On The Money: $4 - 12 million Los Angeles Multifamily Sells in Narrow Band of 9.65 - 9.85 GRM in mid 2010
A few very apparent trends: 1) Opportunities are few, with thin inventory reaching market; 2) Demand is strong and buyers are willing to pay a remarkable 97.1% of asking price; 3) Returns for these assets are remarkably consistent with GRMs in the 9.65 to 9.85 GRM range; and, 4) The trend (excluding Beverly Hills, natch) was consistent from Palms, Sherman Oaks, Koreatown/Mid-Wilshire to Hollywood.
Given the attractiveness of the returns on these buildings (cap rates above 6.0%) when compared to other "low risk" investments (like T-bills near 0%), the market dynamics are characterized by a moderate number of well-capitalized investors pursuing a small number of worthy investment properties. The result: quick sales and finely-calibrated returns.
Buyers seeking distressed options in this market should turn their sights elsewhere. Financially robust owners of these assets sell them to other sound buyers -- with an absence of short sales, loan work-outs, bankruptcies, etc. This market segment is stable.