The Math the Broker Is Pitching
Colliers placed this at a stated 4.7% cap on $747,300 NOI. At $15.9M that math checks: $747,300 divided by $15,900,000 equals 4.70%.
| Scenario | NOI | Cap Rate | Implied Value |
|---|---|---|---|
| As-stated (at close) | $747,300 | 4.70% | $15,900,000 |
| Conventional buyer at 5.25% cap | $747,300 | 5.25% | $14,234,286 |
| Conventional buyer at 5.50% cap | $747,300 | 5.50% | $13,587,273 |
The Church of Scientology paid $2.3M above where a top buyer would have paid. That is big user premium that I am seeing occur when its an owner-user.
What an Operator Sees
Kitty Wallace at Colliers pulled off something rare in this market. Finding a buyer willing to pay a 4.7% cap, $568,000 per unit, for a Hollywood apartment building today is about as good as brokerage gets.
If I were buying it, the numbers would have to look very different. I'd need something closer to a 7% cap with financing around 6% just to make the deal pencil. That puts my value closer to $10.7M, or about $265/SF and $381,000 per unit.
That gap between my number and the sale price is the story. This didn't trade to a traditional real estate investor—it traded to a user with a different investment objective.
What I do like is the building itself. A brand-new 40,000+ SF apartment building doesn't come along very often, and replacement cost is likely well above where this ultimately traded.
I track every multifamily sale in Los Angeles so you don't have to.
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Send OMs to David@AtlasBrief.LA
