By Jon Peterson
San Mateo-based Essex Property Trust is now a 100 percent owner of the 1,098-unit Palm Valley apartment complex in San Jose, as stated by the public real estate investment trust in its 2016 fourth quarter earnings report.
The investor bought out its joint venture partner’s 50 percent interest in the property for $183 million. It was not stated in the earnings report who the joint venture partner was, however public documents list a series of companies that lead to Seattle-based Goodman Real Estate and its President and CEO, George Petrie. John Eudy, co-chief investment officer/executive vice president of development for Essex, declined to comment for this story.
The apartment complex is now unencumbered. When the property was owned jointly, there was a $220 million mortgage encumbering the property. When Essex bought out the joint venture partner, the entire loan was repaid by Essex. Palm Valley has been constructed in four separate communities over 37 acres of land.
Essex had been a 50 percent owner in the complex since November of 2014. This is when the company paid $180 million for its share of the property.
The publicly-traded REIT has created a new joint venture for the ownership of four apartments, two of which are in the San Francisco Bay Area. The properties involved in the venture are the 184-unit Bridgeport complex in Newark and the 132-unit The Carlyle in San Jose. The two non-Bay area assets are located in Simi Valley and La Habra, Calif.
Essex contributed the four properties to a joint venture called BEX II LLC. The company raised $153.2 million of capital by placing all of the properties into the joint venture. The total contract price for the properties was $307 million, as stated by Essex in its fourth quarter earnings report. The REIT has a majority ownership interest in the entity. It did not state the name of the other partner in the joint venture.
Essex is planning an active 2017 for apartments through a mixture of buying, selling, developing and completing some preferred equity investments. The acquisition amounts for the year will likely be somewhere in the range of $400 million to $600 million, as stated by the REIT in its earnings report. These deals will be financed with proceeds from dispositions or joint venture capital. The sales of properties are projected to be in the range of $400 million to $700 million.
Essex plans to start three new development projects during 2017. The REIT did not indicate where these projects are located. The total development spending in 2017 for existing projects under construction and for projected new starts is expected to be $215 million at the company’s pro rata share. The preferred equity deals for the year will total $100 million and be financed with disposition proceeds.