AIMCO Pays $118MM for Apartments in San Jose

San Jose, Shea Properties, Ivanhoe Cambridge, Creative Center for the Arts, SV Creates

By Jon Peterson

Denver-based Apartment Investment and Management Company has paid $118.4 million or $365,000 per unit to acquire the 324-unit Saybrook Pointe Apartment Homes in San Jose.

“We think that the San Jose apartment market is a very strong market to own assets in. The technology jobs being created in the region have made it an area with very strong growth, and the increases in rental rates there make it very attractive,” says John Bezzant, chief investment officer for AIMCO.

[contextly_sidebar id=”BSx58ty7gxvb5ea5SGrGmUpBEhwbUShU”]The asset was acquired with a combination of equity and debt. The buyer expects that the property will produce a levered IRR in the high 8 percent range. It plans to add value to the property trough property upgrades and operational improvements.

The seller of the property was a life insurance company. The listing agent on the transaction was the Palo Alto office of Institutional Property Advisors. One of the people involved was Stan Jones, executive vice president of investments. He did not respond to several phone calls seeking comment for this story.

AIMCO considers Saybrooke Pointe to be a B quality asset. This is based on the fact as to where the rental rates are on the project compared to other properties in the area. When the publicly traded REIT acquired the complex, it was 97 percent occupied.

Diversification played an important role for AIMCO in its acquisition of the property in San Jose. “Prior to this investment, we were under allocated for properties in the San Francisco Bay Area. In this market we had owned 5 percent of our portfolio in Bay Area. On a long-term basis we would like to have our exposure to be somewhere in the range of seven percent to eight percent,” said Bezzant.

According to its 2014 fourth quarter results report, AIMCO owns seven properties in Northern California. These are five assets in San Francisco, one in San Jose and one in the East Bay. These properties total 1,244 units and have a total occupancy of 96.7 percent. The average revenue per effective apartment home is $2,224.

The San Jose apartment market has shown very strong results for the 2014 year. According to data from RealFacts, a San Francisco-based apartment data company, average asking rents in San Jose increased by 10.2 percent over the past 12 months of 2014 to $2,227. Occupancy moved up over the same time period by 2.9 percent to 95.8 percent.

“I think this shows that there still is very strong demand for apartments in San Jose, even though new units are still be added to the market,” says Nick Grotjahn, a sales and client services representative for RealFacts.

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