The Setup
Built in 1956, on a single assembled lot of 32,670 SF. The property is in North Hollywood's Valley Village submarket, with a median household income of $91K.
The unit mix skews large: 8 one-bedrooms averaging 820 SF.
8 two-bedrooms averaging 1,200 SF.
4 three-bedrooms averaging 1,330 SF.
Average unit is 1,074 SF.
The verified close was $5,500,000 at a 5.85% reported and 11GRM.
What an Operator Sees
One of the Assets here is the debt.
At $275,000 a unit and a 5.85% cap and 11 GRM, this isn't a cheap buy. But the buyer assumed $2.7 million of debt fixed at 2.76% through 2030. That financing is about 4% lower than the market giving the buyer around 10% cash on cash and allowing them to use the proceeds to pay down a good chunk of the debt by 2030.
There is also potential upside, but I wouldn't underwrite all of it. The building has large 1 to 3 bedroom units that show a lot of upside if the new buyer can capture it.
My takeaway: in this market, I'm looking at the loan almost like another piece of real estate. A good building with years of 2.76% fixed debt attached to it is an interesting component but it also might have set up the acquisition to be at a higher price. I think without the debt that this would have traded closer to a 9.5-10 GRM.