Midwest REIT Pays $44MM for Apartment Land South of Market

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San Francisco Exploratorium The Registry real estate

By Jon Peterson

Cleveland-based Associated Estates Realty Corp., an apartment landlord with 51 complexes and 13,107 units in 10 states, has acquired a fully entitled apartment site in San Francisco where it plans a $224.4 million apartment project, its first in the San Francisco Bay Area.

[contextly_sidebar id=”650eb351901219727147524cd4c5244f”]The publicly traded real estate investment trust paid $44 million for 3.6 acres at 8th and Harrison streets in an off-market transaction with no brokerage firms representing buyer or the seller. The seller is a family trust. The total development cost is projected to be $550,000 a unit, said Jason Friedman, vice president of construction and development for Associated Estates.

“We think that San Francisco remains a very attractive market for apartments,” he said. “The area is now achieving very strong job growth and the sub-market where we are developing has not seen a lot of new construction. This lack of product is mainly due to the fact there is not a lot of land left to build on,” Friedman said.

This area is known as the western South of Market area. “This is an emerging area that has more of a history of industrial properties than apartments,” said Erik Hanson, a vice president with Colliers International in its San Francisco office.

The land for project, which has not yet been named, is fully entitled for the development of 408 units. The REIT plans to begin filing for building permits in early 2014 and anticipates it would take around 20 months to build the complex.

The company is in discussions with several potential institutional partners who could acquire a 50 percent interest in the project.

Associated Estates has entered into a development agreement for the project with Halcyon, the multifamily development consultancy of Richard Lamprecht and Amir Massih. Both men previously worked for Archstone on the West Coast. Lamprecht is based in Orange County and oversaw the West Coast operations for Archstone. Massih is based in San Francisco and was involved in Bay Area projects for Archstone.

Archstone had been a major player in the San Francisco Bay Area until November of 2012 when it signed an agreement to sell its existing portfolio in the region to Arlington, Va.-based AvalonBay Communities and Chicago-based Equity Residential in a joint purchase.

Associates Estates anticipates housing mostly young professionals at the complex with a smattering of empty nesters. The REIT projects that rents will average around $3,000 a month, Friedman said. Amenities in the project will include community rooms and an Internet café.

“We are definitely looking for more assets in the region beyond this one project. This could be either additional developments or buying existing properties,” Friedman said.

West Coast Commercial Real Estate News