The rents you imagine for this "ultra luxury" property, located in an economically depressed area of Korea Town, are far too high. Instead of "3k per month or more", $700 per month is probably a more accurate maximum.
Marcus & Millichap records the sale of the Mark Wilshire Tower at 691 South Irolo Street, Los Angeles at $21.725MM. There are 236 units or $92k per unit.
However, Don Sterling is operating in a more economically rational portion of the market. Large apartment buildings are priced to provide a 5% to 6% return on investment. Small apartment buildings and duplexes have been bid up to irrational prices levels where rents provide little or no current return on the investment. Purchased with a loan, these properties provide losses.
Donald T Sterling made his money buying apartment buildings in the 1960s and riding the inflation wave up until 1990.
He is obviously making a current bet on the future of the depressed Mid-Wishire area.
findarticles.com
Donald T. Sterling, married the boss's daughter, Shelly Stein, in 1957. By the early '60s, he was a lawyer specializing in personal-injury cases and plowing his profits into Beverly Hills apartment buildings. Few considered that a good investment at the time. But Donald T. had a vision.
"For most of the '60s, he had to subsidize the mortgages on those buildings because they were half empty," Selsman recalls. "But he was able to foresee hordes of people moving to California and needing a place to live. And obviously, his guess was right."
As the market warmed up, Sterling drew longer lines of credit. When it cooled, he bought more buildings. A lone wolf who cut his own deals, he rarely pursued options but waited for distressed properties to come to him. He specialized in 20- to 40-block apartment houses between Beverly Hills and the beach, prime areas that were already developed and where rental property was limited. By the mid-'80s, he'd become the single biggest apartment owner in Beverly Hills. Today, he's among the largest in Santa Monica as well.
As landlords go, Donald T. fits the mold; he's livable if not lovable. "When it's necessary to make interior improvements for health and safety, he'll do that. But I don't know anyone who hasn't had to fight to get back their security deposit." |
