HOLLYWOOD, CA - The Garfield Apartments, a vintage 1920s apartment property consisting of 24 units in Hollywood, CA, has traded for $5,450,000 reflecting a cap rate of 3.8 percent, according to Warren Berzack, president of Berzack Investment Property Advisors, the multifamily specialty group of Lee & Associates-LA North/Ventura.
Berzack, who is also a Lee principal, and Lee Principal Stephen Geiger represented the buyer and seller in the transaction at 1722 Garfield Place.
“These types of vintage properties are in high demand in the Hollywood submarket, and the Seller wanted to capitalize on the renter interest they knew existed by reconfiguring nine existing studio units into one-bedroom, one-bath apartments,” Berzack said. “The rents in the units were already under market, and the renovation would allow the new owner to raise rents significantly given the proof of concept.”
The seller renovated about half of the units and proved the potential upside of the property. In addition to the nine studio units, the old configuration included 11 1-bedroom, 1-bath units and four 2-bedroom, 1-bath units. The new configuration will result in 15 one-bedroom, one-bath juniors and nine 2-bedroom, 1-bath units including two with in-unit washer/dryers. All told, the renovation offered the opportunity to increase rental income by about 75 percent once all the renovations were complete and the apartments turned over.
“The new renovation produced an open floor plan, kitchen/living/dining combination that, when combined with the previously renovated baths, wood floors, crown molding, central air conditioning and vintage charm, made this a highly attractive asset,” said Berzack.
The initial marketing effort produced three offers and the asset went under contract in about two weeks’ time.
The Hollywood submarket has been undergoing a dramatic transformation with more than $4.8 billion of investment in ground-up and redevelopment efforts planned or underway. As of the fourth quarter of 2015, multifamily vacancy levels were just 3.7 percent and rents increased by 5.4 percent on a year-over-year basis.
One of the many developments underway is an apartment complex across from Garfield Apartments on Hollywood Boulevard. The developer, Astani Enterprises, is constructing a $100 million mixed-use complex on the site of the former Falcon Studios.
“Rental rates throughout Los Angeles have been rising for several years now, and the new construction underway in Hollywood will raise the rate ceiling for all apartment owners,” Berzack said.
Both the buyer and seller are private investors. The seller decided to divest the property in order to purchase another asset. The buyer is a multifamily property owner who focuses on value-add opportunities.