Commercial broker Efi Luzon has a special affinity for a sprawling apartment community in East Palo Alto that is being bought by an affiliate of the venerable Silicon Valley developer Sand Hill Property Co.
“It’s my baby,” Luzon, Los Altos-based senior vice president for Intero Real Estate Services, said of the massive 1,800 plus-unit Woodland Park complex, located just south of University Avenue and along the west side of Highway 101. “My baby is in good hands.” He declined to state the price.
His connection to the community goes back to around the turn of the century when he started to assemble a hodgepodge of parcels that would eventually become Woodland Park and be purchased by Chicago-based Equity Residential.
Now Equity Residential is the seller in a mega deal that Luzon has worked on for the past year and that brought in Sand Hill with its backing of international capital.
Sources say the price is $412.5 million, or 228,000 per unit – about three times what Equity Residential paid for the property in 2011, as had been reported earlier.
Sand Hill affiliate Woodland Park Communities, a newly established company, is acquiring the property with financial support from the sovereign wealth fund Abu Dhabi Investment Authority.
But the ownership change at the rent-controlled apartments, which are home to about 2,500 families and represent more than half of East Palo Alto’s multifamily rental units, has raised community concerns over the possible loss of affordable housing in a region of skyrocketing living costs amid today’s technology-driven real estate boom.
Woodland Park is also a particularly sensitive subject to the city and housing activists because of the apartments’ history over the years involving rent hikes, legal battles and other controversies.
Sand Hill and city officials, however, assured that rent control and tenant contracts will remain intact.
“Our intent is to continue to run the property in the same manner as it has been, honoring all rental contracts and the rent-stabilization ordinance of the city,” Michael Kramer, Sand Hill executive and now Woodland Park Communities’ chief investment officer, said in a statement. “We believe, if successful, our local team will serve the community well, and we intend on working closely with our residents to ensure an attractive and well-maintained asset.”
Kramer declined to discuss terms and other details of the sale, citing confidentiality agreements pending closing.
City Manager Carlos Martinez described Woodland Park as “an important part of East Palo Alto’s affordable-housing stock.”
As with Equity Residential, Martinez said, “the new owner will equally be regulated by the ordinance. Sand Hill Property is a responsible company, and they have expressed that they will abide by the ordinance.”
The ordinance limits annual rent increases for current tenants based on inflation, but when a resident leaves, the unit can be leased at market rate.
The city is looking to strengthen the ordinance by streamlining procedures and making other changes, Martinez said. The East Palo Alto Rent Stabilization Board is scheduled to take up the matter on Feb. 24 followed by the City Council on March 10.
Tenant protections in regards to just-cause evictions will also be maintained as Woodland Park changes hands, he said.
Martinez believes the sale is just another sign that East Palo Alto, which has historically struggled with crime and poverty, is beginning to draw the kind of development and investment interest enjoyed by its wealthier Silicon Valley neighbors for years now.
“We welcome new investment,” he said.
Another revered Silicon Valley developer, The Sobrato Organization, is building a large speculative office project in town – the 209,454-square-foot University Square development at 2100 University Ave.
Luzon agrees East Palo Alto is on the upswing despite its socioeconomic challenges. “The time has come for investing in East Palo Alto” because of its central location in the region and other factors, he said.
Sand Hill’s presence is a perfect fit for East Palo Alto, he said.
Sand Hill is a local firm that “is most reputable and has sovereign wealth money,” he said. “They are in it for the long haul. They are not rushing to get profits. They enhance whatever they do to better the quality.”
Luzon envisions the new ownership leading to further improvements in the quality of life and other conditions in the Woodland Park neighborhood, he said. “There will be upgrading of units, an infusion of investment and a cleanup of the area that will bring value to everybody, particularly the tenants.”
Over his three decades in the real estate industry, Luzon has shown time and again a knack for successfully brokering big and intricate transactions involving the assemblage of various properties. His very first commercial deal came in 1990 with the $10 million sale of five acres encompassing 17 different parcels in Palo Alto, known today as Camino Place. Just across the street is the Rickeys Hyatt Hotel, which was listed by Luzon also and sold to a national developer, which was developed into 175 homes.
Luzon also worked on a complicated deal nearly two years in the making in which another Sand Hill affiliate acquired Cupertino’s 1.3-million-square-foot Vallco Shopping Mall in late 2014 for $320 million. Current plans seek to transform the aging mall into a vibrant mixed-use hub with what would be the largest rooftop public park in the world.
Woodland Park was also “a very complex deal,” Luzon said. “I like deals that are complicated. The more complicated, the bigger the feeling of achievement and the better the value to all involved.”