Township Apartments: At $625,000 per unit, Redwood City apartment complex sale may set record
Fetching what could be a record price for an apartment complex in Silicon Valley, Sares Regis Group of Northern California has sold its brand-new luxury Township complex in Redwood City to TIAA-CREF, the huge pension manager.
The New York-based fund paid about $82 million, or roughly $625,000 per unit, for the 132-unit complex at 333 Main St., according to industry sources familiar with the transaction. The sale is potentially a high-water mark for the Peninsula apartment sales market, several brokers said.
Sares Regis, which owned the property with joint venture partner J.P. Morgan Asset Management, would not comment on the pricing, which was confirmed by two people outside the deal. But Chief Investment Officer Drew Hudaceksaid the strong interest in the property reflects a couple of factors including the area’s continued strong rental outlook and relatively few Class A apartment projects for sale.
“The business plan was always to create the asset, stabilize the asset, and sell it in perhaps two to three years,” Hudacek said. “The reality was, we realized the final disposition of the asset much earlier than we expected.”
The sale was arranged by Marcus & Millichap’s Institutional Property Advisors. Stan Jones, Phil Saglimbeni and Sal Saglimbeni were the brokers on the deal. They weren’t immediately available for comment. A representative of TIAA-CREF didn’t immediately return a call.
Sares Regis will continue to manage the project, which started leasing in January and is in the process of achieving LEED Silver certification, a notable achievement given that apartments have been slower to latch onto the green-building trend than office buildings.
Sares Regis and J.P. Morgan tied up the Township project site in 2010, when the economy was still lackluster. A previous developer was in the early stages of proposing a condo project, but San Mateo-based Sares Regis saw an opportunity for rental. The joint venture put it under contract that July and reconfigured the project to includ e more amenity spaces.
While several apartment buildings are currently under construction in Redwood City and San Mateo, the JV was had the advantage of being early. The first new apartment building built in Redwood City in more than 10 years, the project is now 74 percent leased. A 1,083-square-foot two-bedroom unit was going for $3,600 to $3,700, according to the project’s website.
“At that time, J.P. Morgan was one of the very few equity partners who had a similar mindset,” Hudacek said. “They thought it was a good time to go after new projects as we did.”
Ron Granville, CEO of Belmont-based Woodmont Real Estate Services and a veteran industry expert, said he wasn’t surprised at the high level of interest in the property.
“More and more people are realizing just how strong the San Francisco to San Jose corridor is,” said Granville, whose company manages a commercial and apartment portfolio valued at more than $3 billion. “There’s always been this huge effort by institutional investors to diversify geographically. I think they’ve found out that diversifying doesn’t mean you want to be in every metro region in the country. If you’re big enough, you want to pick the strong ones, and this corridor is — if not the strongest, one of the top ones in the country.”
Granville, who wasn’t privy to the pricing, nonetheless said that a price in the rumored range could reflect a new normal.
“When you have average rent over $3,000 a unit, it’s a lot different than when you’re buying at $2,000 a unit, because a lot of your operating expenses don’t increase as your rent goes up.
“We’re also just beginning to see sales of the newest generation of buildings, and these are different,” he added. “They’re built to current energy and design standards.”
Determining comparative pricing for this kind of sale is a little difficult, because there are not many brand-new apartment buildings that have traded recently. A check of recent Bay Area apartment sales tracked by Real Capital Analytics shows mostly rehab-product sales in Silicon Valley. Pricey deals includ e Mariners West, a 45-unit property built in 1979 (and renovated in 2013) in San Mateo that sold for $365,000 per unit in March. Palo Alto’s Towie Apartments, a 42-unit project built in 1965, sold in October 2013 for $429,800 a unit.
Sares Regis has several projects under way right now, including The Pierce, a 230-unit mid-rise project in downtown San Jose, and a 52-unit community at 1101 W. El Camino Real in Mountain View.
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