The recent sales of two West Hollywood apartment buildings are indicators of the strong demand for housing in the city and growing demand on its Eastside. In both sales, buyers paid a relatively high price based on the income they are likely to earn from the properties.
The sales, both conducted by Charles Dunn Company, include a 10-unit building at 1220 N. Formosa Ave. near Fountain and a five-unit building at 1231-1235 N. Vista St., also near Fountain.
The 10-unit building, owned by Aquat 9 LLC, was sold at the full asking price $3.3 million at a “cap rate” of 4.8 percent. The “cap rate” is a commercial real estate industry metric that gives the likely rate of return on a purchase. A building purchased for $1 million that is likely to produce $100,000 in net income would have a “cap rate” of 10 percent.
The smaller building on North Vista, owned by Jambax LLC, was sold for $1.4 million at a very low 2.9 percent cap rate.
“The West Hollywood market for rental properties is one of the best locations for multifamily property investment in California as there are limited availabilities, strong demand, and high barriers to entry for these opportunities,” said Kimberly Roberts Stepp, senior managing director with Charles Dunn, who represented both sellers. The properties were purchased by private investors.
The Formosa building, constructed in 1960, includes four one-bedroom/one-bathroom units, two two-bedroom/one-bathroom units and four two-bedroom/two-bathroom units. It was completely renovated in 2013. It is a “tenancy-in-common” building, which means units are owned by their occupants in a manner like that used for co-ops.
The 1930 Vista property consists of two buildings containing one three-bedroom/two-bathroom front unit and four one-bedroom/one-bathroom units.
“We received multiple offers on both properties and selected all-cash buyers, closing escrow in less than 30 days,” Stepp said.
Several large residential buildings have opened or are under construction on WeHo’s Eastside. The Huxley, a 187-unit apartment building at La Brea and Fountain avenues, opened this Spring with one-bedroom apartments renting for as much as $3,485 a month and two-bedrooms for as much as $4,340 a month. It is a project of the Essex-Monarch group as is the Dylan, with 184 units, that will open soon on Santa Monica Boulevard at La Brea.
Other projects under construction or being planned for the area by other developers will add almost 700 apartments to the area. A block west of La Brea, Trammell Crow Residential has demolished the old Faith Plating building and is erecting a six-story apartment building with 166 units. That “Domain West Hollywood” building is scheduled for occupancy in the Spring of 2016 and current projections put rents in the $2,000 range. South of Santa Monica, on the northwest corner of La Brea and Willoughby avenues, work has begun on the La Brea Gateway, a project of the the Holland Partner Group, which will include 179 residential units and a Sprouts Farmers Market. The developers anticipate that project being ready for tenants in the winter of 2015/2016.
According to Monarch, Huxley is at 80%. I see moving trucks in front every day.
I think the Dylan will be the more desirable property though. Two commercial leases already signed and it just looks nicer overall.
@Snarkygal – I think you’re right. The old single family homes and dilapidated older, smaller multi-unit buildings with rent controlled apartments will be bought for land value, torn down and $800,000+ “luxury” condos will be built. The smaller lot size means that there won’t be more than 6-10 units, but that should be enough to be profitable for a developer. The two new buildings – The Huxley and the soon-to-be-open The Dylan – are very expensive. That said, apparently some of the units at The Huxley have been rented. I don’t know if they got their asking price or if… Read more »
LAND $800,000 plus 6 new units @ average 1200sf each = a total of 14,400sf @ $300.00 psf for construction =$4,320,000 plus land= total construction cost $5,120,000 divided by 6 units is $853,333 each … Some of these costs and sf go up and down. Including the sales average (say one penthouse @$1,300,000) Realize that developers are sometimes using their own cash for land and construction loans for development. Many will make an actual fee off their own loans for construction management of about $25,000-$50,000 per unit. Many are happy with a 10% return on the cash used for land… Read more »
The Huxley is so desperate for tenants they are listing on Craigslist. The rents for these new developments on the East side are so out of reach for the common person, they are going empty.
I foresee many of the older buildings that are rent controlled being sold in the near future, being torn down, and replaced with small condo buildings. It is something I fear.
co op living…..I just loved living in a nyc co-op for 17 years….so much better
than a condo…….
Always knew your neighbors, no influx of tenants …building up keep was better…
safer and more secure.
No ones a stranger in a co op.
My L.A. condo experience was not as good.
Lets hope for more co op living in West Hollywood.
Sales are great. Development can be good Redevelopment a must to replace the aging product on the market. But be careful what we wish for and how. The developers will only buy where they can make a return. As people in these buildings are asked to leave there will be less and less options to move elsewhere within the city that is affordable to those that created it. Is it the goal of our planning dept to replace the aging population only with the wealthy few ? There is little to nothing in the plan now or code to balance… Read more »
Interesting information on the Formosa building. TICs are relatively uncommon (as far as I know) in the LA area. They are far more common in San Francisco, where people buy individual floors of an old Victorian building. I wonder if all 10 units were vacant at the time of sale or if all the current owners put the entire building up for sale. West Hollywood remains a highly-desirable are at live as long as you don’t have a long commute to work every day. I think the race is on for developers to buy “inexpensive” east-side properties with the intent… Read more »