8421 Cedros Ave, Los Angeles

The LAAA Team of Marcus & Millichap is pleased to proud to announce the successful closing of Cedros Terrace Apartments, a 75 unit apartment community located in Panorama City, CA.

Property Overview

Built in 1986, this property is not subject to Los Angeles' strict Rent Stabilization Ordinance (RSO), but it is subject to California's AB-1482 which limits annual rent increases to 5% + CPI. With inflation being where it is, the buyer will soon be able to raise the rents on this building by 10%, which is the maximum rent increase (ceiling) allowed by AB-1482. The property has a great unit mix of (63) 1 Bed / 1 Bath Units and (12) 2 Bed / 1 Bath Units, with the average size of the units being 650sf and 875sf, respectively. The tenants are provided with security through an automatic and gated entry system for both the building entrance and parking garage entrance. Furthermore, the property offers its tenants a pool to enjoy and elevators to access all 4 floors above ground and the subterranean parking lot below ground. Units come with wall AC units, private balconies, open floor plans, and large closets and storage spaces.

Deal Story

We listed this property at the end of June 2022 for a repeat client of ours. This property was the longest owned building in our client's portfolio, and they decided to sell because there was a half step up in basis, allowing for a significantly reduced capital gains tax.

This listing came at a difficult time in the market after the Fed just raised interest rates for the third consecutive meeting and announced rates would continue to rise for the foreseeable future. This real time changing of the market made it difficult to price out the listing because the change in the marketplace had not yet shown itself in the recent sale comps. We advised the sellers to list the property at $18,750,000 which matched the comps, and at that price we had multiple buyers tell us they would have paid that before the rate hikes.

When advising the seller of our recommended list price, we told them it would likely sell for a significant amount less than what the comps were telling us it was worth. However, we were not overly worried about the higher than achievable list price because we still knew we would be able to generate activity and get it sold for the highest price possible. The purpose of a list price is to generate as much activity and offers from qualified buyers as possible because at the end of the day, the market will determine the...