Pacific Property Picks Up 118 Units for $50M

The Property is located at 501 Forest Ave., roughly one block from University Avenue, the main road into Stanford University. Amenities include a swimming pool, rooftop garden, secured parking garage, fitness center and recreation room. The unit mix is primarily one-bed, one-bath and two-bed, two-bath units, but also includes four 2,200-sf penthouse units on the top floor. Pacific has selected FPI Management to manage the property.

Pacific acquisitions manager Eric Schrumpf tells GlobeSt.com the property is 100% leased. Pacific plans to inject a "modest" amount of additional capital into Forest Towers for a "cosmetic repositioning" of the asset.

"Although the property currently achieves rents that are on par with the best assets in the market, Pacific expects to enjoy meaningful upside in rents as the Bay Area recovery continues to gather steam and more aggressive management practices are implemented," Schrumpf says. Forest Towers current average rental rate is $2.66, "which iscertainly well below the levels this property was achieving at the peak of the market in 2000," he says.

The acquisition of Forest Towers is Pacific's fifth major acquisition in the San Francisco Bay Area since the spring of 2005. Most recently, in late April, Pacific paid $39.7 million for the 230-unit Sage at Cupertino in a joint venture with Capri Capital partners. In January, Pacific closed on the 136-unit Townsquare in Millbrae for $25 million, and in December 2005 it paid $25.25 million for the 198-unit French Village and Normandy Square communities in Belmont.

In the past year, privately owned Pacific has spent $900 million on 30 apartment communities in its major west coast markets, making Pacific one of the most active investors in the west. The company is relatively new to the high-rise residential market, however, with only one other such property in its portfolio.

"A majority of our product is garden-style, so this is a bit of a departure," Schrumpf says. "But as you get into more dense urban environments, you are going to start to pick up these type of buildings as well, and that's what is happening."

Despite the uniqueness of the property relative to the garden-style nature of its portfolio, Schrumpf says the company has no plans to convert the property to condominiums. "We bought this property on its potential as a rental apartment property," he says. "Long term, who knows?"