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HEARD ON THE BEAT / REAL ESTATE

With Apartment Rents Surging, Investors Move in

June 04, 1997|Melinda Fulmer

Apartment investors and developers are pouring into Orange County now that the overall vacancy rate is down to 3% and rents are increasing at a rapid clip.

Oasis Residential Inc., a real estate investment trust from Henderson, Nev., is the latest to break into Southern California, with the purchase of 138-unit Sea Palms near Newport Boulevard in Costa Mesa for $10.95 million. To bring the 7-year-old, 95% occupied complex up to top quality or Class A condition, Oasis will spend an additional $600,000. The REIT also has agreed to purchase an apartment site in Mission Viejo on which it will build a 380-unit complex called Oasis Viejo.

Big investors like Oasis started entering the market a year and a half ago when Wall Street noticed Irvine Apartment Communities garnering Mercedes-caliber rents for its new developments, said Joe Leon, vice president with CB Commercial Real Estate Group Inc.

With more players competing for Orange County properties, multiple offers have become commonplace on the few larger, newer apartment buildings. And this competition is driving prices up significantly.

"Prices have increased 10% to 20% in the last 12 months," Leon said. "There's a lot of money chasing a little product." In some cases, he said, buyers are even getting more than their asking price.

Preferred locations for these apartment investors are along the coast like Sea Palms or in yuppie southern Orange County where buildings are newer and rents are higher. These new REIT landlords are starting to have a big impact on rents. In 1994, the average one-bedroom apartment in southern Orange County cost $725, in December it was $801, and Leon expects this year it will jump another 10%.

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Melinda Fulmer covers real estate for The Times. She can be reached at (714) 966-7832 and at melinda.fulmer@latimes.com

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