11616 Burbank Blvd, North Hollywood

Our

11616 Burbank Blvd

North Hollywood, CA 91601

Deal Story

The LAAA Team of Marcus & Millichap is pleased to announce the successful closing of 11616 Burbank Blvd, part of a 3-property portfolio we listed for a developer on March 20th. Even though the property was priced below replacement cost and had a recorded tentative tract map, which would allow buyers to sell the units off individually as condos in the future, activity on the listing was initially slow.

There were a few challenges that resulted in a longer than usual marketing period. First, interest rates were as high as 7% for multifamily loans back in March, and our initial asking CAP rate was under 5%, meaning buyers needed to put down more than 50% to buy the deal or be willing to close with all cash. Second, due to ULA, we had to find a buyer who was looking to buy and hold the property long term. For any buyer looking to increase value and sell in 5 or 10 years - a very common "value-add" strategy - they would need to account for the 5.5% ULA Transfer Tax on the future sale. That massive closing cost on the exit eats into any underwritten profits and kills their expected IRR, making any deal of this size nearly impossible to pencil.

After two months of marketing without any strong offers, we explained the above challenges to the seller, and he agreed to cut the price by $500k. This price reduction increased our asking CAP rate to 5.06%, making the listing more palatable for many. Not too long after the reduction, we found a local, all-cash buyer who has been growing his multifamily portfolio and has a long-term approach, making him the perfect match.

We opened escrow with this buyer at $9,900,000 on September 4, 2024. The contract allowed the buyer 14 calendar days for all due diligence and 30 calendar days to close. The buyer removed contingencies on time with only a short list of small repair items, which the seller took care of, but there was no credit or price reduction request.

After contingency removal, we negotiated a change to the purchase agreement that helped both Buyer and Seller, without materially changing the deal. These negotiated changes were: 1) the buyer - instead of the seller - would pay for both brokers' real estate commissions owed, and 2) the purchase price would be reduced by the same amount as the commissions being...