By Jon Peterson
Palo Alto-based Pacific Urban Residential has sold the 144-unit Alterra San Jose apartment complex for $36.4 million or $252,777 per unit, according to sources with direct knowledge of the transaction. The property is located near the intersection of Amaden Expressway and California highway 87.
The company had owned the asset since July of 2011 when it had acquired the property for $25.2 million or $175,000 per unit.
“This was a property that we had owned for the better part for two and a half years. We felt the time was good for us to take some of our chips off the table and take a positive gain with this property,” says Tricia Peterson, director of capital markets for Pacific Urban.
Pacific Urban had made some improvements to the exterior of the apartment complex. This included doing some work on the fitness center. The company considered the property it to be a B quality asset when it purchased it. The current occupancy of the asset is in the range of 95 percent.
The buyer of the property was the Sares Regis Multifamily Fund. “We have a goal with this property to move it from a B to B+ quality asset. This will be accomplished by making some improvements to the interior of the units in the property. We believe that this will bring the property up to speed and compete with some of the new units in the area where it’s located,” says Ken Gladstein, co-chief investment officer for Multifamily Fund.
The complex was built in 1988. The acquisition of the property represents the first purchase made by the Multifamily Fund in the San Francisco Bay Area. “The other five assets in our commingled fund are located in Seattle, Portland, Southern California and Denver. We also are looking for properties in the Phoenix market,” said Gladstein.
Sares Regis raised $100 million of equity for its commingled fund that was put together and finalized in early 2013. Its investor base includes a combination of public and private pension funds, insurance companies and wealth management firms. The company will be putting 65 percent to 70 percent of debt on the portfolio that it is assembling.
Sares Regis has an investment period that lasts until 2015. It doesn’t anticipate having any problems being able to place all of its capital in the marketplace by its deadline. The company looks to acquire value-added apartments. Only investments in existing properties will be considered. It will not be investing in any new developments. t plans on buying more apartments in the San Francisco Bay Area for the investment fund.