Structure PMG Expects High Returns on California Townhomes

Structure Property Management Group's new acquisition, a 46-unit property, is located in a hot market.

Garrison WestOceanside, Calif.—Structure Property Management Group Inc. has acquired Garrison West Townhomes, a rental community in Oceanside, Calif. The 37-year-old, 46-unit property at 445 Garrison Street was purchased for $8.1 million.

Well situated in a San Diego County coastal region that continues to see steady economic growth, Garrison West Townhomes features 16 one-bedroom, one-bathroom units, and 30 two-bedroom. Structure PMG acquired the asset with proceeds from a 1031 tax exchange from its recent sale of the 18-unit Glencrest apartment community in Anaheim, Calif., as well as equity furnished by new investors. The firm assumed existing in-place financing with Chase.

San Diego is transitioning from an economy dependent on military and tourism into a diverse economy that includes technology, health care and biotech sectors, to name only a few. It also offers a workforce many employers seek. These factors helped solidify Structure PMG’s decision to acquire Villa Garrison West Townhomes.

“We believe we will immediately be able to obtain cash-on- cash returns in excess of 5 percent, and be able to improve that once we have executed on our plans, value add improvements and improvements to the operations of the property,” Structure PMG managing partner Eric Kramer told MHN.

The property’s upsides include its size, its positioning in the very desirable workforce housing segment of multifamily housing, the diversification and maturation of the San Diego region’s economy and an optimal unit mix. Structure PMG also assumed an excellent current interest rate of 3.53 percent that will be fixed for 4.5 years.

After that, “we will have some interest rate exposure,” Kramer said. “There were a number of bidders, [and] we showed that we have recently closed similar properties. We had a great relationship with Chase—the lender the loan was assumed from—and we can get this done in their timeframes.”

The purchase is a continuation of the strategy of Santa Ana, Calif.-based Structure PMG to acquire well-located workforce housing developments across Southern California, according to Kramer.

“Along with proactive property management and some straightforward capital improvements to the landscape, hardscape and exterior and upgrades of the asset, we will be able to significantly improve this diamond in the rough and ultimately bring rents to market rates,” he said.

Ray Adams of DTZ represented the seller and Tyler Leeson of Marcus & Millichap represented the buyer.

“We felt the project was attractively priced on all the key metrics that we look at, [including] price per unit, price per square foot, going in cap rate and going in cash on cash,” Kramer concludes. “We also feel strongly that the in-place rents are below market and we will be able to raise rents to further improve investment results.”

The in-place rents at closing were $1,027 per square foot for the one-bedroom units and $1,323 for the two-bedroom townhome residences.

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