By Jon Peterson
Rockwood Capital, with offices in New York, San Francisco and Los Angeles, has become the new owner of the 100-unit Arroyo Residences apartment complex in Walnut Creek located at 1250 Arroyo Way. The real estate investment firm has purchased the asset for $66 million, or $660,000 per unit, according to public records.
A company representative of Rockwood did not respond to email and phone calls seeking comment for this story.
The seller of the property was Milwaukee, Wisconsin-based Northwestern Mutual Real Estate, the real estate investment arm of Northwestern Mutual. It had put the property up for sale earlier this year. The seller had chosen Newmark to be the listing agent on the sale. Two people working on the sale for the company in the San Francisco Bay Area were Rob LeDoux and Matt Neault, both directors with the company.
Northwestern Mutual had been the owner of Arroyo Residence for the past seven years. The life company acquired the property in a forward commitment transaction in June 2015. It had paid $37.8 million for the property, according to public records. This investment was made while the property was still under construction. It was not completed until the following year.
There will be a chance for Rockwood to add some additional revenue to the property down the road. There is an opportunity to capture the existing 9.3 percent loss-to-lease or around $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.
Arroyo Residences has been a strong property performer in the lease trade-outs, according to the property’s offering document. Leases signed closed to when the property was put up for sale were on average $200, or 6.3 percent above prior rents, which represents strong momentum at both the asset and submarket level.
The apartment complex benefits from a very strong location. Residents of the community have a half-mile walk to the Walnut Creek BART station for their mass transportation needs. They can walk to downtown Walnut Creek, which is less than a mile away. The area close to the property offers strong demographics. The average annual household income within a five-mile radius is approximately $175,000 and 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 to its current level of 3.9 percent.