Downey Apartment Complex Sells for $37.6 Million

A 112-unit apartment building in Downey, California, known as The Square, has been sold for $37.6 million. The seller, real estate private equity firm The Bascom Group, completed the transaction with a private buyer, marking a significant investment in the local housing market.

The deal, facilitated by the brokerage firm Northmarq, also included a $25.6 million financing package for the new owner. This sale highlights continued investor confidence in the Los Angeles County real estate market, particularly for well-maintained properties with strong occupancy.

Downey Apartment Complex Changes Hands

The Bascom Group, a private equity firm based in Irvine, has sold The Square, a multifamily property located at 12535 Brookshire Avenue in Downey. The final sale price was confirmed at $37.6 million. The buyer, identified only as a private investor, acquired the 112-unit complex in a transaction managed by Northmarq.

The property maintains a high occupancy rate of 94%, indicating strong demand for rental housing in the area. According to market data, The Square is one of only nine apartment buildings in Downey that contain more than 100 units, making it a notable asset in the local market.

Northmarq's Dual Role in the Transaction

The commercial real estate firm Northmarq played a crucial part in the deal's success. Beyond representing the seller and securing the buyer, the firm's team also arranged the financing necessary for the acquisition. This comprehensive involvement ensured a smooth process from listing to closing.

Mike Smith, a managing director at Northmarq's Beverly Hills office, led the investment sales team that facilitated the transaction. His team's work highlights the complex nature of high-value real estate deals, which often require expertise in both sales and capital markets.

Strategic Financing Secured for New Owner

A key component of the sale was the $25.6 million financing package Northmarq secured for the buyer. The loan, provided by Freddie Mac, features favorable terms that support the new owner's long-term investment strategy. The financing comes with a seven-year term and a fixed interest rate of 5.05%.

Notably, the loan includes a four-year interest-only period. This structure is designed to improve cash flow in the initial years of ownership, allowing the new investor to allocate capital toward planned property improvements without immediate pressure from principal payments.

"The private buyer is viewing this as a long-term hold and was able to secure a low-rate loan with enough (interest only) that allows them to generate enough cash from operations to fund their capital improvement plans for the property," said Mike Smith of Northmarq.

This financial arrangement demonstrates a strategic approach by the buyer, who plans to hold the asset for an extended period and invest in its upkeep and enhancement.

A Decade of Value-Add Investment

The Bascom Group's sale of The Square for $37.6 million represents a significant return on their investment. The firm originally purchased the property in 2015 for $25.5 million. Over the past decade, the company executed a strategic renovation plan to increase the property's value and appeal to residents.

According to reports, The Bascom Group successfully renovated 71% of the building's 112 units. A key upgrade was the addition of in-unit washers and dryers, a highly sought-after amenity in the rental market. These improvements contributed to the property's strong occupancy and justified higher rental rates, ultimately leading to the profitable sale.

The new owner plans to continue this improvement strategy. Initial plans focus on enhancing the building's exterior and addressing deferred maintenance. According to Smith, the buyer will also evaluate the financial viability of renovating the remaining un-renovated units as market conditions permit.

Los Angeles County Market Outlook

This transaction is seen as a positive indicator for the Los Angeles County real estate market. Smith noted that the deal reflects a trend of well-capitalized buyers actively seeking opportunities despite broader market uncertainties. These investors often do not rely on third-party capital, giving them a competitive edge.

"Well capitalized buyers are taking advantage of the current market and beating out competition that may be on the sideline," Smith explained. This suggests that investors with strong financial backing are confident in the long-term stability of the region's housing market.

Downey's Housing Demand

The demand for housing in Downey remains robust, a factor that likely contributed to the buyer's interest in The Square. Smith stated, "The Square is a great asset that fills a much-needed demand for housing in Downey."

A unique feature of the property is its high concentration of larger apartments. The complex includes 43 three-bedroom units, which are less common in new developments and appeal to families and individuals needing more space. This unit mix gives The Square a competitive advantage in the local rental landscape.

Smith also pointed to the limited pipeline for new development in the area as a key driver for future rent growth. "The investment fundamentals in Los Angeles County remain strong and buyers (are) eager to buy in markets with a very limited development pipeline with the expectation of strong future rent growth," he concluded. This dynamic makes existing, well-located properties like The Square particularly attractive for long-term investors.