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CoStar Market Insights: 4-Star Apartments Gaining Investor Favor

TruAmerica's $35.1 Million Buy of Metro 102 Highlights the Trend
October 30, 2017
People priced out of the Los Angeles, Orange County and San Diego markets have been helping to drive population growth in the Inland Empire as they search for more affordable housing.

The Inland Empire is generally treated as one area, grouping Riverside and San Bernardino counties, though there are noteworthy differences between them, with Riverside County historically being more expensive.

Mid-tier, 2- Star and 3-Star multifamily properties make up the bulk of inventory in the market. However, the past several years have seen the delivery of newer 4 Star properties that have proved popular targets for investors.

While the bulk of properties trading in the market are 2 Star, a number of notable 4 Star properties sold in the last few years, mostly in San Bernardino County. The high prices of these sales have widened the pricing gap that historically separates the two counties.

For 4 Star deals that have traded since January 2015, the Inland Empire’s overall median sale price is approximately $195,600/unit. When broken down by county however, the median sale price of 4 Star properties in San Bernardino County was around $247,800/unit, about 36% higher than the median of about $182,600/unit in Riverside County.

One of the most notable 4 Star transactions was in September 2017 when a joint venture between TruAmerica Multifamily, Allstate Investments and Guardian Life Insurance sold the Metro 102 apartments for $35.1 million ($219,000/unit) to A & J Global Investment. The 160-unit community, built in 2008, is located in Ontario in San Bernardino County, and was approximately 98% occupied at the time of sale and traded at a reported cap rate of 4.12%.

CoStar Market Insights is a new feature providing a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 206 metro areas, with a granular understanding of the projects, players and economic trends that move these markets. Learn how CoStar Market Analytics can add to your market knowledge, helping to minimize risk and maximize returns.

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