By Dees Stribling, Contributing Editor
Los Angeles–Santee Court, a 165-unit adaptive reuse multifamily property in three closely related downtown Los Angeles buildings, has traded hands for $31.1 million. The property was originally built in 1912 and redeveloped in 2004 by L&B Advisors, the seller.
The buyer was Essex Property Trust, which is a major apartment landlord in California and the Pacific Northwest. The REIT tends to acquire multifamily assets of more than 100 units in deals of more than $10 million, but its interest in a property like Santee Court points to new interest among investors for adaptive reuse, especially as the supply of newer multifamily properties for sale is constrained.
“Due to the strong rental demand for trendy housing units in core urban locations, institutionally profiled investors have begun to pursue adaptive-reuse loft projects aggressively,” Greg Harris, an executive vice president at investment specalist Marcus & Millichap’s Encino office, tells MHN.
“REITs, in particular, now have an interest in this product type, which was previously seen as non-traditional,” Harris continues. Along with Ron Harris, a Marcus & Millichap executive vice president in Los Angeles, Greg Harris represented the buyer. Harris and Harris, who are not related, also represented the seller.
The Santee Court structures are a legacy of the now little-remembered textile industry in Los Angeles. Other nearby buildings originating in the early 20th century to serve the same industry have likewise been redeveloped in the early 21st century. The Santee Court property is exempt from Los Angeles’ rent control statutes and is subject to Mills Act property-tax abatements for historical properties, meaning that the owners will enjoy certain tax breaks as long as they maintain the historic character of the structure.
Besides the 165 apartments, the buildings feature 38,540 square feet of ground floor retail, with a fully occupied food court. The apartments have 12- to 16-foot ceilings and, befitting their redeveloped character, sealed concrete flooring, floor-to-ceiling windows and exposed brick walls. The rooftop amenity package includes a pool, spa, barbecue area, driving range, lounge area and basketball court. A fitness center is on the ground floor.