The Griffith Apartments present a very unique opportunity for a new investor. Since its construction in 1987, the property has been held as affordable housing for the community. The 30-year restriction has recently burned off, allowing the existing covenants with the city and state to now be removed from the property. A new owner will be allowed to reposition the asset and increase to market rental rates, which are substantially higher than the current rents at the property today. The floor plans at the building are all two bedroom, one bathroom units with a current average rent of only $1,102 per month. Based on how the market is performing today, we are projecting market rents of $2,100 per month for these unit types that average over 900 square feet each. This equates to an upside potential of nearly 91% from today’s levels. A new owner will need to implement a strategic renovation and repositioning program for the property, which will require an additional investment, but there is clearly a path to upside and a dramatic increase to the net operating income and ultimately property value. The affordable restrictions will wear off at the close of escrow and these deals will become market, non-rent-controlled assets. The State of California requires tenants get 12 months’ notice that their residence will no longer be affordable and will become market. The owner posted notices to tenants in May of this year, meaning a buyer can execute their business plan of remodeling all units and repositioning the assets in May of 2019.
