South Court Apartments
Costa Mesa, CA
Total Units
24
Hold Period
37 Months
Acquisition Price
$3,252,000
Sale Price
$5,470,128
Annual Rate of Return
37.97%
Equity Multiple
3.28x
Property Photos
Investment Overview: South Court Apartments, Costa Mesa, CA
Acquisition & Strategy
South Court Apartments, a 24-unit multifamily property in Costa Mesa, CA, was acquired off-market on May 15, 2018, from a distressed seller. The purchase was structured with owner financing, securing favorable terms. At the time, the property was subject to low-income tax financing restrictions, which had long suppressed rental income despite its prime location and strong infrastructure.
Recognizing the upside potential, we acquired the asset just before the affordability restrictions expired, allowing for an immediate transition to market rents. Unlike many value-add deals that require heavy renovations, this investment required minimal CapEx while delivering strong upside.
Value Creation & Market Dynamics
South Court Apartments already had washer and dryer infrastructure and central air conditioning, rare features for properties of this vintage. However, due to rental restrictions, the property was significantly undervalued. Once these restrictions expired, we quickly repositioned the property at market rates, significantly increasing cash flow without major renovations.
Additionally, post-COVID migration trends played a crucial role in strengthening demand. A significant influx of Los Angeles residents relocating to Orange County drove up rental rates, further maximizing the property’s income potential. This strategic positioning allowed us to capture rapid rent appreciation and generate superior returns.
Market Analysis
Costa Mesa benefits from strong job growth, a diverse workforce, and a business-friendly climate, making it one of the most attractive rental markets in Orange County. The city’s proximity to major employment centers and South Coast Plaza, one of the highest-grossing shopping centers in the country, further enhances its desirability. With high demand for rental housing and limited new supply, Costa Mesa remains a rare and resilient submarket for multifamily investments.
Financial Performance & Exit
With a well-executed strategy and ideal market conditions, South Court Apartments delivered outstanding investor returns over a 37-month hold period. The property was sold on June 3, 2021, for $5,470,128, generating significant value with minimal capital investment.
Key Investment Metrics
- Acquisition Price: $3,252,000
- Sale Price: $5,470,128
- Value Created: $2,218,128
- Annualized Return (ARR): 37.97%
- Equity Multiple: 3.28x
Conclusion
South Court Apartments is a prime example of leveraging market timing, regulatory shifts, and operational efficiency to unlock value. By acquiring the property at the right time, transitioning it to market rents with minimal CapEx, and capitalizing on favorable migration trends, we maximized investor returns with minimal risk. This deal highlights the power of strategic acquisitions and market-driven repositioning in generating superior risk-adjusted returns.