Essex Steps up Acquisition Efforts in Northern California

Essex Property Trust, Palo Alto, REIT, Fremont, Emeryville, San Francisco, Canada Pension Plan Investment Board, Dublin, Alameda, East Bay, Fremont Plaza Shopping Center

Paragon Fremont Essex Property Trust real estate The Registry

By Jon Peterson

Palo Alto-based Essex Property Trust is making its presence felt in Northern California with the publicly traded REIT closing on two apartment purchases and planning to buy more in the region during the third quarter.

[contextly_sidebar id=”aJEjMcaRDndBeOZ5mqOMtHcvZoVYet02″]“We have already closed on $217 million worth of deals in Northern California this year, and we have another $385 million of transactions in process that we are hopeful we will acquire during the third quarter. This would mean we would beat our planned acquisition activity of $300 to $400 million we projected for 2014,” says Michael Schall, president and chief executive officer for Essex during its conference call to discuss the company’s second quarter results.

Essex highlighted two deals that it closed recently. It paid $110 million or $369,000 per unit to buy the 301-unit Paragon Apartments in Fremont located at 3700 Beacon Avenue. This property is brand new and was constructed last year. The complex is condo mapped, and it is situated near public transportation with the Fremont BART station being located nearby. The development is also adjacent to the Fremont Plaza Shopping Center and is within walking distance to restaurants and other amenities. The average rent in the property is $2,090 per month.

Essex also contributed a property in Emeryville into its joint venture with the Canada Pension Plan Investment Board. The Emme is a 190-unit development located at 6350 Christie Avenue in Emeryville. Total cost for this property is $62 million. The ownership split of the asset is 55 percent to Essex and 45 percent to the pension fund.

This is a newly constructed property for which the public REIT is planning to start leasing sometime during the fourth quarter. There is a mixture of studios, one-, two-, three-bedroom units and some townhomes and lofts. The amenities will include a clubhouse, billiard room, rooftop deck and bike facilities.

CPPIB had made a total equity investment of $176 million to the venture with Essex in 2012. This capital was invested into four properties; the other three are located in downtown San Francisco at 900 Folsom and 260 5th Street and one property in Dublin. All of these assets have a similar ownership structure of 55 percent by Essex and 45 percent by CPPIB.

Essex as a company does not expect to be an active player in downtown San Francisco for acquisitions, however. “We have bid on some assets in San Francisco but were not interested in being a player for properties trading at sub four cap rates,” said Schall.

The public REIT is more interested in buying properties in other areas. One example is Alameda County in the East Bay. This is where properties could be acquired at higher cap rate and that would offer lower rental rates, Schall explained. Areas like this are still attractive because they feature strong existing public transportation like BART or light rail for renters and proximity to major highways.

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