San Diego a Magnet for Big-Ticket Multifamily Deals
Out-of-state investors have been making big bets in San Diego County that they can get a solid return on investment on some of the priciest multifamily trades in the U.S. in a market where rents have been flat this year.
Since 2023, San Diego County has had a hefty share of lucrative apartment deals, accounting for 10% of all U.S. multifamily transactions of more than $150M, according to CoStar data.
In the latest big-ticket deal, Chicago-based Mesirow Financial acquired a 410-unit apartment complex in Vista known as the Preserve at Melrose for $185M, which is about $451K per unit. The campus has increased in value by about 38% since its acquisition in 2017 by San Diego-based MG Properties for $134M.
Built in 2015, the Preserve is located at 1401 Melrose Drive, across the street from the Melrose Drive train station and in proximity to Route 78, which provides residents with direct access to major employment hubs including Oceanside, Carlsbad, San Marcos and Escondido.
“The Preserve’s expansive amenity set, transit-oriented location and proximity to key employment centers make it one of north county San Diego’s most attractive multifamily properties,” Mesirow CEO Alasdair Cripps said, in a statement.
Mesirow’s deal for the Preserve was the second-largest multifamily trade in San Diego County this year. In October, private equity giant Blackstone paid $210M to acquire The Avalyn at Millenia in Chula Vista.
New York-based Blackstone’s deal for the Chula Vista campus made it San Diego’s second-largest apartment landlord, with 7,195 units, behind only San Diego-based R&V Management, which has more than 11,000 units.
The average rent in San Diego County in Q3 2024 was about $2,500 a month, essentially flat in a year-over-year comparison with Q3 2023, after an unprecedented surge of rent growth during the pandemic.
Investment firms with deep pockets view this as an opportune time to snatch prime big-ticket properties, confident that the pendulum will swing in the other direction and guarantee that these assets will increase in value.
“They are getting in at a good time for the market,” Joshua Ohl, CoStar director of market analytics, told the San Diego Union-Tribune. “There’s a little less rent growth, a little less demand. But the long-term demand drivers for housing suggest the mid- and long-term path for San Diego should be pretty sound.”
Walker & Dunlop, which represented the buyer and the seller in the Preserve at Melrose transaction, described the property as a vintage, suburban lower-density location with strong prospects for growth and high barriers to entry in terms of limited new supply, Multifamily Dive reported.
The latest big-ticket deals ensure that the total sales volume of $2.5B for multifamily transactions in San Diego County in 2024 will exceed the total of $2.2B in 2023. The transaction downturn in 2023 followed a boom in multifamily deals that totaled $3.9B in 2002 and $5.7B in 2021, the highest total ever recorded in the county.
Source: GlobeSt/ALM