Pacific Urban Nabs Koreatown Multifamily Complex for $139M

Pacific Urban Investors picked up a seven-story apartment building in Koreatown for $139 million — $50 million less than it sold for seven years ago.

The Palo Alto-based investor bought Next on Sixth, a 398-unit complex at 620 South Virgil Avenue, Bisnow and CoStar News reported. The seller was Chicago-based real estate investment trust Equity Residential.

The deal for the nine-year-old building works out to nearly $349,250 per unit, not including the 20,000-square-foot retail store. The brokers involved in the sale were not disclosed.

Equity bought the building in 2019 for $189 million, or nearly $474,900 per unit.

The deal was the second largest of the year in Los Angeles County behind Holland Partner Group’s February purchase of a 344-unit apartment building in Duarte for $141 million, or nearly $410,000 per unit.

Next on Sixth was built in 2017 by Century West Partners, a joint venture by Fifield Companies and Cypress Equity, which paid $20.8 million for the site. The firm, led by Michael Sorochinsky, then became embroiled in a $315,000 contractor’s dispute over unpaid work.

The luxury apartment complex includes a Target retail location, a fitness center, coffee bar, screening room and an indoor simulated golf range. Its studio, one- and two-bedroom units, with hardwood floors and floor-to-ceiling windows, rent for between $1,907 and $3,770 a month, according to Redfin.

The average rent in Koreatown stands at $1,970 per month, 18 percent below the average for greater Los Angeles, according to CoStar data. Vacancy is just above the regional average, at 5.9 percent.

Equity Residential said the heavily discounted Next on Sixth sale was part of its strategy to sell “older, capital-intensive assets or assets [within] heavy concentrations” to pay for stock buybacks and other priorities, Equity Residential CEO Mark Parrell said on the company’s first-quarter earnings call.

The REIT owns three other residential buildings in Koreatown, which range from 200 to 300 units.

Equity Residential and AvalonBay Communities announced in May that they would merge into a new company with a $69 billion multifamily behemoth with 180,000 units and 10,800 units in the pipeline. The merger, with a projected $52 billion equity market capitalization, is expected to close this year.

Landlords across the nation struggle with high supply, low rent growth and operating costs that outpace rental incomes, with a local exodus of mom-and-pop shops.

Pacific Urban Investors, founded in 1998 by Alfred Pace and George Marcus, has $9.3 billion in assets under management, including 23,500 apartments in 15 states, according to its website.

– Dana Bartholomew