CityView Buys Berkeley Apartment Note at Steep Discount

By Jon Peterson

Los Angeles-based institutional real estate investor CityView has paid $66.8 million to acquire Berkeley’s 143-unit Arpeggio apartment complex, a cost well below the $91 million mortgage balance held against the property.

US Bank acquired the complex in a deed-in-lieu foreclosure. The original developer was SNK Realty Group based in Dallas.

CityView purchased the property using two equity commitments totaling more than $39 million from the Los Angeles County Employees Retirement Association, which has more than 156,000 members and more than 54,000 beneficiaries.

LACERA is acting as a co-investor in the project with one of its own specialty investment funds that is focused entirely on the Bay Area, buying a 75 percent interest in the property for $29.4 million. At the same time, the CityView Bay Area Fund, an investment fund that is 100 percent funded by a $100 million commitment from LACERA, is investing another $9.8 million of equity to acquire a 25 percent stake.

“LACERA was attracted to the property by an opportunity to acquire a best-of-class asset at a significant discount to its cost basis and replacement cost in a high-barrier-to-entry market that is located in the urban core of a primary community in the Bay Area,” John McClelland, principal investment officer for real estate for the pension fund, said in an email response to a reporter’s query.

LACERA and McClelland provided all purchase price information, including the loan balance on the bank loan to The Registry. Previous published reports indicated different pricing.

CityView expects to begin pre-leasing in the next 30 days, after it completes flooring work and adds appliances and window coverings to the units, said Tony Cardoza, managing director for the investor. “We expect that the project will be completed over the next 60 to 90 days. There are no residents occupying the property at this time,” he said.

Cardoza works from the investment firm’s regional San Francisco office at 555 California St. “The feeling is that we will attract [as tenants] a mixture of consultants and professors who work for the University of California at Berkeley and people who are already living in the Berkeley area,” Cardoza said.

Berkeley apartments led all 13 cities in Alameda County in occupancy growth in the last year, rising 5.8 percent, according to RealFacts. The submarket’s apartments recorded a 96.1 percent occupancy rate at the beginning of September. At the same time, rent growth in Berkeley has been relatively sluggish at 4 percent year over year, ranking it 12th out of the county’s 13 cities. Emeryville ranked last.

CityView continues to search for urban-infill development opportunities for its Bay Area fund. It is focused on high barrier-to-entry locations in San Francisco, on the Peninsula and in Alameda, Contra Costa and Marin counties. Equity investments are expected to range from $10 million to $25 million and the hope is to get construction loans of up to 65 percent of loan-to-cost. The properties’ sizes are expected to vary from 60 units to 250.

West Coast Commercial Real Estate News