In one of the largest multifamily trades this year in San Diego County, a pair of investors has acquired the 527-unit apartment complex in La Mesa, California, for an undisclosed sum. The property, known as Alterra & Pravada, is the largest transit-oriented housing development in the county.
The buyer is a partnership of Los Angeles–based TruAmerica Multifamily and Boston-based Intercontinental Real Estate Corporation. The seller was a partnership of Fairfield Grossmont Trolley LLC and Metropolitan Transit Authority, a public agency. The price was not disclosed.
Currently, multifamily properties in San Diego County are selling for an average $270,000 per unit, the highest level since 2006, according to a report by Costar, the real estate data company.
The growing profitability of the county multifamily market reflects the imbalances in the San Diego housing market, according to a report by CoStar. Home ownership remains increasingly out of reach in a region where renters have a median household income of $48,500 per year while median prices on single-family homes are north of $600,000.
Currently, the average rent for a two-bedroom unit in San Diego is $1,740.
With home prices rising sharply at a time of only modest income growth, rents are expected to increase in San Diego County by 4.1–4.2 percent by Fourth Quarter 2018, and are expected to rise 3.7 percent next year, according to CoStar.
The continued upward movement of home prices in San Diego County, coupled with a tight supply of apartment rentals, makes it likely that multifamily properties will continue to increase through next year, according to CoStar.
The high price of housing in San Diego County translated into a 10 percent increase in multifamily investment sales from 2016 to 2017, compared to a 9 percent slowdown on the national level during the same period. Given the dynamics of the housing market, “there is a high chance that [San Diego multifamily properties] will continue to outperform the national average,” according to Jessica Levin, a senior director for Intercontinental Real Estate.
Built in 2010, the Alterra & Pravada complex contains one- and two-bedroom units scattered throughout a half-dozen four-story buildings. The developers dedicated 15 percent of the units for moderate-, low- and very-low income households. Advantages of the property include “location, walkability and commutability, setting it far apart from other properties in the competitive set,” according to Levin.
The largest of 23 transit-oriented developments in San Diego County, the property is located immediately adjacent to the Grossmont Transit Center, within walking distance of both Sharp Grossmont Hospital, the largest employer in La Mesa and the 1-million-square-foot Grossmont Shopping Center. Served by the Orange and Green Lines of the San Diego Trolley and Metropolitan Transit Center bus lines, the transit center connects residents to El Cajon, Mission Valley and the downtown area. The station is among the busiest in the county, with an average 2,600 riders boarding at the station daily.
The investors plan a set of capital improvements to Alterra & Pravada, including upgrades to existing clubhouses, pools and pool decks, plus new landscaping and exterior paint.
Kevin Mulhern, Rachel Parson, Stewart Weston and John Montakab of CBRE’s San Diego Multifamily Investment Group represented both the buyers and the sellers in the sale. The purchase used 10-year financing through Fannie Mae’s preferred borrower program, Borrower Channel, arranged by Troy Tegeler, vice chairman of CBRE Capital Markets Group’s Orange County office.