• Jason Tuvia

Multifamily Sales Volume Reaches Record Quarterly High in Southern California's Inland Empire



What a difference a quarter makes. Sales of apartments in Southern California's Inland Empire area had slowed considerably heading into the fourth quarter of 2018 after seeing heightened multifamily investment activity from 2015 to 2017.

Just as it appeared it could be a down year for apartment sales in the market, investors returned in a strong way in the fourth quarter with projected sales volume of around $871 million, surpassing the market’s previous quarterly peak of $830 million in the second quarter of 2007.

The fourth quarter started off with a bang when Signapore-based CapitaLand purchased three Corona apartments as part of a 16-property portfolio in October. The portfolio consisted of mostly suburban communities in West Coast metropolitan areas of Seattle, Portland, Oregon, Denver and the Inland Empire. The three Corona apartments were valued at $277 million.

Later in the month, Los Angeles-based Afton Properties purchased a 288-unit community in Riverside for $63 million, or $219,000 per unit. The community was 95 percent leased at the time of sale and closed at a 4.8 percent cap rate, or projected rate of return.

One of the largest single-property sales to record in the Inland Empire was Crow Holdings’ November purchase of the 514-unit Ironwood at Empire Lakes Apartments in Rancho Cucamonga for $146 million, or $290,000 per unit. That community is expected to compete for renters with The Resort at Empire Lakes, which the Lewis Group of Properties is developing on the adjacent parcel. At 1,000 units, the new project will be the largest multifamily development expected to deliver in the Inland Empire market since January 2010. Both communities are located near the Inland Empire’s highest concentration of office space, as well as the Citizens Business Bank Arena and the Ontario International Airport.

Other major fourth quarter sales include Invesco’s purchase of a 286-unit community in Chino Hills for $95 million, or $334,000 per unit, and Abacus Capital Group’s purchase of a 235-unit community in Upland for $49 million, or $208,000 per unit.

Two major elements shared by most major sales in the fourth quarter are properties with low vacancies (5 percent or below) trading at low capitalization rates (5 percent or below), indicating investor’s appetite for lower-risk trades.

The average market cap rate remains 6 percent in the Inland Empire, compared to an average 4.7 percent cap rate in Los Angeles and an average 4.6 percent cap rate in Orange County. However, these recent apartment sales demonstrate how the Inland Empire is gaining recognition from multifamily investors for offering stable supply-demand fundamentals, and perhaps beginning to shed its reputation as a boom-and-bust market.

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