Pacific Property Re-Enters NorCal With $31M Buy

SUNNYVALE, CA-Pacific Property Co. is adding to its Northern California apartment portfolio after a two-year hiatus. The Palo Alto-based apartment investor recently acquired the 124-unit Alexan Villa Del Sol Apartments here from Trammell Crow Residential for $31.1 million or $250,806 per unit. The complex was completed in 2001 and is one of the higher quality assets in the area with class A interior appointments. In-unit amenities include washers and dryers and air-conditioning. Common amenities include a clubhouse, swimming pool, spa, business center and gated, underground parking. Pinnacle Realty Management, which manages close to 2,000 units for Pacific in Northern California, will provide property management services for the asset.Pacific Property’s CFO Steven Weilbach tells GlobeSt.com the newer, high-end building was purchased in an off-market transaction for the company’s core portfolio and is planned as a five-year hold. He says the going-in cap rate is sub-5%, a figure he expects to rise modestly during the first two years of ownership, mostly through annual rent growth.”We think it’s a good building at a good price,” Weilbach says. “Even at $250,000 per unit, it’s still below replacement cost, which is closer to $275,000 or $300,000 per unit because of the lack of land and what it costs to build in Northern California.”Pacific was an aggressive buyer in Northern California in its early years, acquiring over 3,000 units between 1998 and 2001. Following the economic decline in Northern California brought on by the demise of the dot-com industry and 9/11, Pacific moved its investment focus to Southern California. Late in 2004, Pacific made the call that the Northern California market had hit bottom, and began looking hard for additional acquisitions, both core and value-add deals. During 2005 Pacific plans to acquire an additional $300 million to $400 million of value add and core assets throughout California and the Pacific Northwest.Pacific Property still owns about 2,000 units in the Northern California market, but like most others is finding it hard to add to it because of condominium converters, who will pay the equivalent of a 2% to 3% cap rate to secure a property these days. It is a love-hate relationship for Weilbach, given the fact that he is getting ready to roll more of the Northern California properties he acquired several years ago. “We’re selling to condo converters,” he says.