Southern California investors continue to buy in on large apartment complexes in the Central Valley
VISALIA – Local residents have had epic battles at public meetings to stifle the development of apartment and rental homes in the last few years but they may not be able to hold them off much longer.
The price of multifamily housing has dramatically increased since new construction slowed to a crawl before the pandemic, which snuffed out what was left. High-end rental complexes have caught the attention of Southern California investors looking to turn big profits on a tight housing market. On April 19, The Mogharebi Group (TMG) brokered the sale of ReNew, a 128-unit development in Visalia from FPA Multifamily to a Santa Barbara-based private investment firm for $30.65 million.
There are 1,055 multifamily properties of 50 units or more, a total of 123,000 rental units, scattered among 70 cities between Bakersfield and Sacramento, according to commercial real estate database Yardi Matrix.
“The Central Valley has long been thought of as strictly an agricultural area, but that is only one part of its economic story,” said TMG Executive Vice President Otto Ozen. “Government and healthcare are large and growing economic drivers, which combined with the region’s lower cost of living has resulted in an in-migration of people from higher-cost coastal cities. Yet new construction has not kept up with demand. The strong regional economy and steady population growth combined with the high barriers to entry, has not been lost on investors,” Ozen added.
Built in 2008, ReNew Visalia is a two-story, 128-unit apartment community located at 3315 Lovers Lane. The property comprises 16 residential buildings totaling 119,608 rentable square feet. The complex is situated on a 6.76-acre site, for a comfortable density of 18.9 units per acre. The apartment homes feature spacious one-, two-, and three-bedroom floor plans with an average size of 934 square feet, respectively. The property boasts a swimming pool, recreation room with wet-bar, laundry facilities, clubhouse, spa, and reserved parking.
“Not only did we help the seller find ReNew a few years ago, but after 24 months, we were able to sell it for 50% higher price, which is indicative of growing investor interest for properties in the Central Valley,” Ozen concluded.
TMG also brokered the sale of a 240-unit apartment complex in Bakersfield for $22 million, a 109-unit complex in Tulare for $15.66 million and a 237-unit complex in Visalia for $42.5 million in 2020 alone.
In the last two years, 445 multifamily properties in the Central Valley have traded hands, 10% of those transactions brokered by TMG. Over that span, the average sales price per unit increased 21% from $111,275 to $135,444. The greatest increases could be found in 4- and 5-star properties which increased 28% from $228,465 to $292,412.
And there are plenty more in the permitting pipeline. Apartment permits in Visalia were up 30% in the first two months of 2022 alone. Permits in Tulare are estimated to skyrocket as they are often priced lower than similar sized homes in Visalia, and the same can be said of apartment complexes as well.
Since its founding in 2015, TMG, one of the leading multifamily brokers in the State of California, according to real estate research and advisory firm Green Street, has been involved in the sale of more than 6,500 units in the Central Valley with sales exceeding $800 million.