Barely a year after it opened, Greystar’s Franklin 299 apartments in Redwood City have sold for a healthy price tag to one of the country’s largest financial services firms.
TIAA Global Asset Management just paid $213 million, or roughly $700,000 per unit, for the 305-unit project at 299 Franklin St., according to public records. That appears to be a record in Redwood City, reflecting continued strong investor demand for multifamily rental assets even as market observers question how long the economy will hold out.
The luxury rental complex is one in a flurry of downtown Redwood City projects that has helped transform the formerly sleepy Peninsula city into an urban hub. The city’s downtown precise plan allowed up to 2,500 new units to be built in the district, and those are mostly spoken for, though not all built.
In emailed responses to questions, Mark Washington, director of western acquisitions for TIAA, said that the pickup fits the investor’s long-term strategy. “It offers a desirable location, high quality construction and amenities, and the market is in high demand with professional tenants in Redwood City, Palo Alto, Menlo Park, San Francisco and Silicon Valley,” he wrote.
The project was marketed by an Institutional Property Advisors team of Sal Saglimbeni, Phil Saglimbeni and Stan Jones.
Apartment rents have seen a remarkable run-up in the Bay Area over the last seven years. At the end of the first quarter, average one-bedroom asking rents in Redwood City were $2,781, according to Real Answers. (The number reflects rents at large apartment communities.) But some are wondering if rents have peaked, with anecdotes of increased renter concessions — a possible sign of market weakness — on the rise.
But bullish investors believe demographic trends will increase the value of multifamily assets over the long haul, regardless of market cycle ups and downs.
“We are selective about acquisitions but with more than 110 million people living in rental housing in the US — approximately a third of the population — we continue to believe in the strong fundamentals underpinning multifamily investments,” Washington wrote. “Household formations are on the rise, particularly with millennials who are entering their prime renting years.”
An industry source outside the deal pegged the initial cap rate — a measure of yield — at just under 4 percent. Market rents in the building were about $4.73 per square foot, with the average unit about 843 square feet.
The building includ es a roof deck with “barbecue lounge,” bike storage and repair room, pool and spa, fitness center and WiFi space. But the biggest amenity might be the location, close to bars, restaurants and transit. “The property is desirable location for commuters,” Washington said. “It’s walking distance to all of the downtown Redwood City retail amenities and a couple of blocks from the Redwood City Caltrain Station.”
Greystar has been an active apartment developer lately, and is fond of Redwood City. The company is currently in the early planning stages for an eight-unit, 346-unit project at 1409 El Camino Real.
This is the biggest luxury apartment sale since Deutsche Asset & Wealth Management and Maximus Real Estate Investors paid an out-of-San Francisco Bay Area record of $828,000 per unit for Sharon Park Green in Menlo Park.