A luxury apartment complex in Santa Monica that attracts celebrity tenants has sold for $330 million or $2.75 million per unit – a record amount per unit for a larger rental building in the city.
Santa Monica-based Douglas Emmett Inc. purchased the 120-unit property at 1221 Ocean Ave. at Irvine Co, based in Newport Beach.
Douglass Emmett did not immediately respond to requests for comment but discussed the sale during an earnings call. Jordan Kaplan, president and CEO of Douglas Emmett, called the property “one of the most prestigious and well-located multi-family assets on the West Coast with panoramic ocean views from every unit.”
“It suited us perfectly and we were able to broker a deal that made everyone happy,” he said on the call.
The property is 98% leased. Its units average 1,500 square feet.
Kevin Crummy, the company’s chief investment officer, said on the earnings call that the company would pursue a major renovation of the project. Renovations include upgrading units and common areas.
The complex has been known to Hollywood elites over the years, with rents estimated at $15,000 per month on average.
The property, which boasts its ocean views, consists of one-, two-, and three-bedroom apartments with high-end finishes. The property features a rooftop pool with ocean views, a club, business lounge, restaurant, and fitness center. The Santa Monica Pier is three blocks south.
This led Irvine Co. to pay $44.1 million for the property in 1998. Celebrities such as Britney Spears, Larry David and Michelle Pfeiffer have taken up residence at one point or another, according to a New York Post article. .
Dean Zander, executive vice president of CBRE Group Inc., said properties in sought-after areas that are hard to replicate and have many amenities are currently in high demand.
“It’s very difficult to build this type of product and you can set your own rents when you have this type of fully serviced housing that rivals single family and even surpasses single family,” he said.
Santa Monica as a whole has seen strong rent numbers.
In the Santa Monica/Marina del Rey submarket, the average rent in the first quarter was nearly $3,686, according to CBRE data. That’s the highest average rent of any submarket, the brokerage found. It also represents an increase of more than 13% over the previous year and 3.8% over the previous quarter.
The appeal of the Santa Monica market and the ultra-luxury factor of the Ocean Avenue property likely led to its record unit price.
The previous record, according to data from CoStar Group Inc., was held by 302-312 San Vicente Blvd., sold as part of a portfolio. In 2015, United El Segundo Inc. purchased the 10-unit property for $1.9 million per unit. Other high-priced unit sales in the Santa Monica area include 301 Ocean Ave., which sold for $1.8 million per unit in 2021; 1025 Ocean Ave., which sold for $1.3 million a unit in 2019; and 901 Ocean Ave., which sold for $1.2 million a unit in 2021.
The property 1221 Ocean Ave. is also the most expensive multi-family transaction in Santa Monica and the second most expensive commercial real estate sale in Santa Monica of all time, according to data from the Commercial Real Estate Exchange Inc., or Crexi.
“Your core markets like Santa Monica are still active, still healthy,” said Eli Randel, chief strategy officer at Crexi.
Douglas Emmett, whose head office is a short walk from the acquisition of the apartment, recently announced its first quarter results.
The company owns and operates 18.2 million square feet of Class A office properties and 4,415 apartments in Los Angeles and Honolulu.
The Santa Monica acquisition, along with projects the company is developing and leasing in downtown Honolulu and Brentwood, will add approximately 1,000 units to Douglas Emmett’s portfolio.
The Brentwood project, dubbed the Landmark Los Angeles, is currently leased. It is the first new high-rise residential development west of the 405 freeway in more than 40 years, according to Douglas Emmett, and has 376 units stacked in a 34-story tower.
Your main markets like Santa Monica
are still active.
Commercial real estate exchange
Kaplan said the company will continue to pursue high-end assets like the Santa Monica acquisition in the future.
“Throughout our portfolio, both in office and residential, we’re trying – we’re targeting high-end, and that suited us perfectly. We just built something at the top; we have other things here along the coast that we’re working on, which is the upper end. All the steps we’ve taken have been to have the highest, most upscale residential and office portfolio,” Kaplan said on the earnings call.
During the first quarter, the company recorded an increase in revenue of more than 10%.
But all may not go smoothly in the future.
“Looking forward, rising interest rates and inflation will present us with both challenges and opportunities,” Kaplan said on the call. “We are ready to meet the challenges and remain ready to seize the opportunities.”
Douglas Emmett purchased the Ocean Avenue complex through a company-managed joint venture in which it holds a 55% stake.
For the acquisition, the joint venture received a $175 million interest-only term loan that matures in 2029.