SAN FRANCISCO-The locally based Prado Group has acquired a 245-unit REO portfolio of apartments from lender UBS in a joint venture with Angelo Gordon & Co. Managing director Stephen Pugh of Alain Pinel, who marketed the portfolio along with senior director Mark Bonn, tells GlobeSt.com that the Prado Group JV submitted the winning bid among 17 prospective buyers.

The specific sales price was not disclosed, but Pugh says that the four-building portfolio, which was on the market at an asking price of $34 million, closed at a price approximately 10% below the asking. He says that Prado won the deal not just on price but also because the Pinel brokers and the seller felt that the local company understands both the market and the San Francisco rent control regulations that govern the units.

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

The foreclosed portfolio was one of the largest in the city to go on the market in years. The last time before this that an apartment portfolio of this size went on the market in the city was close to 10 years ago, Pugh pointed out when the deal went to market.

The factors generating such strong investor interest included the prime location of the buildings near Downtown San Francisco and the favorable pricing in today's market, according to Pugh. Another reason the portfolio drew broad interest is that it offered the prospect of acquiring units in a market where barriers to entry are some of the highest in the country.

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

The portfolio hold the potential for future rent growth because of below-market rents as a result of San Francisco’s rent control ordinance, which allows units to be marked to market when they are vacated, according to Pugh. He also noted that the asking price was well below replacement cost, which is now more than $300,000 per unit for multifamily development in San Francisco.