$33M Buys Presidio Apartment Homes

OCEANSIDE, CA-The nation’s fourth largest apartment REIT, known as United Dominion Realty Trust, has added a 264-unit local asset and an adjacent 3.5-acre parcel to its portfolio, which is currently comprised of 75,809 apartment units. United Dominion has shelled out $33.3 million for the property, known as Presidio Apartment Homes, which stands at 4401 Mission Ave. Although the seller was not disclosed, Sares-Regis purchased the asset in 2000 and was managing the complex at the time of sale. Built in 1987, Presidio is a low-density, garden-style property that underwent a $1.9-million renovation in recent years. The improvements that were implemented include upgrades to the clubhouse and leasing center, the pools and tennis courts and the unit interiors. The seller was motivated to divest of the asset because “they had created good value through their rehabilitation of the property and they saw an opportunity in the market to take advantage of the value that they had created,” says Scott Davis of Moran & Co. Davis, along with his Moran & Co. colleague Mary Ann King, acted on behalf of the seller. The asset, which had been on the market for approximately six weeks, attracted a “very strong” interest level, according to Davis. He tells GlobeSt.com that there were 19 offers on the property and attributes the high level of interest to various factors, including the low density of the project and the potential to build more units. In regards to the project’s density, Davis says it “is about 7.7 units to the acre and there are many single-family home tracts today in Southern California that are built to that density, if not higher.” The adjacent parcel that was included in the sale was another attractive factor for prospective buyers, as the vacant site is zoned for up to as many as 50 new apartment units. “They saw the chance to create a unique environment through continued upgrades at this property that just couldn’t be created anywhere else in town,” says Davis of the prospective buyers. And the area market itself boasts a supply-constrained, demand-heavy environment that is favorable to apartment owners. While the majority of existing, large apartment assets continue to be sold to condominium converters, the development of new apartment stock here is fairly limited. “I think the combination of those two things means that the apartment market itself is going to get stronger and stronger,” Davis tells GlobeSt.com. On the demand side, meanwhile, “there is lots of new employment growth happening in North San Diego County,” Davis notes. Recent examples include IDEC Pharmaceuticals’ 1.3-million-sf campus that is rising a half mile from Presidio that will house 2,400 employees and Ocean Ranch Corporate Center’s 400-acre business park currently under development in Oceanside. Matthew Akin, vice president of United Dominion, says his company sees “long-term value” in Presidio because of “San Diego’s concentration in fast growing areas of the economy, such as defense, biotech and telecommunications.” The sale of Presidio involved $13.3 million in tax exempt bonds with a fixed interest rate. As a condition of this financing, 23% of Presidio’s units must be set aside for tenants with limited incomes. However, the bond will expire in 2012 and that restriction will then be lifted.