Security Properties Earns Higher Cap Rate with Apartment Purchase in Napa

Security Properties, Seattle, Saratoga Downs,Intercontinental Real Estate, San Francisco, Silicon Valley, Peninsula, Cushman & Wakefield, Marin, Sonoma, East Bay, Santa Rosa, Vacaville, Richmond, Fairfield, Bay Area, Napa

Security Properties, Seattle, Saratoga Downs,Intercontinental Real Estate, San Francisco, Silicon Valley, Peninsula, Cushman & Wakefield, Marin, Sonoma, East Bay, Santa Rosa, Vacaville, Richmond, Fairfield, Bay Area, NapaBy Jon Peterson

Seattle-based Security Properties has earned a 100 basis point higher yield by acquiring the Saratoga Downs Apartment property in Napa.

“The cap rate on our purchase of Saratoga Downs Apartments was in the neighborhood of five percent. Had the property been in San Francisco, on the Peninsula or Silicon Valley, I would think it would have been in the four percent range,” says Mark Hoyt, senior director of Investments for Security Properties.

The cap rate was based on the property’s net operating income for the trailing 12-month period.

The 178-unit Saratoga Downs Apartment community is located at 2075 Funny Cide Street. While the name of the seller was not disclosed, both the buyer and seller of the property were represented by the San Francisco office of Cushman & Wakfield. The brokers were Seth Siegel and Jason Parr. Neither responded to phone calls seeking comment.

Security Properties acquired the property in a joint venture along with Boston-based Intercontinental Real Estate Corporation. Jessica Levin, director of acquisitions for the company, did not return phone calls for this story. This transaction is the first deal between the two companies.

The purchase price on the property was $58 million or $326,000 per unit. “We have put a loan from Fannie Mae on the property that has a loan-to-value of 55 percent,” said Hoyt.

The complex had been built in two phases. One was started in 2006 and includes 124 garden-style units. The rest of the property was constructed in 2012. The property currently has an occupancy level in the mid 90 percent range. This puts it a little lower than the apartment market occupancy for Napa, which is in the high 90 percent range.

Security Properties likes the lack of new supply that Napa has experienced in the past and the very limited amount of new development it has plans for the future.  “I think in the last 10 years the market has only had two new apartment developments, and there are plans to only have two more complexes build in the next 10 years. This makes the area a very attractive market [in which to] own properties,” said Hoyt.

Hoyt sees that Saratoga Downs does attract a wide renter audience. “The property does have people who work in the wine and tourism business. Other renters are people who work at places like the Napa State Hospital and Napa Community College,” he said.

Security Properties owns and looks for other apartment properties to buy in Northern California. Its targeted areas would be Marin, Sonoma and Napa Counties as well as communities in the East Bay. The company currently owns the 156-unit Redwood Park Apartments in Santa Rosa. In the past it had also owned a property in Pleasanton.

Intercontinental Real Estate is nationally known as a real estate advisor to pension funds and other institutional investors. According to its Web site, the company owns industrial properties in Silicon Valley and Vacaville and apartments in Richmond and Fairfield as it’s only four assets in the greater San Francisco Bay Area.

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