A U.S. subsidiary of Beijing-based BCEGI International Company shelled out $18.8 million for a three-acre site at 6041 Variel Avenue in Warner Center, property records show. The land is entitled for a 274-unit, 490,755-square-foot multifamily development that includes 11 live/work units, according to the offering memorandum.
BCEGI paid the seller, Encino-based Selective Real Estate Investments, roughly $6.3 million an acre — and $68,600 per developable unit — for the site. Shanghai Commercial Bank provided a $9.4 million loan for BCEGI’s acquisition, according to records.
The site is home to two vacant industrial buildings, which total roughly 84,300 square feet. It is additionally entitled for a 66,5000-square-foot office building, but Laurie Lustig-Bower of CBRE, who brokered the deal along with colleague Kamran Paydar, said the interest from BCEGI was tied to the residential entitlements.
“They could decide to build the office tower in the future,” she said.
Lustig-Bower said the $68,600 per developable unit deal was roughly in line with other transactions in the San Fernando Valley. The average price per developable unit ranges from $50,000 to $100,000, and can reach as high as $200,000 in the most desirable areas such as Studio City, Encino and Sherman Oaks, she said.
Lustig-Bower recently brokered a deal for a nearby site at 6263 Topanga Canyon Boulevard that was zoned for 300 units by way of the Warner Specific Plan, but not fully entitled. That site sold for roughly $92,700 per developable unit, according to CoStar data. It was pricier because it is positioned across from Westfield Village, “and the market went crazy over there,” Lustig-Bower said.
The Variel site, while not as close, is still in walking distance to three Westfield properties, including the Promenade, which is undergoing a major retail renovation.
This is not BCEGI’s first purchase in suburban Los Angeles, where Chinese buyers do not frequently go, favoring city centers. In fact, the subsidiary has an office in Woodland Hills. It was recently a partner on the purchase of 7401-7419 La Tijera in Westchester, a site that was entitled for 140 multifamily units. That deal also brokered by Lustig-Bower.
Vacancy rates for multifamily properties in L.A. slightly increased from the start of the year through the third quarter as large amounts of new supply continue to be delivered, outpacing demand growth, according to CBRE’s latest research report. Completions for multifamily units totaled 6,001 through the third quarter and are expected to reach 8,793 units by the end of 2016 — the largest amount of completions in a single year over the past 20 years.
Meanwhile, over the past five years, rental rates in Los Angeles have risen from $1,794 to $2,241 per unit, a 25 percent increase.