$88M Buys Luxury Apartment Tower for Condo Conversion

OAKLAND, CA-Essex Property Trust of Palo Alto has sold for $88 million the Essex at Lake Merritt, a 270-unit luxury waterfront apartment tower here that it completed in 2002. The buyer, a 50-50 joint venture of Lennar Communities and San Francisco-based condominium specialist Emerald Fund, plan to immediately begin flipping the units as condominiums.The two-building development is located at 17th Street and Lakeside Drive, behind the Lake Merritt Hotel. One of the residential towers is eight stories tall and the other 20 stories, and both are fully occupied. Common area amenities include a health club, swimming pool and clubhouse. Most of the units have floor-to-ceiling windows providing views of Lake Merritt, Downtown and the East Bay hills. The unit mix ranges from studios and lofts to one and two bedrooms. The asking price for the units will start in the $300,000 range and ramp up into the mid-$600,000 range. Additionally, there are eight 20th and 21st floor penthouses with wrap-around views for which the asking price will be at, or above, $1 million. Essex will continue on as manager of the property during the conversion and, having invested in the conversion prior to the sale, will receive a portion of the profits.The seller’s brokers were Richard Knutson, John Leyvas, Jr. and Bill Moison, all with Moison Investment Co., which has offices in San Leandro and Los Altos. Sources tell GlobeSt.com that Lennar and Emerald plan to invest an additional $15,000 to $20,000 per unit and flip the units over the course of the next two years. Per instructions from Lennar, Alastair Mactaggart of Emerald Fund declined to confirm the additional investment or reveal the expected return on investment.Essex acquired the land for the project in 1999 from a Korean-based investment group and developed it in a joint venture with Lakeshore Partners LLC, a private real estate development company based here that acted as development manager. It wasn’t immediately clear how much Essex paid for the vacant parcel that became the Essex at Lake Merritt, but at the time the estimated cost of the project was $40 million, according to published reports, and units were to rent for between $2 and $2.35 per sf.Mactaggart tells GlobeSt.com that Emerald Fund has developed some 1,300 condominium units in the Bay Area over the past five years. Last year, it began converting to condominiums Oceanview Village, a five-building apartment-over-retail development that it completed in 2002. “We leased up the first four buildings and then did not lease the fifth, we just converted it to condos and then worked out way backward through the project,” says Mactaggart, adding that there only a few units remaining to be sold.