By Meghan Hall
About a month after major real estate equity firm Stockbridge Capital purchased a 6.35 million square foot industrial portfolio for $570 million, the company has sealed the deal on yet another acquisition, this time closer to home in the Bay Area. According to reporting by The Mercury News, Stockbridge has purchased the LINQ apartments in San Jose for $103.8 million. The complex also includes 12,000 square feet of retail space.
According to sources with knowledge of the transaction, the property was acquired with equity and 56 percent leverage. The cap rate on the purchase was four percent and was based on in-place rents for the property. Currently, occupancy at LINQ is in the low to mid-90 percent range.
JLL represented the sellers in the transaction, including Director Scott Bales, Director Peter York and Analyst Nolan Moore.
The asset was acquired for the manager’s commingled fund, Stockbridge Value Fund III. Even though it is a value fund, the manager does have a partial strategy of blending in assets with different profiles. LINQ is expected to be one the final assets to be placed into Fund III, which is a 2017 vintage commingled fund where the manager raised $355 million in equity. The leverage limit for the fund is 65 percent at the portfolio level, and it has a three year investment period which will be coming to an end in March 2020. Most assets in the fund figure to have holding periods between three to five years.
The sellers of the 230-unit property were Core Companies and Republic Urban Properties. The development, which is located at 1700 Newbury Park Dr., was completed in 2016. According to Republic Urban Properties’ website, the final project cost totaled $70.1 million. LPMD was the architect for the project.
Units within the luxury apartment complex come equipped with quartz countertops, stainless steel appliances, full size washer and dryers, hard surface floors and outdoor space. 22 different floor plans can be found throughout the development, and units are a mix of studio, one- and two-bedroom apartments. Studios hover at around 530 square feet per unit, while the most spacious two-bedrooms include more than 1,100 square feet of space.
The complex’s amenities and services package include a fitness center, pool, sundeck and spa, an outdoor courtyard, community barbecue area with a pizza oven, a billiards room, bike storage and parking. Pets are also allowed.
LINQ is also within walking distance of a nearby, one-acre park and the future Berryessa BART station. Its location will only strengthen in the future when the BART station opens, and it is projected that rents in transit-oriented locations, like where LINQ is located, will be five percent higher than assets further from BART stations.
Stockbridge, based in San Francisco, is one of the largest equity real estate investment management firms in the country, and as of June 2019, the company and its affiliated had approximately $14.6 billion worth of assets under their management, which includes assets of all property types throughout the United States. In February, Stockbridge provided $130 million of equity for a $320 million apartment development in San Francisco. Known as 1629 Market, Stockbridge will be the majority owner of the property, which it is developing alongside Strada Investment Group. The project is expected to total 420 units over nine stories. Stockbridge, along with Wilson Meany, also invested in a smaller 82-unit development in San Mateo called The Morgan at Bay Meadows, another pedestrian and transit-oriented development in the works.