WALNUT CREEK, CA—Continuing its expansion into the Bay Area, Decron Properties has acquired a 251-unit apartment portfolio in Walnut Creek for $63 million.
The portfolio consists of the 152-unit Creekside Glen complex and the 99-unit Cypress Creek complex, both located within a mile of downtown Walnut Creek and adjacent to the Walnut Creek BART Station. Decron plans to invest up to $16 million to upgrade the early 1960s-vintage properties. The purchase falls on the heels of Decron's recent acquisition of a 187-unit garden-style apartment community in Mountain View for $86 million. The Los Angeles-based investment firm is nearly halfway to its goal of buying $350 million of apartment properties in the San Francisco Bay Area this year.
The Walnut Creek portfolio is in keeping with Decron's strategy of acquiring assets that have upside potential in attractive suburban areas within commuting distance of markets with strong job growth. Walnut Creek has strong demographics, good schools and a vibrant downtown that is attracting young families and Millennials who work in the Bay Area.
“We've watched the run-up in rents in San Francisco and renters are simply priced out,” said Decron CEO David Nagel. “The East Bay is poised to take advantage as the more affordable option and Walnut Creek is the best of the East Bay.”
Nagel said that Decron has been attempting to break into the Bay Area market for more than a year. However, there are few properties listed for sale, and with little available land, new development is rare. Over the past five years, absorption in Walnut Creek has outpaced new supply, driving the submarket's vacancy rate down to 2% and pushing up rents nearly 15% in the year ending 4Q14, according to Marcus & Millichap.
Current in-place rents are 20-25% below market and premiums can be achieved with thoughtful capital improvements and proper management, according to Nagel. Both properties have been virtually untouched in the 50 years since they were built.
Decron plans to renovate the interior with luxury finishes, providing full-size washers and dryers to each unit, enhancing community facilities and modernizing the exterior. The upgrades include installing high-quality flooring, new cabinets, stone countertops, stainless steel appliances and six-panel doors, creating a resort-style swimming pool and Bar-B-Que areas and adding resident lounges and leasing offices.
The brokerage assignment for the portfolio was handled by the Jones-Saglimbeni Team of Institutional Property Advisors.
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