Property: The Paseos at Montclair North
Buyer: Archway Equities
Seller: 4919 Olive Street Properties
Property type: Garden style
Units: 385 units
Location: Montclair, California
Purchase price: $150 million
As investors have flocked to the Sun Belt, once-popular coastal areas have taken a backseat for many apartment hunters.
But one recent deal shows buyers will still place bets on Southern California. Beverly Hills, California-based Archway Equities acquired The Paseos at Montclair North from 4919 Olive Street Properties earlier this month for $150 million, which is the largest deal of the year in the region, according to CoStar.
With cap rates now lower in the Sun Belt than in some coastal markets, Archway saw the opportunity to secure what it perceived as attractive risk-adjusted returns in California’s Inland Empire.
There were other factors that made the deal attractive to Archway. It could assume the original loan from Freddie Mac, which had five years remaining on the term. And, the firm didn’t face the same level of competition it would have encountered a couple of years ago.
“There was less capital looking at deals,” said Archway President Sean Moghavem. “All the institutional capital was sidelined, and this just required a large check. We were lucky enough to have access to that kind of equity.”
A value-add opportunity
The 97% leased Paseos at Montclair North features studio, one-, two- and three-bedroom townhomes built around a central linear park with a concert amphitheater. Its amenities include two resort-style pool areas with spas and cabanas, a fitness facility with a children’s entertainment suite, a yoga room, a conference center and an entertainment lounge.
The apartments at the garden-style property haven’t been renovated since 2014, providing Archway with an opportunity to update interiors, create a co-working space and reimagine the amenity areas. It also wants to extend the hardwood flooring throughout some of the units.
“[The apartments] are still in good shape,” Archway Managing Director Sankeerth Pulusani said. “They just need some light touches — upgrading some of the plumbing, the cabinet pulls and adding backsplashes.”
Paseos at Montclair North, located at the Inland Empire’s eastern gateway to Los Angeles’s San Gabriel Valley, offers proximity to the area’s growing economy. In addition, it sits close to Claremont McKenna College and is within walking distance of the Montclair Transit Center, which provides bus and train service throughout the region.
For all those reasons, Pulusani doesn’t think this will be Archway’s last purchase in the area.
“We're looking aggressively across Southern California, all the way to San Diego, including the Inland Empire, Orange County and Ventura County,” he said.
Archway isn’t giving up on pursuing Sun Belt opportunities, where most of its portfolio sits. “Pricing is still very aggressive in those markets, and that's one of the reasons we came and made our first multifamily investment in California,” Pulusani said.
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