CalPERS Sells Vacaville Apartments to Sequoia

By Jon Peterson

The California Public Employees’ Retirement System has sold the 312-unit River Oaks Apartments in Vacaville for $52.4 million on an all-cash basis to Sequoia Equities Inc., a real estate investment and operating company based in Walnut Creek.

The pension fund had owned the complex since 2004 through its Western Multifamily LLC partnership. Western Multifamily acquired the property when BlackRock Realty managed the partnership. The management was transferred to Boston-based General Investment & Development Cos. in October 2010; GID has a regional office in Larkspur.

Rich Ross, a vice president and director of Western region acquisitions for GID, said the company sold because it did not expect to see the same rent appreciation in Vacaville that other, more “prime” San Francisco and Silicon Valley submarkets are expected to experience. The property sold for $168,000 a unit.

“When we first took over the BlackRock portfolio, the idea was that we would be pruning a portion, and that is what we did in this case,” Ross said. He did not say what additional properties of the former BlackRock-managed portfolio might be sold.

Sequoia Equities manages 11,000 apartments in 42 West Coast properties. In October, it acquired Heritage Green Apartments, a 333-unit community in Vancouver, Wash., for $30 million with 85 percent financing from Fannie Mae. The company said it would do $9 million in renovations. The firm did not respond to phone calls.

Institutional Property Advisors, a Marcus & Millichap company, represented both the buyer and the seller. Phil Saglimbeni, a vice president of investments for the Palo Alto-based company, said Sequoia accepted a capitalization rate in the “mid- to high-5 percent range,” based on three-months of trailing net operating income.

The property was built in 2000. At the time of sale the complex was 95 percent occupied, which is roughly the present market rate. “This market does not have the strong rent growth of some other Bay Area markets,” Saglimbeni said. “Over the past 12 months, rents have gone up 4 percent to 4.5 percent in Vacaville.” In the same time, rents on the San Francisco Peninsula and in the South Bay have increased 13 percent to 14 percent, he said.

GID owns six other Bay Area apartments through the Western Multifamily partnership in Oakland, Fremont, Pleasanton, San Jose, Pleasant Hill and Sunnyvale. CalPERS placed a value of $1.6 billion on the partnership through the end of September 2011. The partnership can buy and develop apartments on a nationwide basis in major metropolitan markets, and the San Francisco Bay Area is a targeted market.

The pension fund recently announced a new $631.8 million equity commitment to the Western Multifamily partnership. With leverage of 45 percent, the additional equity could produce $1.15 billion in purchasing power.

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