BWE Lands $75M for SoCal Communities

BWE has secured $75.4 million in financing for seven multifamily properties, totaling 582 units, across California’s Contra Costa, Santa Clara, and Los Angeles counties.

Max Sauerman, senior vice president in BWE’s Los Angeles office, originated the financing from life company lenders on behalf of the borrower, a multi-generational family office based in Los Angeles.

The terms of the permanent, fixed-rate loans vary from five to 10 years. All are non-recourse and, in some cases, limit carve-out obligations to the borrowing entity. They have varying levels of prepayment flexibility and are full-term interest-only.

The properties included in the portfolio are mostly stable core communities with an average occupancy rate of 95 percent. The California communities that secured the loans are:

• Low-rise apartments in Martinez, totaling 98 units: A $9.15 million loan with a five-year term to finance the senior housing community, built in 1984.
• Garden-style apartments in Pleasant Hills with 101 residences: A $13.3 million loan with a ten-year term to finance 1979-built property.
• Garden-style apartments with 48 units in Canoga Park: A $6.75 million loan with a five-year term to finance the property built in 1980.
• Low-rise apartments in Reseda with 100 homes: An $11.2 million loan with a five-year term to finance the property built in 1969.
• Five-story apartments with 76 homes in Hollywood: A $13.5 million loan with a five-year term to finance the community, built in 2016.
• Low-rise apartments in Santa Clara, totaling 111 units: A $15 million loan with a ten-year term to finance the senior housing property built in 1978.
• Garden-style apartments with 48 homes in Covina: A $6.5 million loan with a five-year term to finance the property built in 1981.

SoCal multifamily

Jordan Lang, president, McCourt Partners, told Multi-Housing News that Southern California’s multifamily market is experiencing sustained transaction activity as investors recognize the lasting demand for quality housing throughout the region.

“While financing conditions have been uneven, we’re seeing signs of renewed stability,” Lang said.

Evan Faulkner, head of acquisitions at Virtú Investments, based in Larkspur, Calif., told MHN that multifamily sales transaction volume has increased during the past six to nine months in Northern and Southern California markets.

“We see this as a sign that the gap between buyers and sellers has narrowed and as an early indicator of value appreciation,” Faulkner said. “Additionally, current pricing in California markets has made financing more achievable.”

Blake A. Rogers, senior managing director at JLL, said that throughout Southern California, transaction activity has increased with the third quarter of 2024 marking the highest quarterly sales volume since 2022 at $3.8 billion.

“San Diego remains a hotspot for large institutional transactions with 7 deals closing over the $100 million market year-to-date, the highest rate on the west coast,” Rogers said. “Private capital remains highly active in Orange County and the Inland Empire, with these markets together recording 105 transactions during the third quarter of 2023, nearly double that of a year prior.”

A recent market report from Yardi Matrix showed that Los Angeles multifamily fundamentals were sluggish at the start of the second quarter of 2024.

Short-term rent growth rose from negative territory, up 0.1 percent, to $2,584, on a trailing three-month basis through April. But year-over-year movement moved down 0.5 percent. Still, despite high supply hitting the market last year, demand remained steady.

Worries about Prop. 33

Warren Berzack, national director, Lee & Associates Multifamily Advisory Group, told MHN that SoCal apartment investment transactions are picking up, depending on the area.

“If you look at 13 to 24 months ago, the trailing 12 months apartment sales volume in Los Angeles was about $5.95 billion, compared to $5 billion for the current 12-month trailing apartment sale volume,” he said. “That equates to a 15 percent+ drop in volume, partially due to the market, interest rates, etc., but also due to the ULA tax.”

Berzack said that San Diego County is about even at $2.4 billion when compared to the prior 12 months, and Orange County’s volume is up substantially due to some fairly large sales.

“Generally, there are many more properties on the market today than a year ago, but the vast majority aren’t selling because of a combination of being priced incorrectly, sellers that won’t mark to market, buyers sitting on the sidelines waiting to see what happens with the election, and Proposition 33,” he said.

Berzack also noted that markets that don’t have rent control by their specific city are seeing more activity since the fear with Prop 33’s passage would be that cities like Los Angeles, West Hollywood, Santa Monica, etc. will expand rent control to the vast majority of buildings located in their cities and only those that fall under AB1482 and were built in the past 10 years will have no rent restrictions.

“There is also the fear of vacancy decontrol, which means if a tenant moves out normally, that unit would move to the market rent after investing some money to fix it up, but there is the potential that cities will restrict the amount you can raise the rent from the old to the new,” he said. “This happened a few years ago in New York and has had devasting effects on the values of buildings there.”

More lenders “tiptoeing” into the market today, but the lenders are still very conservative with their DCR ratios, generally requiring about 50 percent down, he said.