By Jon Peterson
Milwaukee, Wisconsin-based Northwestern Mutual Real Estate, the real estate investment arm of Northwestern Mutual, has placed on the market for sale the 100-unit Arroyo Residences apartment complex in Walnut Creek located at 1250 Arroyo Way, according to sources familiar with the property. No pricing guidance on the sale was available at this time.
The seller has selected Newmark to be the listing agent on the sale of the property. Two people working on the sale for Newmark in the San Francisco Bay Area are Rob LeDoux and Matt Neault, both directors with the company. Both the seller and its representatives at Newmark declined to comment on the details of the sale of the property when contacted for this story.
The property in Walnut Creek has been in the Northwestern Mutual real estate portfolio for some time. The life insurance company had acquired the property for $37.8 million in June 2015, according to public records. This transaction was completed prior to the completion of construction, which was completed in 2016, as written in the property’s offering document.
The new owner of the property should be able to add revenue in the future by increasing rents; it will have the opportunity to capture the existing 9.3 percent loss-to-lease, or roughly $303 per unit, by increasing in-place rents to market levels. This would help increase near-term revenue by over $363,000 annually independent of any capital deployment in the property.
The asset has performed strongly in the lease trade-outs, according to the offering document. Recently singed leases were on average $200, or 6.3 percent above prior rents, which represents strong momentum at both the asset and submarket level.
Arroyo Residences benefits from a very strong location. Residents of the community have a half mile walk to the Walnut Creek BART for their mass transportation needs. They can walk to downtown Walnut Creek, which is less than a mile away. The area close to the complex also offers strong demographics. The average annual household income within a five-mile radius is around $175,000, and it is expected to grow 2.6 percent annually for the next five years.
The Walnut Creek sub-market for apartments has proven to be resilient throughout the COVID-19 pandemic. While many Bay Area markets experienced double digit rent declines and large increases in vacancies, rents in Walnut Creek have grown 6.6 percent year-over-year, and vacancy has dropped 161 basis points down to its current level of 3.9 percent.