Fourteen income properties sold during this period, including a 23-unit building that closed for over $7.5 million, compared to six sales during the 1st Quarter 2009, with a top sale price of $4.5 million, which was for a development opportunity.
The rise of multi-family sales activity in Santa Monica could be explained as a reaction to the rout in the financial markets during the 1st Quarter of 2009. As investors suffered heavy losses, they may have turned to multifamily investment as an alternative to equities.
The large number of apartment building sales gives a good indication of what kind of returns investors are expecting in this area.

The big sale of the quarter was 811 6th Street, a 23-unit building with 28,644 sq ft of living area on a 14,998 lot, which sold for $7,550,000. The 1972 building is located just off Montana Avenue, a short distance from the beach, and has some updated units. Unit mix consists of 11 x 1 bedroom, 1 bath, 6 x 2 bedroom, 2 bath, and 6 x 3 bedroom, 2 bath. Originally listed at $8,000,000, the building closed 6% under the asking price in 148 days.
Gross annual rent is $463,000, giving a GRM (gross rent multiplier) of 16.3.

Gross annual rent is $242,018, yielding a GRM of 12.5.
811 and 1901 6th Street are on the same street, but have much different GRMs – what can this difference be attributed to?
First, location. 811 6th Street is in one of the best Santa Monica neighborhoods; 1901 6th Street, less so. Second, market rents. 811 6th Street is capturing market rents; 1901 6th Street has below-market rents. Third, unit size. 811 6th Street unit size averages 1,245 sq ft per unit; 1901 6th Street averages 900 sq ft per unit.
Two other buildings point to the consistency of a GRM of approximately 16 for Santa Monica.


It’s remarkable how consistent the GRMs are for 2805 3rd Street and 1524 7th Street. Although this is a crude tool in evaluating income property, it’s quick, easy, and seems to provide a reliable means of evaluating income properties that are consistent in neighborhood quality, unit mix, condition, and age of construction.
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