O.C. Apartment Deal May Be Record
Veteran Southern California real estate developers Alan and Henry Casden have jumped back into the apartment acquisitions arena, buying one of Orange County’s biggest rental communities recently for what may be a record price. They also have recently purchased properties in Los Angeles County.
Orange County real estate professionals estimated that a Casden Co. affiliate paid between $110 million and $114 million for the Lakes, a 770-unit apartment community in Costa Mesa near South Coast Plaza. A $110-million price tag amounts to $143,000 per unit, which real estate observers say may be the highest price paid yet for a large Orange County rental property.
Local real estate sources said that Casden Co. has been raising additional acquisition funds by converting its big apartment portfolio--now held under various entities--into a real estate investment trust. Although the market for publicly traded REIT shares has tumbled this year, sources noted, the Casden group could use a private REIT structure that would retain certain tax benefits.
Representatives of PaineWebber Properties, a partner in the group that sold the Lakes, declined to identify the buyer. Calls to Casden headquarters in Beverly Hills were not returned. Nor were calls to Eastdil Realty, which brokered the sale on PaineWebber’s behalf. Title records, however, list the buyer as a limited partnership called Casden Lakes.
Earlier this year, the Casdens purchased the 698-unit Malibu Canyon Apartments in Calabasas for $85 million; the 608-unit Mirabella Apartments in Newbury Park for $50.5 million; and the 130-unit Crescent Gardens in West Hollywood for roughly $15 million.
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The sale of the Lakes marks the second large Orange County apartment deal in recent weeks. San Francisco-based entrepreneurial real estate firm Gerson Bakar & Associates just acquired a group of properties totaling 1,609 units, including the Resorts in Aliso Viejo, for $198.6 million--or about $123,000 per unit.
Phil Dodge, a senior vice president specializing in apartment investments with brokerage Grubb & Ellis in Newport Beach, said the two big transactions demonstrate optimistic expectations about economic and population growth in Orange County--where development costs for new buildings in top neighborhoods are likely to reach $150,000 per unit or more.
Southern California apartment rents, which have remained stagnant during much of the 1990s, started rising during the last 18 to 24 months, with prime neighborhoods seeing the earliest and strongest increases, said Laurie Lustig, a senior vice president specializing in apartment sales with brokerage CB Richard Ellis. Hence, investors active today “believe there’s still room for increased rental growth.” The recent investment pullback by REITs has created opportunities for well-heeled real estate entrepreneurs such as Bakar and the Casdens, as well as wealthy family trusts, pension funds, investment syndicators and others, said Robin Ossenbeck, vice president with property investment brokerage Marcus & Millichap.
