like 7703 La Mirada Avenue, investors can get the best returns -- an 8.9 GRM on current rents. This building has 26 units, 18,201 sq ft of living area, and sold for $2.4 million with gross income of $273,300. 4 x 0 br, 20 x 1 br, 2 x 1 br. A "hands on" owner operator could capitalize on the 24% upside on the building's rents.

4100 W 1st Los AngelesAnother building offering excellent returns is 4100 West 1st Street in Mid-Wilshire, that sold at a low 7.5 GRM. This building has 23 units, 19,329 sq ft of living area, and sold for $2,185,000 with gross income of $291,000. 19 x 1 br, 4 x 2 br.

3821 Effie3821 Effie Street in Silver Lake sold for an 11.2 GRM. This building has 6 units, 5,310 sq ft of living area, and sold for $1,075,00 with gross income of $96,000. 6 x 1 br. Silver Lake and Echo Park remain a magnet for post-college renters and local investors like this type of small, easy-to-rent, easy-t0-manage complex.

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