$5 Million Pasadena Multifamily Property Traded in Multiple Offer

Buyer opts for full-price offer with plan to increase rents by more than 30 percent

Published : Thursday, February 15, 2018 | 11:05 AM

Lee & Associates-LA North/Ventura Transacts Sale of Pasadena Multifamily Property

A 16-unit multifamily property in Pasadena has traded for $5,060,000 or $316,250 per unit in a multiple offer scenario that is playing out for many Southern California multifamily properties, according to George Yessaie CCIM, a principal of Lee & Associates-LA North/Ventura, who represented the buyer, a private investor.

“This investor, SOMA Realty LLC, was looking outside of Southern California for its 1031 Exchange upleg because pricing in this market is considerably higher,” Yessaie said. “But ultimately the company wanted to stay in Southern California where it believed it could achieve the highest equity growth whereas other markets offered mainly cash flow and more moderate growth in equity.”

The property attracted several offers, requiring the buyer to place a full-price offer in order to prevail, Yessaie said. But because the rents were more than 30 percent below market at the time of sale, the buyer felt justified in offering full price.

The acquisition strategy was to purchase the property and bring the rents up to market, allowing the buyer to take advantage of an earn-out financing strategy whereby it could finance up to 65 percent of the value of the property once rents were increased.

“Financing was the icing on the cake,” Yessaie said. “The buyer was only able to finance 40 percent of the purchase price initially, but could earn out an additional 25 percent once it brought rents up to market,” Yessaie added.

In 2017, Pasadena asking rents rose 4.3 percent year over year to $1,936 and effective rents rose 4.1 percent to $1,866 for the same period.

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