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CASE STUDY: KIMBERLY APARTMENTS

Deep market knowledge and end-to-end execution deliver certainty of performance and drive big returns for both buyer and seller

Key Information

Service Lines Engagement

  • Capital Markets, Debt & Structured Finance
  • Valuation & Advisory Services

Location

Baldwin Park, CA

Topline

A 26-unit boutique garden-style apartment community located in the high-demand East San Gabriel Valley rental market in Baldwin Park, California.

The Opportunity


Kimberly Apartments was first purchased by the seller, a local multifamily, value-add investor based in Orange County, Calif., as a value-add opportunity that needed heavy renovation. After successfully implementing their reposition strategy, the property was commanding the highest rental rates in the submarket and ownership had increased rental income by nearly 35%. With healthy property fundamentals and strong submarket conditions, the seller wanted to carry through on their initial business strategy and trade the asset.

The buyer, a private real estate investment firm from San Gabriel Valley, Calif., recognized Kimberly Apartments as an immediate income-producing asset that also offered the possibility for additional increased cash-flow through operational efficiencies. The property also fit well with their long-term investment strategy. However, faced with a rising interest rate environment, the buyer needed to act quickly to ensure the best lending terms. The buyer would also have to convince lenders that the property’s recent operating history based on higher rental rates/lower operating costs was sustainable long-term and a good basis for underwriting. Additionally, due to a complex ownership structure that included an overseas partner, the buyer needed a firm that was sophisticated enough to navigate the additional paperwork required, while also paying close attention to international time zones and post regulations .

 

The Solution


The seller enlisted CBRE’s Capital Markets team in Ontario, California to market the property. Based on their experience and deep market knowledge, they helped the seller arrive at a competitive list price that would still give them their desired ROI. Leveraging their strong local-market, private investment relationships, they were able to quickly identify an appropriate buyer.

Once the buyer had been selected, the CBRE Freddie Mac Small Balance Loans (SBL) team in Newport Beach was able to quickly coordinate the necessary third party reports through CBRE’s Valuation team and underwrite the transaction with the short financing contingency required in the purchase contract according to the buyer’s tight timeline. Additionally, during the underwriting process, CBRE built a case to prove the property’s new higher rental rates and lower operating costs would be maintained long-term. Using CBRE Research and market insights into comparable assets in nearby similar submarkets, CBRE’s experts proved Kimberly Apartment’s trajectory of stable and increasing cash-flow.

 

The Outcome


Ultimately, CBRE arranged a $4.382 million, 4.29% hybrid-rate, 20-year loan with 30 year amortization for the buyer with 70% LTV ensuring they could achieve their required cash-on-cash returns. Additionally, the SBL team was able to lock in an interest rate at application with no rate lock fee until the commitment was delivered to the buyer. The secured rate was 45 basis points below the market average when the transaction ultimately closed.

Additionally, the seller benefited from achieving a record price per unit and price per square foot in the City of Baldwin Park and a 31% return on their original investment. Seamless execution by CBRE’s Investment Sales, Debt & Structured Finance and Valuation teams ensured that all deadlines were met and all parties had full transparency throughout the process providing them with certainty of execution, and ultimately an excellent outcome.

Advantage In All Sizes

Explore our Hub for Small- to Mid-Cap Multifamily Transactions

Contact Us

Eric-Chen
Eric Chen
Senior Vice President
Capital Markets, Multifamily
Lic. 01489184
+1 909 418 2071
+1 626 757 5717
+1 909 498 0320
Ryan Wilkinson, Senior Vice President
Ryan Wilkinson
Senior Vice President
Debt & Structured Finance
Lic. 01367594
+1 949 5092118
+1 949 725 8545