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San Diego Sees One of Its Largest Apartment Transactions in the Last Year

In a notable transaction within San Diego's real estate market, Decron Properties, a prominent Los Angeles-based investment firm, recently secured a significant acquisition, purchasing a 240-unit apartment complex in the bustling Mission Valley neighborhood for a substantial $125.5 million. This deal stands out as one of the largest in the region over the past year, a period marked by a general slowdown in such high-value real estate transactions, primarily due to rising interest rates.

The property in question, known as Margo at The Society, is a relatively new development completed in 2021, located at 201 Del Sol Drive. It was previously owned by a private investor based in San Diego. The acquisition of Margo at The Society is particularly strategic for Decron Properties. It was part of a larger financial maneuver, a 1031 exchange, where Decron sold two other apartment properties in Thousand Oaks, California. This exchange, governed by specific IRS tax codes, allows investors to defer capital gains taxes by swapping investment properties under certain conditions.

Decron Properties is actively reshaping its portfolio in California, aiming for a more youthful and geographically diverse collection of assets. This strategy also involves reducing exposure to properties affected by strict rent control regulations imposed by local or state authorities. The acquisition of Margo at The Society aligns with these objectives, as it's part of a larger mixed-use development in San Diego. This development features a variety of amenities, including retail spaces, restaurants, and entertainment options, all within walking distance. Notably, it's near the Fashion Valley Mall and several San Diego Trolley stops, enhancing its appeal.

In an ambitious growth plan, Decron Properties aims to acquire an additional 500 to 1,000 apartment units in San Diego County within the next two years. This expansion strategy is fueled by San Diego's dynamic growth, driven by the influx of tech, healthcare, and biotech industries. The location of Margo at The Society, combined with the increasing demand for high-quality multifamily living spaces, makes this acquisition a strategic move for Decron.

Mission Valley, the location of this significant real estate transaction, is a key area in San Diego. Known for its dense concentration of retail centers and robust development activities in housing, it's a hub for both residential and commercial activities. Despite a general slowdown in construction and deal volume across the San Diego region, influenced by high interest rates and other macroeconomic factors, the area maintains a relatively tight apartment vacancy rate.

The sale of Margo at The Society is not just a testament to the strength of core real estate assets in prime locations in San Diego, but also highlights the enduring appeal of strategically located properties with comprehensive amenities. As industry experts like Joshua Ohl, senior director of market analytics for CoStar Group in San Diego, suggest, while the overall investment activity may remain subdued due to broader economic concerns, prime properties in central locations continue to attract significant interest and investment.

Source: CoStar, Lou Hirsh, MMCG


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