In the largest multifamily transaction in Southern California to close this year, real estate investment firm Archway Equities (Archway) has acquired from 4914 Olive Street Properties LLC, The Paseos at Montclair North, a 385-unit multifamily community in the Inland Empire community of Montclair, Calif. for $150 million.
For Archway, which has more than $1 billion in commercial real estate assets under management, including 5,000 apartment units across the Sunbelt, The Paseos represents the firm’s first multifamily investment in California.
“Somewhere along the way, cap rates between the Sunbelt and coastal markets inverted and select pockets of Southern California should now provide more attractive risk-adjusted returns in the current environment,” said Archway President Sean Moghavem. “We are still very bullish long term on multifamily in the Sunbelt because of its favorable business climate, low cost of living and continued job and population growth. Having said that, we continue to see aggressive pricing that’s not factoring in short-term headwinds such as supply, rising property taxes and insurance costs. We’ll always look to grow our Sunbelt portfolio but are also actively seeking opportunities in the Inland Empire, Orange County and San Diego.
“With a lot of institutional capital sitting on the sidelines, there are very few firms that would be able to close on a transaction of this size,” added Archway Managing Director Sankeerth Pulusani. “Consequently, we believe that we were able to acquire the best asset in this submarket,” he said.
Paseos at Montclair North is located at 4914 Olive Street at the Inland Empire’s eastern gateway to Los Angeles’s San Gabriel Valley. The Paseos’ location offers immediate proximity to the rapidly growing Inland Empire economy and prominent Los Angeles employment hubs, according to JLL who marketed the property for sale on behalf of the seller.
Nearby to Interstates 10 and 210, residents are a 60-minute commute to more than 6.5 million jobs. In addition, the property is within walking distance of the Montclair Transitcenter, an intermodal transit center providing bus and train service throughout the region. It also will be the future home of the eastern terminus to the Los Angeles Metro Rail “L” Line serving downtown Los Angeles when completed in 2028. The property also neighbors Claremont McKenna College, ranked as one of the top 10 liberal arts universities in the country, according to U.S. News & World Report.
Encompassing nearly two full city blocks, the garden style community features a unit-mix of studio, one-, two- and three-bedroom Santa Barbara inspired townhomes built around a central linear park with concert amphitheater. The property boasts a best-in-class amenity set including two resort-style pool areas with spas and cabanas, fitness facility with children’s entertainment suite, yoga room, conference center, and entertainment lounge. The property was 97 percent leased at closing.
While well maintained, 100 percent of the units have not been significantly updated since the property was developed in 2014. Archway plans to add designer touches to the unit interiors, create a co-working space and reimagine the amenity areas in what Pulusani describes as a “modest renovation.”
According to CoStar data, The Paseos is the largest of 546 multifamily transactions to close this year in Southern California, a market area that includes Los Angeles, Orange, Riverside, Ventura and San Bernardino Counties. It is only the second transaction to trade at more than $100 million.
Archway assumed the accretive in place Agency loan with five years remaining on the term.