Faulkner Capital Scoops up New Luxury Multifamily Property Below Build-To-Cost
The Baxter, a newly constructed, 86-unit mid-rise luxury apartment community in Hollywood Hills, has been sold to Faulkner Capital Partners in a transaction facilitated by Colliers.
This sale follows a trend that's picking up today, benefiting buyers: new properties are trading below the cost to construct. Plus, add that to the fact that The Baxter transaction was coupled with limited new construction in the area, according to Kitty Wallace, vice chair at Colliers, told GlobeSt.com.
"Historically, it takes years to entitle and build, and new assets typically trade at or above replacement cost," she explained.
"Today, we're in a rare window where high-quality, newly delivered properties are trading below the cost to build, creating a meaningful entry point."
Completed in 2024, the seven-story property at 1818 N. Cherokee Avenue at the base of the Hill comprises approximately 85,775 square feet and is situated above two levels of subterranean parking. The property traded at a price exceeding $400 per square foot.
The asset was designed and constructed to institutional standards, with a hotel-like amenity profile and modern construction quality that is increasingly difficult to replicate in today's cost environment.
"What ultimately set The Baxter apart was its ability to support sustained rent growth through quality and relevance," said Wallace, who led the deal.
At the same time, the underlying housing fundamentals in Los Angeles have shifted. For years, renting has been relatively unaffordable, with residents often spending 45% or more of their income on rent. However, income gains have recently outpaced rent growth, improving affordability closer to the 35% threshold.
In contrast, the cost of homeownership has risen significantly, with buyers now spending 75% or more of their income on mortgage payments, versus roughly 65% historically.
This dynamic is drawing both sophisticated capital and a new wave of investors into the market. This buyer is a compelling example of that trend, according to Wallace.
"New construction in this part of Hollywood sets a higher bar for finishes, layouts, and resident experience, allowing the asset to remain competitive as renter expectations evolve," she said.
"That relevance over time, combined with efficient operations and walkability to employment and lifestyle hubs, provides investors with confidence in steady rent appreciation well beyond initial stabilization."
Source: GlobeSt/ALM