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Gemdale USA Acquires 130-Unit The Madison at Town Center in Valencia

Suburban Buy Part of Company's Unique Strategy
January 25, 2018
A Chinese company with an eye on the Santa Clarita Valley has plucked down $45.9 million, or more than $353,000 per unit, to acquire The Madison at Town Center apartments in Valencia, CA.

Gemdale USA, a subsidiary of China’s Gemdale Corporation, just closed on the deal this week, purchasing the property from NF Capital Finance Southwest LP, an affiliate of Decron Properties in Los Angeles.

It is an ideal purchase for Gemdale USA, according to Joseph Grabiec, a senior managing director at Institutional Property Advisors (IPA), a division of Marcus & Millichap, which brokered the deal.

“The community benefits from excellent submarket fundamentals, including a 54.9%increase in population growth over the last 16 years, a vacancy rate of 1.7% in 2016 and median household income that is projected to increase by 13% to $106,321 by 2021,” Grabiec noted in a statement.

The 15-year-old property consists of three mid-rise buildings at 24555 Town Center Dr., next to Westfield Valencia Town Center in Los Angeles County.

Daniel Nagel, chief financial officer of Decron Properties, said it was a good time for the company to sell the property.

“We executed our business plan of converting a broken condo project back into a conventional apartment building,” Nagel said. “We created a lot of value by doing so. As a broken condo, the property was worth a 5.5% cap. We sold at a 4.5% cap rate.”

This acquisition is not Gemdale's first foray into the Los Angeles market. The company is also developing two projects in a joint venture with LaTerra Development: the Deluxe Hollywood, a reportedly $125-million, mixed-use project at 1350 N. Western Ave.; and Pinnacle 360, a $91 million, 212-unit development, according to Gemdale’s website.

The firm also owns South Hills, an 85-unit property at 2900 E. Virginia Ave. in West Covina.

Gemdale has a very different strategy than other foreign investors flocking to Los Angeles, according to Stephen Cheung, president of World Trade Center Los Angeles.

“They look at opportunity sites that are not getting all the media attention,” Cheung said, describing a “smart approach” that is taking advantage of the fact areas like Valencia have more land and good job creation.

Cheung has previously worked with Gemdale as the company has participated in the World Trade Center Los Angeles’ SELECT L.A. Investment Summit.

There is a huge demand for multifamily outside of downtown Los Angeles, according to Cheung.

“I think you’re going to see more foreign firms starting to look outside of the traditional areas,” Cheung said. “For a foreign firm to come here and do the analysis and find not highly publicized opportunities, we applaud that because we need the housing units.”

Gemdale USA did not return requests for comment.

Grabiec worked with IPA's Kevin Green and Greg Harris in representing the seller and procuring the buyer in the sale.

Please see CoStar COMPS #4116550 for additional information on this transaction.

Karen Jordan, Los Angeles Market Reporter  CoStar Group   
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