By Jon Peterson
Toronto-based Ivanhoe Cambridge and Aliso Viejo-based Shea Properties have together invested $100 million of equity to fund 50 percent of the $200 million apartment development, the 650-unit ASCENT project in south San Jose located at 5827 Charlotte Drive. Ivanhoe provided the majority of the equity and is the main owner of the development. Shea is the development partner.
The total construction cost of the development is $200 million. Wells Fargo Bank is the construction lender for 50 percent of the project. This project has broken ground and should be ready to open by the spring of 2015.
“San Jose and Silicon Valley is a region that we like very much. It has many of the benefits that we look for. These include strong job growth, high barriers to entry and near major transportation venues so our renters can get into either San Jose or San Francisco to work,” said Ezio Sicurella, vice president of investments for Ivanhoe Cambridge. He worked on the company’s investment in this project.
He sees that the company’s return on the costs of the development will be well north of 6 percent. “This return falls in line with the idea that on developments you can achieve a 150 to 200 basis point higher return than by acquiring an existing asset,” said Sicurella.
Ivanhoe has now invested in an apartment portfolio in the San Francisco Bay Area totaling more than 2,000 units. These projects are a joint investment with Shea Properties and Greystar, two companies with which it plans to invest in additional assets going forward.
“We are definitely interested in investing in more apartment projects in the region in the future. I think there is a chance that we could double the size of our current portfolio down the road,” said Sicurella.
Ivanhoe has a preference of investing in existing properties versus new development. The investment company is taking a very selective position on new development. The existing properties that it buys need to have some sort of a value-added component to it, and the assets could be throughout the Bay Area.
Ivanhoe is the real estate subsidiary of the Caisse de dépôt et placement du Québec, one of Canada’s leading institutional fund managers. It invests in both apartment and commercial property types.