By Jon Peterson
Boston-based Berkshire Group has bought the 75-unit 901 Jefferson Street apartment complex in the Old Oakland section of downtown Oakland for $24.7 million or $330,000 per unit.[contextly_sidebar id=”3cFqbP5WcAN7HICC5J9mkvgEFOzV1x8J”]Oakland-based Madison Park Financial was the seller on the property. “We had acquired the property in July of 2009 for $14.5 million. It was our feeling that the Oakland apartment market is at a new plateau now, and we thought that there is a significant amount of capital looking for apartments to buy,” said Simon Chen, chief financial officer for Madison Park.
The seller traded the property through the listing agent, Richard Knutson, a senior vice president with Newmark Cornish & Carey. He works out of the company’s Emeryville office.
“The sale of this property attracted a wide range of buyers. This included value-add private capital, high net-worth individuals and 1031 Exchange buyers,” said Knudson.
The cap rate on the deal was in the sub four percent range. This return is based on the current net operating income. “I would think that once you bring the rents to market, the cap rate could be as much as the high 4 percent range. The current rents in 901 Jefferson are now 15 percent to 20 percent below market,” said Chen.
Another aspect that appealed to Berkshire was the location of the complex. “We feel very good about the location of the property. It’s about a five-minute walk to a BART station. This means that residents in our property who work in San Francisco can be there through public transportation in about 20 minutes. That is very attractive,” says Eric Schrumpf, vice president of acquisitions for the West Coast for Berkshire. He works out of the company’s regional office in San Francisco located at 455 Market Street.
The new owner will be making some improvements to the property. This will include turning the 1,000 square feet of ground floor retail space that was never occupied into a leasing office. The complex will also be getting its first ever fitness center.
When Madison Park bought 901 Jefferson it was 98 percent completed. It was originally constructed as a condo development but the units were always rented as apartments. After buying the property it spend another $500,000 for improvements of the property. The apartments are now fully occupied.
Berkshire would like to buy more apartments in the San Francisco Bay Area. “The areas we would consider for future deals would include places like San Jose, Campbell, San Francisco and the East Bay,” said Schrumpf. The company is known as a national investor of apartments, and it describes itself as specialists with over 45 years of years of experience in the sector investing in both debt and equity, and in both public and private markets.
Madison Park is more of a regional player for apartments. It seeks value-add transactions in markets like Northern California, San Diego, downtown Los Angeles, Portland, Seattle and Utah.