Downtown Hayward Renaissance Grabs Buyer’s Attention

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HAYWARD, CA—Companies located in Hayward have raised more than $450 million in venture funding–greater than Portland, OR and San Antonio–demonstrating strong investor confidence that this market will flourish. Trion Properties likes that level of confidence so much that it has acquired another multifamily asset.

The firm recently purchased Villa Morada Apartments, an 89-unit multifamily community, for $25 million. The property is located at 1180-1182 East St.

This acquisition brings the total number of Bay Area assets owned by Trion Properties to four. The firm recently sold Cinnamon Apartments, a 30-unit apartment property located 0.1 mile from Villa Morada Apartments, after a strategic rebranding and three-year hold.

“The city of Hayward perfectly aligns with our firm’s investment strategy of targeting markets with strong multifamily fundamentals and growth potential, which was proven when we brought Cinnamon Apartments full cycle earlier this year,” says Max Sharkansky, managing partner at Trion Properties. “Known as ‘the Heart of the Bay,’ Hayward is located in the geographical center of the technology capital of the world. The market benefits from close proximity to high-wage jobs in Oakland, San Francisco, Fremont and Palo Alto, and the convergence of four major thoroughfares providing residents easy access throughout the region.”

Built in 1969, Villa Morada Apartments is located in an opportunity zone in downtown Hayward, within short walking distance to one of the city’s two BART stations, retail and restaurants. Sharkansky also notes that downtown Hayward is experiencing a renaissance.

In addition to being revitalized recently with new shops, a movie theater, city offices and restaurants, the library is undergoing a major renovation. The 21st Century Library and Learning Center at 58,000 square feet will be one of the largest net-zero-energy public buildings in the country. The completed project is poised to be the new cultural, educational and civic hub of the city.

Pointing to data from Zillow and federal government, median home values in Hayward have risen 78% during the last five years–reaching more than $650,000 last year.

“The value proposition of apartment renting in the market is stronger as rising home prices in this market are making homeownership increasingly difficult for residents to afford,” Sharkansky adds.

He notes that while the city implemented a rent stabilization ordinance while Villa Morada Apartments was being marketed, this did not detract from the appeal of the asset based on its strong in-place cash flow, cap rates and inexpensive debt.

The firm was also drawn to the asset due to its Spanish-style design and unique features including oversized balconies and penthouse rooftop patios with Bay views. Trion will implement its value-add improvement strategy with the property, including renovations to the interiors as units turn. These interior upgrades will include adding new washer/dryers, quartz countertops, new flooring, cabinets, smart locks, bathroom vanities, lights and plumbing fixtures throughout.

“There were a few vacant units upon our purchase of the property, so we’ve been able to begin renovations on those units now. As units turn, we anticipate it will take approximately three years for all renovations to be completed,” Farhan Mahmood, managing director of acquisitions at Trion Properties, tells GlobeSt.com. “Our strategy is to take B and C properties, and upgrade them to the top class-B plus multifamily assets in their markets. While there are a few class-A properties in Hayward, Villa Morada Apartments offers many of the same amenities at a more affordable price point. In addition to its oversized floorplans and balconies, the community will stand out as the only class-B apartment community in Hayward with washer/dryers in each unit.”

The firm will also make light exterior upgrades to improve hallways, lighting, branding and signage. Exterior renovations also include new windows, paint, landscaping, decks, concrete parking, secured access, pool rehab and roof replacement when needed. In addition, Trion will upgrade lighting and flooring in interior hallways, install Spanish tile in the entryways, renovate the leasing office, add pool furniture and upgrade exterior amenities.

While select units at Villa Morada Apartments have been upgraded with new flooring, interiors have been mainly untouched since construction. With the upcoming improvements to the property and based on comparable properties in the area, Trion anticipates being able to quickly bring rates up to market.

“This asset ideally matches our investment criteria of well-located assets with strong value-add potential,” Sharkansky notes. “The capital improvements we are planning will help meet the demands of renters seeking an attractive yet affordable alternative to homeownership and apartment rentals in pricier nearby markets.”

Villa Morada Apartments consists of two buildings featuring a variety of one- and two-bedroom units, as well as one three-bedroom unit. Both buildings have covered surface parking and a rooftop deck. Additional amenities include a swimming pool, laundry facilities, outdoor barbecue and picnic areas.

In addition to Villa Morada Apartments, Trion’s current multifamily portfolio includes Parc88, an 88-unit garden-style multifamily community in Fremont, CA; Metro 77&85, a 146-unit multifamily community near downtown San Leandro; and Metro348, a 38-unit multifamily community within walking distance to the San Leandro BART station.

“We’re bullish on growing our multifamily portfolio in the East Bay, based on how well our properties have operated in the submarket,” Mahmood tells GlobeSt.com. “The Bay Area has one of the strongest job markets in the world and the East Bay remains the most affordable pocket in that region, while still offering easy commutes to San Francisco and Silicon Valley. We anticipate that the multifamily market will remain strong, even in the face of a potential downturn.”

Brett Betzler of Moran & Company represented both Trion Properties as the buyer in the acquisition and Klingbeil Capital Management as the seller.

Trion is a private equity real estate firm that specializes in value-add multifamily investments in niche western markets.