SAN CARLOS, CA—What with traffic snarls and lack of buildable land, transit-oriented projects continue to appeal to developers, investors and financiers in the Bay Area. Trestle Apartments, a multifamily/mixed-use property consisting of 202 units and 25,898 square feet of commercial space, is no exception. Located at 333 El Camino Real, Trestle features six residential buildings and two commercial buildings which flank the historic depot of the San Carlos Caltrain station.
With half of the buildings still under construction, a $103.77 million pre-stabilized construction take-out loan was needed. This loan is almost certainly the largest for a multifamily project in San Carlos and one of the largest in recent history on the Peninsula, GlobeSt.com learns.
NorthMarq arranged the financing for the borrower, a joint venture between Prometheus and Legacy Partners, through its in-house Fannie Mae production team. Nathan Prouty, senior vice president/managing director, Andrew Slaton, vice president and Briana Harney, vice president in NorthMarq Capital’s San Francisco office, facilitated the fixed-rate transaction structured with a 10-year interest-only term.
With access to both Caltrain and US 101, the location is convenient for households commuting either north to San Francisco or south to Silicon Valley, and is a short drive to major employers in the immediate area including Oracle, Electronic Arts and the Visa headquarters. Just one block away is San Carlos’ downtown area along Laurel Street, which is lined with popular restaurants, boutiques and daily needs retail.
“Transit-oriented projects have become increasingly desirable in urban in-fill markets, particularly in the traffic-congested San Francisco Bay Area where rush hour can easily double commute times in a car,” Prouty tells GlobeSt.com. “For example, the 25-mile commute from San Carlos to downtown San Francisco can become an hour-long drive which equates to the same time one might spend on Caltrain where they might catch up on work or relax on their way into the office.”
Apartment amenities include stainless-steel dishwashers, refrigerators, ranges and microwaves; patios/balconies, washers and dryers, keyless entry systems, Elfa closets, outdoor living space, LED lighting, NEST thermostats and EV charging stations. Community amenities include a Think Tank conference room, rooftop deck with al fresco dining, controlled access, Wifi in common areas, outdoor pool and lounge area, reserved parking spaces, Hub by Amazon 24/7 package pickup and a fitness center.
“This was a complex transaction on a property with four of eight buildings still under construction, on a ground lease, with significant commercial space and the NorthMarq team was able to close in a very short timeframe,” notes Eron Kosmowski, vice president of finance for Prometheus. “We appreciate what it took to pull this off and are very happy with the manner in how it got done. It was a real concerted effort by a group of creative and solution-oriented people to navigate an incredibly complex transaction with no shortage of moving parts.”
While the transit-oriented nature of this project was a factor in getting the loan done, quality of sponsorship between the two developers and Fannie Mae, along with the desire for new housing in the market were the main drivers behind the success of this financing, Prouty tells GlobeSt.com.
The tremendous growth of tech industries, including semiconductors, social media and cybersecurity, has underpinned an exceptional economic expansion for more than a decade, according to a recent report by Marcus & Millichap. Fueled by median home prices well out of reach of the average metro resident, these conditions have generated a severe housing shortage throughout the Bay Area. Developers have mostly focused on locations in North and Central San Jose along the VTA lines and urban Santa Clara. This year, the largest completion will be the second phase of Santa Clara Square, where more than 850 units will become available, joining retail and office space just off US 101.
Despite considerable and rising supply growth with overall deliveries reaching a new cycle high this year, vacancy has remained extremely tight, below 4% metrowide. Average rents have soared, particularly in more affordable areas such as North San Jose and Milpitas, where monthly rates have risen nearly 50% in ﬁve years. Increasing supply will likely cause minor upticks in vacancy in the short term, yet the overall lack of housing in the metro will support rental gains throughout the year, according to the report.