Apartments Sell in Millbrae, Cupertino

SAN FRANCISCO-Two apartment units in the region have changed hands for a combined $68 million. Pacific Property Co. of Palo Alto paid $39.7 million for a 230-unit property in Cupertino in a joint venture with Capri Capital partners while BayRock Residential of Emeryville paid $28 million for a 72-unit complex that it intends to convert to condominiums.

The Cupertino property, called Sage at Cupertino, was developed in 1969. Property features a swimming pool, fitness center, clubhouse, business center, a newly remodeled leasing center and covered parking. Pinnacle will manage the property. The seller, a joint venture of Wolff Co. of Arizona and William Lyon of Newport Beach, had largely completed a renovation of the property. Pacific plans to inject “a modest amount” of additional capital to complete the renovation.

Pacific Property expects to enjoy “meaningful upside” in rents without having to invest significant dollars in further upgrades as the Bay Area recovery continues to gather steam, according to Pacific’s acquisition manager Eric Schrumpf. “The property itself is in excellent condition given the recent renovation,” he says in a prepared sentence. “However, we believe that the full rent benefit of the rehab has not yet been realized.”

The acquisition is Pacific’s fourth significant addition in the San Francisco Bay Area since the spring of 2005. Most recently, in January, Pacific closed on the 136-unit Townsquare in Millbrae for $25 million. In December 2005, it paid $25.25 million for the 198-unit French Village and Normandy Square communities in Belmont.

Pacific Property Co. is a privately owned multifamily investment company looking to acquire apartment properties up and down the West Coast, with a focus on California and Washington. The company expects to close on another $50 million in local acquisition within the coming weeks.

The 72-unit Millbrae property, called Avalon Apartments, was built in 1989 and is located within walking distance of BART and Caltrain stations. The new owner, BayRock Residential, intends to convert the units to condominiums. The price equates to $388,888 per unit and $414 per sf.

The City of Millbrae is completely built out and the average price of a single-family home in the immediate area tops $1 million emphasizing the need for affordable housing in this submarket.

The three-story building has subterranean parking and 67,500 sf (net rentable), which gives it an average unit size of about 938 sf. The property offers a mix of one-bedroom (37%) and two-bedroom and two bath (63%) units, each equipped with a full-size washer and dryer, fireplace, and all kitchen appliances.

Curtis Gardner and Mark Leary of Arroyo & Coates Apartment Marketing Group, acted as advisors to both parties in the Millbrae deal. Leary also brokered the Cupertino deal.