Greystar, Goldman Sachs Buy East Bay Transit-Oriented Apartments

Intero, San Francisco, Bay Area, Berkshire Hathaway, HomeServices of America,

By Jon Peterson

Greystar Real Estate Partners will more than double its ownership exposure to the San Francisco Bay Area apartment market with its acquisition of three East Bay complexes from Equity Residential. The transactions are expected to close in the first quarter.

East Bay The Registry real estateCharleston, S.C., -based Greystar and New York City-based Goldman, Sachs & Co. have agreed to buy 711 East Bay apartments for $188.5 million from Chicago-based Equity Residential. Greystar already owns 458 units in the region and manages another 3,972 units in the area for other owners.

The properties to be purchased are the 259-unit Park Central Apartments at 1555 Galindo St. in Concord, the 252-unit Iron Horse Park Apartments in Pleasant Hill at 225 Coggins Drive, and the 200-unit Gatewood Apartments in Pleasanton at 3992 Stoneridge Drive.

“We remain very bullish on the San Francisco Bay Area markets due to continued employment growth and the difficulty of building new product. We are particularly interested in the [Equity Residential] properties due to their close proximity to BART stations,” a Greystar spokesperson said.

The Park Central Property is a tenth of a mile from the Diablo Valley College/Concord BART Station. Iron Horse is three-tenths of a mile from the Pleasant Hill BART station, and Gatewood is 2.3 miles from the Dublin/Pleasanton BART station.

The East Bay properties are part of a portfolio of 27 apartment properties with 8,010 units nationwide that Greystar and Goldman Sachs expect to purchase from Equity Residential. The other assets are in Southern California, Denver, Phoenix, Florida, Northern New Jersey and Washington, D.C. The total purchase price is expected to be $1.5 billion.

At a portfolio level, Greystar and Goldman are paying $187,000 per unit while securing a going-in capitalization rate, or first-year yield, in the mid-5 percent to high-5 percent range.

Goldman Sachs and Equity Residential did not respond to phone calls seeking comment. Equity Residential did hire the Palo Alto office of Institutional Property Advisors, a Marcus & Millichap company, to handle the sales listing for Concord’s Park Central Apartments, which were built in 2004 and are currently 96 percent occupied—at or somewhat above the market average.

Phil Saglimbeni, a senior vice president of investments for IPA, said he viewed the property as an A-quality or A-minus-quality complex. “At some point in the future there could be some value added to it through a minor renovation,” he said.

Managers have been able to increase Park Central rents 4 percent to 6 percent when tenants leave and others replace them, he said. “There has been minimal new development in the region, which has kept the market tight.”

But that may be changing. Park Central may face new competition from the expansion of an existing apartment development about a mile away, the Renaissance complex at 1825 Galindo St., which is owned by Dallas-based Behringer Harvard. “There could be as many as 179 units developed in the future,” Saglimbeni said.

Behringer Harvard paid $47.65 million to acquire the existing 132 units for phase I of Renaissance in September 2011, including a 2.7-acre parcel for the second phase.

West Coast Commercial Real Estate News