By Jon Peterson
Mill Valley-based Objective Real Estate Partners has closed on its initial real estate investment after being formed in 2013. The company paid nearly $16 million or $122,000 per unit to acquire the 135-unit The Preserve Apartments in Oregon City, Ore. The complex is located in the southeast suburb of Portland at 19389 Highway 213 and was developed in two phases between 1994 and 2004.
“We are very pleased to have completed our first transaction. We think that the property is located in a growth controlled sub-market of Portland where there has been very little, if any, new units built in a very long time,” says Rich Ross, one of the founding principals of Objective Real Estate.
The company acquired the property in a joint venture with another Bay Area firm, Kentfield-based OpenPath Investments. The seller also had Bay Area roots. This was Fowler Property Acquisitions, the San Francisco-based company that has an office at 100 Bush Street.
For the first deal, Objective Real Estate used private equity capital from a combination of high-net worth individuals and families to fund the investment. The equity raised was $4.4 million with the balance of the acquisition being funded with debt. The cap rate on the investment was 6.4 percent, which is based on the property’s existing net operating income.
The buyer sees the property has a value-added component. “The previous owners had started a renovation program on the property. We will continue this as there remains around 25 units that still need to be renovated,” said Ross.
The complex, which sits on 7.28-acre site, is now 98 percent occupied with rents averaging at $970 per unit. This level of occupancy is roughly where the market for apartments in Oregon City. It is a reflection of a broader trend in the Portland market; this city has seen rents go up 6.7 percent over the past 12 months alone.
Objective Real Estate is looking to find more value-add apartment complexes to buy. The company is considering deals in a variety of western markets in the U.S., which includes the San Francisco Bay Area. Objective will also look at other major markets in California, as well as Portland, Seattle and Denver.
Ross has been a major player in the acquisition of apartments for institutional clients over the past 12 years. He was vice president and director of Acquisitions for GID Investment Advisors from 2000 to 2012. During his time at GID, Ross was instrumental in acquiring 39 properties with a collective value of over $2.6 billion. This capital was invested for some of the nation’s largest pension funds, including the California Public Employees Retirement System and Oregon Public Employees Retirement Fund.