San Diego Apartment Sale Among Region’s Largest of Past Year
Property Trades for $125.5 Million Amid Slowdown in Deal Activity
Los Angeles-based investment firm Decron Properties acquired a 240-unit apartment complex in San Diego's Mission Valley neighborhood. (Decron Properties)
By Lou Hirsh
CoStar News
December 12, 2023 | 4:23 P.M.
A $125.5 million San Diego apartment sale is among the region’s largest of the past year by total price, though big deals remain rare with elevated interest rates.
Los Angeles-based investment firm Decron Properties said it bought the 240-unit Margo at The Society, built in 2021 at 201 Del Sol Drive in San Diego’s Mission Valley neighborhood. The seller was a private San Diego investor.
Decron officials said the acquisition was part of a 1031 exchange in which Decron sold two apartment properties in Thousand Oaks, California, near Los Angeles. IRS tax codes allow investors to swap one or more investment properties for another and defer capital gains taxes under certain conditions.
A Decron statement said the company has several other dispositions scheduled to close in the next few weeks, as it looks to make its California portfolio “younger and geographically more diverse while reducing the firm’s exposure to assets that are restricted by city or statewide rent control.”
The company said Margo at The Society is part of a San Diego mixed-use development that includes four multifamily complexes surrounded by a variety of hotel, retail, restaurant, transit and entertainment options, all within walking distance of the acquired property. Those include the 1.7 million-square-foot Fashion Valley Mall and several stops of the light-rail San Diego Trolley.
Decron officials said the company is looking to acquire 500 to 1,000 more apartment units in San Diego County over the course of the next 24 months.
“Unlike most markets in California, San Diego continues to experience remarkable growth, powered by a surging presence from the tech, healthcare and biotech industries establishing a growing presence in the area,” Decron CEO David Nagel said in the statement regarding the purchase of Margo at The Society. “The property’s stellar location, combined with the ongoing need for high-quality, multifamily assets to meet the demand of a growing population, made this an ideal opportunity for Decron.”
Mission Valley, in the geographic center of San Diego, is among the region’s most trafficked neighborhoods with several freeways and public transit routes passing through it. It also has among the region’s largest concentrations of retail centers, and during the past decade has been among its most active for development of apartments and single-family housing.
Construction and deal volume across the San Diego region has slowed in the past year amid high interest rates and other macroeconic factors, though the region has a tight apartment vacancy rate of 4.6% with rent growth of 1.2% in the past year, according to CoStar data as of Dec. 11.
The region posted $1.7 billion in apartment sales during the past 12 months, down 61.1% from the prior year. The deal for Margo at The Society in Mission Valley was the region’s fourth-largest apartment sale of the past year by total price, CoStar data showed.
“I’m not sure that it speaks to a revival in the local investment market,” said Joshua Ohl, senior director of market analytics for CoStar Group in San Diego, regarding the Mission Valley sale. “There are a great many market participants who expect investment activity to remain relatively subdued next year due to elevated interest rates, slowing rent growth and broader economic concerns.”
“But it does speak to the strength of core assets in premier locations in San Diego,” Ohl said. “That property is one of the newest in Mission Valley, and it is centrally located with great amenities, including a five-minute drive to the beach.”