CBRE acted as financial advisor to a venture led by TruAmerica Multifamily, LLC, on the formation of a $522 million multifamily joint venture between Guardian Life, Allstate and a large offshore institutional investor.
The joint venture was formed to acquire a 14-property Southern California value-add multifamily portfolio from JH Real Estate Partners Inc. of Newport Beach, CA.
The 2,669-unit portfolio is spread across Los Angeles County, San Diego County, and the Inland Empire.
TruAmerica plans to invest approximately $40 million in upgrades to the assets, built in the 1980s and 1990s.
“TruAmerica is acquiring vintage buildings with amenities in need of enhancements that are located in blue and gray collar neighborhoods The strategy is to renovate these units and reposition the properties as higher-end to create a better living experience for the residents while generating returns for the investors,” said Imran Ahmed, Executive Managing Director, CBRE Capital Advisors.
“CBRE’s global footprint and integrated platform means that we are well positioned to match offshore capital sources with established domestic sponsors in large value-add deals such as this,” added Ahmed.
According to the latest CBRE research, Class B rent growth in the U.S. rose 190 basis points (bps) from 3.1 percent in Q3 2013 to 5.0 percent in Q3 2014 — a 61 percent increase year-over-year. In the Los Angeles area, Class B rent growth saw a 103 percent increase during the same period.
“The acquisition of value-add properties is not a new phenomenon and, in fact, there is currently a higher demand for this product by investors than for core assets, although these acquisitions are generally made by non-institutional capital,“ said Peter Donovan, senior managing director, Multifamily, CBRE.
“While multifamily is into its fourth year of recovery and expansion, our expectation is that there will continue to be solid rent growth in 2015. We have seen continued cap rate compression for both core and value-add properties driven in part by increased capital allocations to multifamily—coupled with expected continued strong performance over the next several years.