The world of commercial real estate in Orange County is always exciting. Because it is such a hot market in which virtually every business would like to have a presence, and because there is almost no land available anymore, and properties that do come up are snapped up very quickly. Just recently, four multifamily properties were sold across Orange County and San Diego County by Marcus Millichap.
About Marcus & Millichap
The office of Marcus Millichap is based in Newport Beach and they are one of the area’s best known commercial real estate businesses. They have been involved in numerous transactions and are often called upon for a variety of different investment opportunities.
The Newport Beach office of Marcus & Millichap provides real estate investment clients with the opportunity to buy and sell all types of commercial property, including apartments, retail, office, single-tenant net-lease, industrial, healthcare, self-storage, seniors housing, hospitality, land, manufactured homes and special assets. The Newport Beach agents represent commercial real estate investors throughout Orange County, California and surrounding states.
They were very excited to have been involved in this latest acquisition and look forward to seeing the positive impact it will have on residents of Orange and San Diego Counties.
The Deal
Four multifamily properties were sold in total. Between them, they offer 239 individual units. The total sale price for all four properties was $67.7 million. Marcus & Millichap brokered for the properties, which included The Adelphi in Anaheim. What is interesting about this deal is that the properties have received very poor reviews and it is therefore hoped that the new owners will be able to turn things around.
Getting things repaired properly will never happen. They like to put band-aid, so things always break because they don’t repair it right in the first place. No given notice to do any repairs in your apartment, she leaves that to maintenance to contact tenants. Which isn’t the maintenance workers job to do so. Any kind of complaints like noises, you have to call the police.
Two of the sold properties are found in Orange County and all four, which includes the other two in San Diego County, were 1031 Exchanges.
No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment, if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.
Investors right now can strike excellent deals across Southern California if they are interested in multifamily properties. This is particularly true for those who already have real estate holdings and are looking to reposition or upgrade them. This is something that Marcus & Millichamp’s Tyler Leeson, the firm’s senior managing director-investments, has explained.
With the proper execution, 1031-tax exchanges can allow owners to use built-up equity to trade into larger or higher quality properties, increase return on equity and defer payment of capital gains taxes.
Meanwhile, the firm’s senior associate, Drew Holden, both represented the property’s sellers and helped them to find the buyers. Neither names have been disclosed as of yet. However, according to a representative of the firm, there were three private parties involved in the transactions, and all are high net-worth individuals.
Besides The Adelphi in Anaheim, the second property in Orange County is the Franciscan Apartments, found on North Syracuse Street. As with The Adelphi, these apartments have received poor reviews from residents, despite all units being occupied, although the Franciscan Apartments seem to be more popular than The Adelphi.
When there is a problem they come and fix it as soon as possible all in all not a bad place to live wish they coould somehow fix the parking situation though.
Between the two apartments, there are a total of 105 units. The other two properties were in San Diego County, totally 134 apartments. They were the Terra Oceanside and the Ocean Breeze Village, both found in Oceanside.
As part of the deal, Marcus and Millichap also arrange acquisition finance for the four properties. This was done by their staff members Nick Gray and Michael Derk. A total finance of $28.5 million was arranged for the purchase of the properties, which is further testament to the fact that the buyers must be high net worth individuals, since nearly $40 million was financed out of pocket. Acquisition finance is generally quite difficult to obtain.
Acquisition finance is the use of debt, equity and hybrid financing techniques to achieve an acquisition. The focus of acquisition finance is on identifying the optimal financing solution for a company. This occurs when the cost and flexibility of the financing structure is linked to the company’s cash-flow based value and growth potential. Optimal acquisition finance structures are adapted to the client situation and may call for nonstandard corporate finance techniques and funding sources.
As with all transfers of ownership in cases of commercial real estate, it leads to a degree of insecurity. The people and families who currently occupy the units are concerned about what it will mean for their tenancies. They also want to know who the new owners are so that they can research whether or not this will likely lead to an improvement in any issues they have faced, something that those in The Adelphi are particularly keen to hear about. However, because the sale has been conducted completely privately, no official statements have been made on behalf of the new owners.
That being said, it is expected that tenancy agreements will be honored and that some investments will be made in terms of renovating the property. Because of the fact that 1031 Exchanges were conducted it is unlikely that there will be any significant rise in rental rates but no official statements have been made in relation to this. Nevertheless, overall, it is hoped and expected that the properties will be modernized to place them more in keeping with the rest of Orange County.
