Scenic LA Community Changes Hands

Cityview and Wafra have obtained a nearly $73 million loan from 3650 REIT to acquire Silva, a newly constructed 221-unit Class-A community in Los Angeles’ Silver Lake.

Located at 235 N. Hoover Ave., the apartment building offers 360-degree views of Hollywood, West Los Angeles and Downtown from its homes, which average nearly 1,000 square feet. The units include 9-foot ceilings and floor-to-ceiling windows.

Silva is situated one mile from the heart of Silver Lake, an area with a culinary scene and various boutique retail options. Residents have easy access to Downtown and West Los Angeles via the 101 Freeway.

Toby Cobb, co-founder and managing partner, 3650 REIT, told Multi-Housing News that population growth within a three-mile radius of the property is projected to increase by approximately 5.6 percent over the next five years. This would significantly outpace Los Angeles County’s expected growth rate of 2.1 percent, making the Silver Lake area highly attractive for new rental housing construction.

Silver Lake also features a large concentration of renters, with 76 percent of housing units in the same three-mile radius being renter-occupied versus just 49 percent across Los Angeles County.

“Transaction volume resulting from buyers and sellers coming together on valuations will likely increase with the recently announced lower rates and there will probably be more opportunities to finance various asset types,” Cobb said.

Silver Lake’s challenging development

Silver Lake’s housing stock is an eclectic mix of craftsman bungalows, mid-century gems designed by Richard Neutra and smaller-scale multifamily buildings, Bob Lisauskas, Principal, RDC, told MHN. It includes historic architecture, courtyards and walkable, tree-lined streets.

“Although it is a desirable place to live, there are many challenges facing the Silver Lake housing market: a scarcity of land to build new projects, integrating into a fine-grained urban community and gaining the approval of higher density multifamily projects,” Lisauskas said.

He continued to note that developing more diverse density is imperative for the future of Los Angeles. “Some keys to success for developing in the area include locating higher density projects on boulevard streets, integrating with the city’s existing character and bringing affordability to the community,” he said.

Silver Lake is located between East Hollywood, Downtown and North East Los Angeles. The Silva property’s location provides with easy access to Koreatown and the Dodger Stadium.

Situated in a hot market

Jack McKee, vice president of origination, PearlX, told MHN that Silver Lake is similar to Brooklyn in many ways. “It is a hip and desirable area that is popular with young people and has struggled over the years to balance gentrification, affordability and the rising demand for housing,” McKee said.

“More broadly, to date, Los Angeles’ multifamily growth has not kept pace with the rest of the nation,” he said. “The rents in Northeast Los Angeles are relatively flat, while higher-end properties seem to be doing well.”

Despite vacancy rates being slightly elevated, McKee anticipates that they will fill in as recent inventory is absorbed into the market.

According to Yardi Matrix’s June report, Los Angeles multifamily fundamentals were sluggish at the start of the second quarter of this year. Short-term rent growth emerged from negative territory, up 0.1 percent, to $2,584, on a trailing three-month basis through April.

Meanwhile, year-over-year movement slid further, down 0.5 percent. However, demand remained steady. Despite last year’s decade-high supply expansion, the occupancy rate in stabilized properties declined just 50 basis points to 95.8 percent.

Silver Lake and other neighborhoods directly outside of Downtown Los Angeles core are “hot” right now, according to David McCullough of McCullough Landscape Architecture. Residents are looking to the outer ring for the social, convenient, pedestrian-oriented lifestyle that urban living brings without the downsides of living in a major downtown area.

“Silver Lake is a prime example of an area that provides residents with the ‘downtown experience’ without being in Downtown Los Angeles,” McCullough said. “While developers are engaging with this trend, it’s important to recognize the reasons (convenience, connectedness) that have created greater interest in these neighborhoods in the urban outer ring.”