Multifamily Ground-Up Construction Los Angeles

[Jay Chang]

Investment Info:

Large multi-family (5+ units) commercial investment investment in Los Angeles.

Purchase price: $11,600,000
Cash invested: $4,000,000

A 31-unit ground-up apartment with 41 total bedrooms in the heart of Koreatown. It's currently in construction and is projected to generate >45% IRR on the project level.

What made you interested in investing in this type of deal?

This project is located at a very good location. We bought the project with the building permit, so the project was ready to start construction right away. We also have a prior relationship with the architect and like the design. Based on our projections, the project IRR will be about 45% after we sell in 2025.

How did you find this deal and how did you negotiate it?

We found this deal through a broker. It fell out of escrow with the previous buyer, so we bought it at a discounted price.

How did you finance this deal?

We bought this project with cash. We're using construction loan for the construction.

How did you add value to the deal?

By doing ground-up construction and optimizing the design

What was the outcome?

The project is currently under construction with our own in-house GC.

Lessons learned? Challenges?

We closed the escrow at a bad time because of the banking crisis, which significantly delayed our construction start date. It took us 5 months to get construction financing.