2010 UCLA Case Study Reveals The Hillview = BAD INVESTMENT
Download the FULL report HERE!
Some key factors noted in the report include:
The Hollywood Hillview Apartments (“Hillview” or “the Property”), located at 6531 Hollywood Blvd. in Los Angeles, is offered by “Joe W. Kimaz” at CB Richard Ellis and consists of 54 residential and 3 retail units.
– Based on our assumptions, we find the Hillview property to be an attractive investment at a purchase price at or below $8.5 million. In addition, we recommend to hold the property for no more than 5 years due to the assumption of rising expenses over cash flows from rents.
– Risks to the projected cash flows are numerous. The low vacancy rates and slow rising rents due to rent control and economic conditions must be seriously considered when reviewing the property. We do not see any remaining upside following renovation and restoration of market rents.
– Since this offer price is substantially lower than the last recorded sale of $12.5 million, we find it unlikely it will be accepted. Hillview is an interesting, historic property, but we do not find it an attractive investment opportunity at what we believe will be an acceptable price for the seller.
The building, perhaps from its unique location, sordid history, and/or eclectic demographic has experienced a great deal of tenant involvement in the operations of the apartment property. Among other sources, our research uncovered a tenant blog website at www.hollywoodhillview.com highly critical of the on-site management. From the website, we were able to secure interviews as well as e-mail correspondence with current and former tenants of the building.
– Tenants interviewed were asked about their rents, their satisfaction with their units, and their thoughts about the management of the property. Generally tenants were not happy with the Hillview Apartment 12 current management. New management had been brought in after the property started the foreclosure process earlier in the year.
– One resident, “DM” lived in the apartment since 2008, paying $2900 monthly. He works in the entertainment industry and chose Hillview because of its location. When new management came in, some eviction notices were posted and they allegedly refused to honor some previous lease agreements for lower rents, refusing to accept rent checks.
– DM believes there are about 12 vacant units on the property (as opposed to the 4 mentioned in the offering). He identified them as units 305, 203, 400, 208, 106, 111, 200, 201, 300 and “more units on the 4th floor.” We assumed 7 vacancies for our projections. Included is Unit 102, which is known to be given free to the onsite manager.
- We visited unit #200 – which was vacated 3 months ago – and found that the unit is not cleaned nor repaired for a new lease. DM stated that the current management does not put an effort to lease out vacated units. He is generally not confident in the new management’s abilities, claiming it is the manager’s first such job after working previously in the mortgage industry.
– DM also cautioned against relying too heavily on information from the CBRE broker, claiming he only visited the property once since the offering.
– Other issues identified with the property include:
-Parking not valet as advertised, guard leaves around midnight every day.
– The night club below and street cleaning trucks create a lot of noise at night.
– During renovation, the drainage system was not property constructed and a pipe had to be placed above the bathroom sink to drain excess water from the ceiling. The picture below shows the pipe attached to the ceiling, a building code violation.