Kennedy Wilson sells Napa Property, Plans $500MM in West Coast Buys

Napa, Silicon Valley Bank, North Bay, Trefethen Estates, St. Helena, Santa Rosa, Portland, Pacific Northwest, Wine Business Monthly

By Jon Peterson

Kennedy Wilson has sold Napa’s 66-unit Rutherford Townhomes apartments to a private Japanese investor for $8.7 million as the Beverly Hills-based international real estate buyer seeks to lock in capital gains on the North Bay asset that it has accrued since 2005.

Napa The Registry real estateThe sale does not indicate disaffection with the Bay Area—indeed Kennedy Wilson plans to invest another $500 million buying West Coast apartments in 2013, including in Northern California. That would be on top of a like investment amount dedicated in 2012.

Rather, the international real estate investor had owned the property in a partnership since 2005, when they paid $6.6 million to buy it. In 2009, Kennedy Wilson became the sole owner. Now it wants to lock in gains, said Kurt Zech, senior managing director of the KW Multifamily Management Group. Zech is based in the company’s regional office in San Francisco at 300 California St.

“We think that the Napa market is a very tight. There isn’t a lot of new development. It’s very hard to obtain entitlements for new apartment projects. There has been decent rental growth in the market over the past year,” he said.

The cap rate on the sale of the 1624 Pueblo Ave. complex was 5.61 percent based on its current income, Zech said. The buyer paid all cash. The complex was 98 percent occupied at closing. The asset was built in the mid-1970s.

The size of the property in Napa was an anomaly for Kennedy Wilson, which typically looks for apartments with 200 or more units. The Napa asset was acquired in a portfolio deal with properties in Davis and Pinole that the investor still owns.

Kennedy Wilson bought into Rutherford Commons for its investment fund KW Property Fund III. Kennedy Wilson owns approximately 12 percent of the fund.

The company remains invested in the North Bay. In 2011 it acquired the 492-unit Enclave at Adobe Creek in Petaluma for $68 million. “This is a property we are happy with and are planning to hold onto long-term,” Zech said.

Kennedy Wilson now has ownership interests in 5,311 apartments in the greater San Francisco Bay Area among 14,764 units it owns worldwide.

The other targeted West Coast markets include Los Angeles, Portland, metropolitan Seattle, Salt Lake City, Denver and potentially Phoenix. “The greater San Francisco market is still attractive to buy apartments in. The market has not peaked yet, and rents will still be moving up,” said Zech.

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