By Meghan Hall
Publicly-traded Essex Property Trust is continuing to show its confidence in the Bay Area multifamily market, purchasing its joint venture partner’s 49.9 percent in Marquis, a 166-unit apartment community in San Jose for $35.4 million. The sale dates to December, according to Essex’s Full-Year 2018 Results and 2019 Guidance. The owner of the majority share of the property is San Jose-based The Core Companies.
According to Essex, the property is encumbered with a mortgage $45.8 million; with the property consolidated, Essex recorded a $1.3 million gain to remeasure the Company’s investment. The calculation was not recorded in Essex’s FFO, or Net Income and Funds from Operations. However, Michael Schall, president and CEO of Essex, said the company had a favorable fourth quarter in not just the Bay Area, but many West Coast markets.
“We continued to produce favorable results in the fourth quarter and full-year 2018, reflecting an improving economy and a stable operating environment in our West Coast markets,” said Schall in the company’s report. “We expect these conditions to continue into 2019, leading once again to market rent growth near long-term averages. Solid job growth and higher income growth rates underlie our belief that housing affordability pressures are slowly abating, improving our outlook longer term.”
The property is located at 817 N. 10th St. and is about equidistant from Interstate 880 and State Routes 101 and 87. While the neighborhood is primarily residential, downtown San Jose and San Jose’s Japantown are just a short drive away.
The community itself has an array of features; the interiors of each unit are fit with European cabinets, quartz countertops and stainless steel appliances. Faux wood flooring and in-home washer and dryers are also included. Exterior amenities, including a fitness center, rooftop lounge, a dog park and a bocce ball court. A bike kitchen, library and swimming pool are also part of the development’s many amenities. Marquis offers brand new studio, one- and two-bedroom homes, according to its website, and the units come in a range of sizes. Studios are between 530 and 554 square feet, and rent from between $2,183 to $2,342 per month, according to the community’s site. One bedrooms range from 710 to 733 square feet and are priced around $2,338 per month, while the two bedrooms are the largest at around 1,043 square feet. Pricing was not available for the community’s two-bedroom units.
According to a Marcus and Millichap 2018 fourth quarter apartment report, rapidly transforming neighborhoods—particularly in San Jose—will continue to draw investors seeking returns. Cap rates remained in the low four percent range during the fourth quarter, and prices per unit in the metro reached above $403,000 per unit, far exceeding metro averages in Cupertino, Palo Alto and Mountain View.