By Jon Peterson
San Francisco-based Grosvenor Americas has bought the 432-unit Waterstone Apartment Homes in San Jose at a 4.25 percent cap rate, according to sources familiar with the property.[contextly_sidebar id=”cDca2WFFWSeY6vj4ePfbYcMLJnskejxm”]“Once the property becomes stabilized over the next two to three years, we figures that the cap rate on the complex will be moved up into the mid five percent range,” says Peter Staver, a senior investment manager with Grosvenor.
The sales price on the trade of the complex was $160 million or $370,000 per unit. This price point puts the asset at well below replacement cost. “I would think the replacement cost for this kind of asset, if you could build it today, would be somewhere in excess of $450,000 per unit,” says Al Pace, president and chief executive officer for Pacific Urban Residential. This Palo Alto-based company was the seller of Waterstone.
Pacific Urban sold the property through its listing agent, the Palo Alto office of Institutional Property Advisors. The people involved in the sale were Stan Jones, executive vice president of investments, and Sal Saglimbeni, vice president of investments.
Pacific Urban sold the asset in San Jose due to some partnership reasons. “This property was owned in a partnership that was winding down and this asset was the last property in the partnership. Another factor was that we had owned the asset since the mid-2000s, and the complex had a nice run up of value,” said Pace.
Waterstone was developed in two phases in 1986 and 1988. The complex currently has occupancy in the mid 90 percent range. Many of the units in the property are rented by technology workers. The property is close to public transportation including Caltrain.
Grosvenor is planning on investing an additional $16 million over its purchase price for capital improvements to the property. One part of this will be a brand new free-standing leasing facility. The current leasing operation in the property takes up one of the units in the complex. There also will be a significant expansion of the existing fitness facility and interior suite moderation.
This particular group at Grosvenor would like to acquire additional apartment complexes in the Bay Area. This would include assets that are located in San Francisco, San Jose and Silicon Valley. Its investment strategy is to place capital into existing assets only.