Soma Capital Partners Buys Sacramento Apartment for $57M
Located in Midtown Sacramento, the 75-unit property opened in 2021 and is 95% leased.
Soma Capital Partners, in partnership with a vehicle managed by Argosy Real Estate Partners, has acquired 1430 Q Street Apartments in Midtown Sacramento for $57.1 million. The property opened in 2021 and is 95% leased. It features 75 luxury apartment units, 8,700 square feet of ground floor retail and is walking distance to several amenities, including restaurants, retail and entertainment venues.
Soma Capital Partners acquired the property as a core-plus investment. The deal included a 99-year sale-leaseback with iStar Financial’s SafeHold REIT. Tye Palonen represented SafeHold in the transaction. Scott MacDonald and Jason Parr from Cushman & Wakefield represented the sellers on the transaction. Chris Botsford and Rene Alvarez with Walker & Dunlop provided loan advisory services to secure leasehold financing for the property.
Last year, Sacramento took the lead in the apartment recovery, along with a slew of other West Coast cities. West Coast mid-size cities took the lead in Q1 rental markets, according to an analysis by RENTCafe.com. The survey pointed to the hottest six of the nation’s 125 rental markets as being in or near the West Coast: Northern California’s Central Valley; Spokane, WA; Boise, ID; Sacramento, CA; Southern California’s Inland Empire; and Eugene, OR.
For Sacramento, the growth came from people leaving the more expensive Bay Area market, which became a common trend during the pandemic. Renters are looking to get more square footage or more amenities for the same price as in larger metros.
To keep up with demand, some developers are repurposing dated office product into apartments. A report last year from Marcus & Millichap suggests that challenges in the office market and a dearth of apartments could create an opportunity for apartment redevelopment. The office market across the country has been severely impacted by the pandemic, and Sacramento is no different. The market has a record level of sublease supply—driven even higher in the second quarter by Sutter Health, which placed 200,000 square feet of sublease supply on the market. So far, there has been limited demand for the sublease stock, and Marcus & Millichap notes few executions of subleases since the start of the pandemic.