Invesco, CalPERS Look for Green in the Dublin Hills

By Jon Peterson

Atlanta-based Invesco Real Estate has paid $105.4 million in cash to buy the 305-unit Avalon at Dublin Station I apartments. It is its first purchase for a newly created separate account with CalPERS, the huge California public pension fund.

Dublin Station California The Registry real estateThe price of not quite $345,600 a unit is high compared to recent sales of apartment properties in Dublin, Livermore and Pleasanton, according to RealFacts LLC. Sales in the region averaged $210,215 a unit in 2012 and $262,000 a unit the year before, the San Francisco apartment-data research company found.

Only six apartment projects with 50 units or more have sold in the submarkets in the last three-and-a-half years, including no sales in the first half of 2013, RealFacts said.

The buyer accepted a capitalization rate, or initial yield, in the low 4 percent range, said Sean Breslin, executive vice president of investments and asset management for the seller, Arlington, Va., -based AvalonBay Communities Inc. Breslin released the sale information during a July 25 conference call to discuss the public real estate investment trust’s second-quarter operating results. He did not disclose the buyers.

The return is based on a pro-forma of the property’s net operating income for the next 12 months, Avalon Investor Relations Director Jason Reilley said after the call. “We own two other phases of development for Dublin Station, and it would be best for diversification reasons to move the first phase out of our portfolio,” he said.

The sale produced a $20 million economic gain for AvalonBay, which developed the property in 2008; it was 96.4 percent occupied at the time of sale.

Avalon is investing $76 million in the second phase of the project, which has 253 apartments. The company started construction in the second quarter of last year and anticipates initial occupancy in the fourth quarter of this year with completion in the second quarter of 2014. The average projected rent is $2,080 a month.

The company’s development pipeline includes a third phase for Dublin Station, but Reilley would not disclose the amount of land or number of units planned.

Dublin’s average asking apartment rents have climbed steadily since the middle of 2011, when they were $1,711 a month, according to RealFacts. At the end of the second quarter, Dublin’s average asking rent was $2,029, up 11 percent in the last year alone. That average is depressed by comparatively weak demand for two-bedroom, two-bath units, the data shows, because rents for two-bedroom townhome style units are up nearly 18 percent in the last year to $2,507 and rents for three-bedroom, two-bath apartments are up nearly 15 percent to $2,718.

Despite the increases, Dublin occupancy has remained firm and even ticked up in the second quarter to 96.9 percent from 94.2 percent in the first quarter, RealFacts said.

Invesco plans to rebrand the property beginning with a new name: Eclipse at Dublin Station. “The property that we bought fits the criteria we have established for our relationship with CalPERS—high-quality, newer properties in high-growth markets in transit-oriented locations,” said Chris Cole, acquisitions director for Invesco in the Bay Area.

Invesco has seen the East Bay apartment-rent growth firsthand, Cole said: “The other two complexes that we own have increased rents by 10 percent over the past 12 months.” One of these properties is the 520-unit Stoneridge Apartments in Pleasanton, which the real estate manager owns for its open-ended commingled fund Invesco Core Real Estate. The other property, the 104-unit Aqua Via, is on Oakland’s Jack London Square.

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