SAN FRANCISCO-The locally based Prado Group has acquired a245-unit REO portfolio of apartments from lender UBS in a jointventure with Angelo Gordon & Co. Managing director Stephen Pughof Alain Pinel, who marketed the portfolio along with seniordirector Mark Bonn, tells GlobeSt.com that the Prado Group JVsubmitted the winning bid among 17 prospective buyers.

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The specific sales price was not disclosed, but Pugh says thatthe four-building portfolio, which was on the market at an askingprice of $34 million, closed at a price approximately 10% below theasking. He says that Prado won the deal not just on price but alsobecause the Pinel brokers and the seller felt that the localcompany understands both the market and the San Francisco rentcontrol regulations that govern the units.

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The portfolio includes buildings at 825 Post St., 1008 LarkinSt., 750 O’Farrell St. and 72 Gough St. Pugh tells GlobeSt.com thatit generated "a tremendous amount of interest" from a diverse groupof bidders from throughout the US that included private equitygroups, institutional investors and others.

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The foreclosed portfolio was one of the largest in the city togo on the market in years. The last time before this that anapartment portfolio of this size went on the market in the city wasclose to 10 years ago, Pugh pointed out when the deal went tomarket.

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The factors generating such strong investor interest includedthe prime location of the buildings near Downtown San Francisco andthe favorable pricing in today's market, according to Pugh. Anotherreason the portfolio drew broad interest is that it offered theprospect of acquiring units in a market where barriers to entry aresome of the highest in the country.

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Dan Safier, president of the Prado Group, described theacquisition as "quality housing properties in well-located SanFrancisco submarkets," in the company's announcement of the deal.The properties are all close to jobs and public transit and "fitsquarely within our strategy to acquire and develop residential andmixed use properties in vibrant, supply-constrained, 24/7 marketslike San Francisco," Safier said.

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The portfolio hold the potential for future rent growth becauseof below-market rents as a result of San Francisco’s rent controlordinance, which allows units to be marked to market when they arevacated, according to Pugh. He also noted that the asking price waswell below replacement cost, which is now more than $300,000 perunit for multifamily development in San Francisco.

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