10 Unit Closing in Manhattan Beach
DEAL STORY
Surprisingly, this was one of the most difficult deals we’ve ever had to sell, which we would have never guessed would be the case after the initial reaction from the marketplace. This property is located in one of the most sought after cities in all of LA county, Manhattan Beach, which has an extremely high barrier to entry with less than 2 apartment buildings selling per year on average.
When we hit the market in August 2022, and throughout the entire 6 month process from list to close, we were never short of interested buyers. In fact, we were able to gather an impressive 16 total offers during the life of the listing, but even with all of that interest, it was difficult to get a buyer to the finish line. There were definitely issues with the property itself which did not help (lots of deferred maintenance, small units, low rents, etc.), but in the past few years many buyers would have accepted those issues and still bought the deal. Now that the market is trending down, buyers have become much pickier than they used to be, causing a much higher percentage of cancelled escrows than we’ve ever seen.
After 4 months of marketing, and a few failed escrows, we were able to get a buyer to open escrow fully non-contingent from day 1. We opened escrow with this buyer in mid-December 2022, and the buyer’s initial deposit became immediately nonrefundable when escrow received it. Two months later, we were able to get escrow closed. The buyer was ready to close much sooner, but Chase Bank needed those two months to get the loan assumption approved and closed.
The buyer was a local investor who lives almost walking distance to the property. They own a handful of other apartments in Manhattan Beach so they are excited to add this to their growing portfolio. It’s a perfect value-add deal for them in a great location that will pay dividends over the years to come.
The sellers motivation was to escape management responsibilities because they are getting older and are tired of self-managing their apartments. They are now doing a 1031 exchange into the ever-popular option of single tenant triple net (NNN) properties. With this exchange, they will be able to get rid of all management responsibilities while increasing their net cash flow each month.
