M&T Provides $61M Loan for San Jose Luxury Apartment Complex
Financing helped JRK Property Holdings acquire the 301-unit apartment complex
By Brian Pascus August 25, 2023 10:15 am
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JRK Property Holdings, a Los Angeles-based real estate investment firm, has acquired a 301-unit apartment complex in San Jose, Calif., via its value-add fund, for $93.5 million, with the help of $61 million in financing.
The financing — a 10-year, fixed-rate Freddie Mac (FMCC) loan at a 5.37 percent interest rate-– was supplied through a joint arrangement between Institutional Property Advisors Capital Markets and M&T Bank (MTB).
Institutional Property Advisors, a division of Marcus & Millichap (MMI), used the team of Brian Eisendrath, Cameron Chalfant and Jake Vitta to arrange the financing. The group has been tapped to market the property for sale on behalf of the seller. CoStar (CSGP) listed the seller as Fairfield Residential.
JRK Property Holdings acquired the Duo Apartments in San Jose out of the firm’s $1 billion multifamily value-add fund, JRK Platform V, which has been targeting multifamily assets built after 1990 for investment purposes. The fund has so far acquired three assets in Florida, Kansas and California.
It is the firm’s seventh acquisition in Northern California, according to James Broyer, CFO at JRK Property Holdings. He added that the debt on the deal is accretive to the financing because the 5.37 percent interest rate is lower than the 6 percent cap rate.
“It’s a market we’ve always been very comfortable operating in,” he told CO. “Because we have debt that is at 5.37 [percent], we know coming out of the gates that we’ll be achieving healthy cash-on-cash, and just have a strong DSCR [debt service coverage ratio] on the asset.”
JRK has also been investing out of its $200 million MF Opportunities III fund, a portfolio that targets value-add multifamily assets that were built prior to 1990.
“As well-capitalized buyers with predominantly long-term, fixed rate financing on our existing portfolio, we are excited to have $1.1 billion of dry powder available to acquire high-quality real estate at incredible values as owners face equity shortfalls from cash-in refinances or otherwise capitulate to cap rate expansion,” said JRK President Daniel Lippman in a statement.
Located at 6670 Emergent Way in southern San Jose, the Duo Apartments are positioned for easy transportation access to downtown San Jose and the nearby San Francisco Bay Area. The property is also near both the Kaiser Permanente San Jose Medical Center and the Blossom Hill Caltrain Station (a mere three stops from downtown San Jose).
Trains, buses and light rail surround the property and provide access to San Francisco, while an upcoming development near the Diridon Caltrain Station is expected to bring thousands of transit-oriented jobs and create additional demand for local housing at the property, according to JRK Property Holdings.
“It’s got a great employment base nearby — whether it’s Adobe, Western Digital, IBM, Cisco — it’s a lot of household name companies that provide steady employment with these residents,” said Broyer. “To us this felt like a very safe bet in buying an asset that’s less than two years old from when it was constructed.”
The Duo Apartments have experienced strong demand since opening in 2021 — the property was 97 percent leased upon closing, according to JRK. Featuring one-, two-, and three-bedroom units in a collection of two- and four-story buildings, the Duo Apartments include luxury finishes and popular amenities like a fitness center, co-working spaces, a high-definition golf simulator and an outdoor pool with cabanas.
JRK Property Holdings was founded in 1991 and currently has more than $7 billion assets under management. The firm specializes in value-add opportunities and carries a portfolio of more than 30,000 multifamily units across 25 states.
Brian Pascus can be reached at bpascus@commercialobserver.com
