Operators Take
This is exactly why buying existing buildings can make more sense than developing today. Replacing this property would likely cost $45–50 million, require years of planning and construction, and produce no income during that time. Instead, the buyer acquired a completed 2019 building for $31.5 million and can collect rent immediately. I have been looking, still can't find anything this good.
At roughly $389,000 per unit and $415 per square foot, the buyer is getting newer West LA housing at a significant discount to replacement cost. The building is already entitled, constructed and leased. Most of the major development risk has already been absorbed by someone else.
The buyer may still need to improve rents and occupancy, but the basis creates room to do that. When an almost new property trades this far below what they would cost to build today, developing from the ground up becomes much harder to justify. I still don't know why anyone is doing it unless they can really build toa 7% Cap rate on costs. From recent bids and talking to sub contractors, the costs keep going up.