BRE Brings More Sacto Assets to Market

Neither the assets nor the seller are distressed. BRE announced its plan to exist the Sacramento some 18 months ago. BRE sold three Sacramento-area properties in the first half of last year at or below a 6% cap rate on trailing NOI. One year later, cap rates are cresting 7%, market sources tell GlobeSt.com.

The properties are free and clear of existing financing and being offered for sale on an all-cash basis, with the sale price to be determined by the market. Investors have the option to purchase both properties together or each property may be acquired separately. The lead broker on the disposition is ARA principal Mark Leary.

Current market cap rates are hard to determine these days because of a dearth of closed deals, and Leary could not be reached Friday for comment. The only recent possible comparable is BRE's sale of Quail Chase, a 90-unit property in Folsom in December that sold for $9.1 million, reportedly a 6.8% cap rate.

Arbor Point is a 20-building, 240-unit property built in 1987 on 20 acres at 9750 Old Placerville Rd. in Sacramento. Overlook at Blue Ravine is a 39-building, 512-unit property constructed in 1991 and 2001 on 39 acres at 1200 Creekside Dr. in Folsom. Both assets are approximately 93% leased.

While there are no official asking prices sources tell GlobeSt.com that BRE wouldn't be bringing the assets to market in this environment if it wasn't planning to meet the market. Marketing brochures for the assets say they can be acquired at a "significant discount to actual replacement costs," which is approximately $200,000 per unit in the Sacramento region, according to reports.

The per-unit prices for the Sacramento assets BRE sold in 2008 ranged from $101,000 per unit for the Quail sale, which was a 6.8% cap, to more than $150,000 per unit for its sale of the 260-unit Pinnacle at Blue Ravine in Folsom, CA, in July, which at the time was a 6% cap.

BRE Properties has been working to concentrate its portfolio in coastal, supply-constrained markets of California and Seattle. Despite that effort, BRE chief executive Constance Moore says rents will continue to decline this year and next.

"We believe we are looking at a negative rent curve for the next two years," Moore told analysts on its fourth quarter conference call. "All eyes are on the proposed government stimulus package. If it is successful helping to create jobs and grease the credit skids, it may soften the magnitude and duration of the pricing compression."