Redlands apartment trade prices renovation over rent roll

The CBRE-brokered sale of The Kimberly Apartments in Redlands closed at $12.3 million, a price built on the buyer's ability to turn a 1964 rent roll into something bigger. The 54-unit property at 475 E. Cypress Avenue traded at $228,704 a door and $144 a foot, and CBRE's announcement quotes a 5.71% current cap rate against a 7.84% pro forma. Eric Chen and Blake Torgerson of CBRE exclusively represented the buyer; the announcement does not name the buyer.

Built in 1964, the building spans 86,040 square feet on more than 2.5 acres, with six one-bedrooms, 42 two-bedrooms and six three-bedrooms averaging nearly 1,500 square feet. It carries a pool, a fitness center, laundry facilities, a spa and ample parking, and sits across from an Albertsons, a Chase Bank and a Panera, minutes from downtown Redlands and within walking distance of Redlands High School; Sirott Investments is listed as the owner in CBRE's announcement.

That amenity list is the kind of detail value-add buyers use to sell the spread between current and pro forma numbers, and the spread here is 213 basis points. A 1964 building does not reach that figure on its current rent roll alone; the buyer paid for that capital before spending it, at $228,704 a door, making the acquisition a renovation wager as much as a real estate purchase. The bet is that the Redlands location and those house-sized units can carry the rent growth the pro forma assumes.

The Redlands trade is another marker in the multifamily pricing reset, and it fits the two-tier market this publication has argued for: stabilized, renovated cash flow commands a premium, while vintage assets clear when a buyer can underwrite the work. A Brooklyn loft building trading 24% below its 2016 price showed the other side of that divide. The Redlands buyer priced the upside before the renovation; the first upgraded unit's lease will say whether it was real.