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.