By Jon Peterson
Palo Alto-based Pacific Urban Residential is now in the middle of a major growth pattern for the company through the acquisition of what it calls vintage apartment properties.[contextly_sidebar id=”rzngsfpwaFeuStzIRSxvSdh1uYrrztgG”]The company has $300 million of equity capital available to them through its partnership with The California Public Employees Retirement System. The leverage limit on this capital is up to as high as 25 percent.
This is an extension of a program that was started with a $200 million allocation in January of last year. The long-term plan was to have it reach the $1 billion equity range over the next four to five years.
“For us vintage properties are assets that are of at least 11 years old. We believe that these assets do have core-style attributes through their ability to have durability of income. This occurs with these properties due to the fact that these assets are rented by teachers, firemen, police officers and nurses who are less likely to be laid off from their jobs,” said Al Pace, chief executive officer and co-founder of Pacific Urban Residential.
This belief is a little different from what many pension funds and other institutional investors consider core properties to be from an age standpoint. The general agreed upon rule for core assets has been that the asset needs to be 10 years old or less.
Some of the activity for the CalPERS relationship has taken place in the San Francisco Bay Area. This has included acquisitions in Dublin and Sunnyvale. Pacific Urban is close to another deal in the Bay Area. A closing on this should happen in the next 30 to 45 days. Pace declined to give out any other specifics on this deal.
Overall, Pacific Urban has acquired seven properties for the CalPERS relationship amounting to $500 million of acquisitions on nearly 2,000 apartment homes. The apartments that are in places outside of the Bay Area are located in Long Beach, Portland and Seattle. Its next deal to close will be an asset in Irvine.
The buyer has certain areas in the Bay Area where it would like to find assets in the future. These would be San Francisco, Santa Clara, San Mateo and the East Bay.
The overall mandate with CalPERS does call for Pacific Urban to look at assets west of the Mississippi. At some point in the future this could include markets like Texas, Salt Lake City and Las Vegas.