By Jon Peterson
Palo Alto-based Essex Property Trust Inc. has paid $42.5 million to acquire the Regency at Mountain View apartments at 333 Escuela Ave. in Mountain View, citing the 142-unit project’s proximity to the Google Inc. corporate campus as well as retail and entertainment.
The real estate investment trust, which owns half of the property in a partnership, paid $299,295 a unit. That is much more than the average sales price for properties bought in Mountain View over the past 12 months, according to RealFacts LLC, a Bay Area-based apartment research firm. The average sales price for Mountain View apartments over the past 12 months was $216,000 a unit, counting institutional quality complexes with at least 50 units.
The company plans to invest another $7 million into the Mountain View property for renovation, which raises its cost per unit to nearly $348,600. The planned improvements include interior and exterior work.
Essex would not disclose the capitalization rate, or first-year yield, that it expected to achieve with the purchase.
Regency at Mountain View was developed in 1970. Occupancy of the complex is around 95 percent, which is typical of most of the properties that Essex owns, according to its second quarter financial results. The property is located in an area that has a mixture of housing and businesses, 3.2 miles from the Google headquarters campus.
Essex acquired the property for its joint venture Wesco III, in which it shares a 50 percent ownership position alongside the state of Wisconsin Investment Board. The venture was formed earlier this year after both institutions invested $60 million in equity. There is 50 percent leverage in the venture for a total capitalization of $240 million.
The investment strategy for Wesco III is to buy apartments in markets where Essex already owns properties. These would include Northern and Southern California and the metropolitan area of Seattle.