TruAmerica Multifamily, the new investment firm formed by a team of apartment-industry veterans this past summer, has chosen a San Jose location close to BART for its first deal.
The company closed last week on Avenel, a 168-unit community a stone’s throw from the under-construction Berryessa BART station at 750 North King Road. The price was $38 million, or about $226,000 per unit, according to public records. Fairfield Residential was the seller.
“It was a perfect fit for what we do,” saidGreg Campbell, director of acquisitions for TruAmerica and a former VP of acquisitions for Archstone Residential. “We think we can take it to another level with some renovation capital, and transition it to a more transit-oriented community.”
TruAmerica was launched in July by Robert E. Hart, the former president of Kennedy Wilson Multifamily Management Group. The new firm is a joint venture with the Guardian Life Insurance Co. of America. Together, the group plans initially to invest $300 million into acquisitions, focusing on Class B or better apartments on the West Coast. TruAmerica co-invests capital and invests along with with third-party partners in its deals.
“California is a priority for us,” Campbell said. “The Bay Area we like a great deal, and so is Southern California.”
The transaction was arranged by Institutional Property Advisors, a Marcus & Millichap subsidiary. Salvatore Saglimbeni, Philip Saglimbeni and Stanford Jones were the brokers on the deal.
Investor interest in Silicon Valley multifamily has been exceedingly strong during the recovery on both the new-development and acquisitions sides, driven by the region’s strong jobs growth. In 2012, apartment tracker RealFacts recorded 16 apartment deals of 50 units or greater in Santa Clara County, with a total dollar volume of $933 million. That was up from eight transactions totaling $517 million in 2011.
Through the third quarter of this year, though, just three transactions of size were recorded in Santa Clara County, with a total dollar volume of $102 million, according to RealFacts. But that does not appear to be a sign of investor appetite slowing.
“There’s more capital chasing assets than assets to satisfy that capital,” Campbell said.
Indeed, Salvatore Saglimbeni said Avenel saw more than 20 interested parties and more than 10 offers. Driving the demand was a trifecta of assets: Proximity to BART, closeness to San Jose’s jobs-rich “Golden Triangle” district, and new construction slated to transform the adjacent San Jose Flea Market into a major new community.
“One of the consistent requests we get from prospective buyers is transit-oriented sites,” Saglimbeni said. “This is right there.”
Avenel was built in 1987 and is about 96 percent leased. It was last refreshed about five years ago, but TruAmerica intends to invest between $2 million and $3 million in interior, exterior and common-area renovations, Campbell said.
The area around the BART station is on deck to see a wave of new multifamily development — both for-sale and for-rent. But Campbell said the lower density of Avenel (it sits on about eight acres) sets it apart.
“We think there’s a lot of residents that like that low-density feel,” he said. “There’s a lot of space you don’t get with new construction.”
Going forward, Campbell said he expects regional rent growth to moderate from the very high levels in recent quarters, though he said it will still outpace inflation.”We think this will continue to be a strong market and create jobs,” he said. “San Jose has one of the highest occupancy rates in the country, and we think there’s a demand. We certainly want to put out more capital in the Bay Area.”
Saglimbeni said he expects investor demand to continue, especially in the Class B, value-add segment of the market.
“Anything built in 80s, 90s where there is a value-add story, will get a lot of demand,” Saglimbeni said. “New owners can come in and take those properties to a higher level, and achieve stronger rents. That doesn’t mean there’s not a core-asset demand. Across the board, there’s good demand.”