Sac Bounces Back as Multifamily Investors Capitalize on Growth

SACRAMENTO—Hit hard during the economic downturn, the Sacramento market is in the midst of a comeback. It is in the top tier in terms of highest annual effective rent growth, making this an attractive market for multifamily investors.

Los Angeles-based private equity real estate firm, Trion Properties, capitalized on the growth of this region and repositioned two value-add Sacramento multifamily assets within a few short years. The two dispositions include Sierra Village, a 185-unit garden-style apartment community, and Regalia Crest, a 128-unit multifamily asset, for a total consideration of $25.5 million.

Trion Properties purchased Regalia Crest and Sierra Village in 2013 and 2014, respectively, for a total of $14.2 million. Trion doubled the net operating income for Sierra Village and more than doubled the value of Regalia Crest.

“The Sacramento market, which was hit pretty hard during the recession, has experienced tremendous recovery over the last several years, and investors are taking note,” says Max Sharkansky, managing partner of Trion Properties. “Investor groups are flocking to the region as multifamily demand continues to rise, and Sacramento remains the leader in the nation for the highest annual effective rent growth. Based on these market dynamics, we recognized that now was the time to seize the opportunity of the current bull market and sell these assets.”

Sharkansky explains that Trion Properties recognized the value potential of this market early on in the recovery cycle, which allowed the firm to capitalize on the rapid growth in the region and obtain a premium price for both of these assets.

“These investments were well aligned with our strategy of acquiring value-add, distressed multifamily assets in markets with strong employment drivers and rent growth,” Sharkansky tells GlobeSt.com. “Our ability to double our net operating income at Sierra Village and more than double the value of Regalia Crest speaks to the strength of the recovering Sacramento market, as well as our property management platform in aggressively renovating and repositioning these properties in order to generate significant value.”

Trion Properties sold Sierra Village, a 1980s-garden-style apartment community located in the North Highlands submarket at 5146 Jackson St., for $15.5 million. Acquired in January 2014 for $9.3 million, Sierra Village was neglected during its prior ownership and presented a strong opportunity for deep value creation, according to Sharkansky.

“This asset had endured a foreclosure during the downturn, and was being managed by a Texas-based company that was unable to realize its potential,” he says. “We understood from the start that implementing a strong management strategy would be critical in order to improve operations at the property. Our investment strategy was to optimize this asset by executing aggressive capital improvements, which included an extensive interior gut renovation. We implemented a series of interior renovations and effective hands-on management to maximize the asset's operational efficiencies, bringing the asset up to nearly full occupancy and drastically increasing cash flow.”

Interior renovations included new kitchen appliances, vinyl plank flooring, faux granite countertops, new bathroom vanities, new fixtures and lighting to modernize each unit. Within less than three years, Trion Properties had fully repositioned and stabilized the property, doubling the asset's net operating income from $500,000 to $1 million, at a 98% occupancy.

Marc Ross of CBRE represented Trion Properties as the seller and Oracle Properties Development as the buyer in this transaction.

Regalia Crest is located at 3536 Watt Ave. Trion initially purchased the asset in April 2013 for $4.9 million and sold it for more than double its initial purchase price three years later, at $10 million. Regalia Crest was approximately 60% vacant at the time of acquisition and required an extensive renovation of both the common areas and interior units. The capital improvements included new flooring and kitchen appliances as well as new paint to the exterior.

“We immediately addressed deferred maintenance items and integrated a comprehensive renovation plan to significantly enhance the appeal of the property,” notes Sharkansky. “By performing these much-needed renovations, we were able to bring the property's occupancy rate from 40% up to 94%, further stabilizing the asset and increasing net operating income. This resulted in an attractive property with strong in-place occupancy, which garnered tremendous interest from investors.”

Nate Oleson at ARA Newmark represented Trion Properties as the seller in this transaction. The buyer was a Bay Area-based company.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.

SACRAMENTO—Hit hard during the economic downturn, the Sacramento market is in the midst of a comeback. It is in the top tier in terms of highest annual effective rent growth, making this an attractive market for multifamily investors.

Los Angeles-based private equity real estate firm, Trion Properties, capitalized on the growth of this region and repositioned two value-add Sacramento multifamily assets within a few short years. The two dispositions include Sierra Village, a 185-unit garden-style apartment community, and Regalia Crest, a 128-unit multifamily asset, for a total consideration of $25.5 million.

Trion Properties purchased Regalia Crest and Sierra Village in 2013 and 2014, respectively, for a total of $14.2 million. Trion doubled the net operating income for Sierra Village and more than doubled the value of Regalia Crest.

“The Sacramento market, which was hit pretty hard during the recession, has experienced tremendous recovery over the last several years, and investors are taking note,” says Max Sharkansky, managing partner of Trion Properties. “Investor groups are flocking to the region as multifamily demand continues to rise, and Sacramento remains the leader in the nation for the highest annual effective rent growth. Based on these market dynamics, we recognized that now was the time to seize the opportunity of the current bull market and sell these assets.”

Sharkansky explains that Trion Properties recognized the value potential of this market early on in the recovery cycle, which allowed the firm to capitalize on the rapid growth in the region and obtain a premium price for both of these assets.

“These investments were well aligned with our strategy of acquiring value-add, distressed multifamily assets in markets with strong employment drivers and rent growth,” Sharkansky tells GlobeSt.com. “Our ability to double our net operating income at Sierra Village and more than double the value of Regalia Crest speaks to the strength of the recovering Sacramento market, as well as our property management platform in aggressively renovating and repositioning these properties in order to generate significant value.”

Trion Properties sold Sierra Village, a 1980s-garden-style apartment community located in the North Highlands submarket at 5146 Jackson St., for $15.5 million. Acquired in January 2014 for $9.3 million, Sierra Village was neglected during its prior ownership and presented a strong opportunity for deep value creation, according to Sharkansky.

“This asset had endured a foreclosure during the downturn, and was being managed by a Texas-based company that was unable to realize its potential,” he says. “We understood from the start that implementing a strong management strategy would be critical in order to improve operations at the property. Our investment strategy was to optimize this asset by executing aggressive capital improvements, which included an extensive interior gut renovation. We implemented a series of interior renovations and effective hands-on management to maximize the asset's operational efficiencies, bringing the asset up to nearly full occupancy and drastically increasing cash flow.”

Interior renovations included new kitchen appliances, vinyl plank flooring, faux granite countertops, new bathroom vanities, new fixtures and lighting to modernize each unit. Within less than three years, Trion Properties had fully repositioned and stabilized the property, doubling the asset's net operating income from $500,000 to $1 million, at a 98% occupancy.

Marc Ross of CBRE represented Trion Properties as the seller and Oracle Properties Development as the buyer in this transaction.

Regalia Crest is located at 3536 Watt Ave. Trion initially purchased the asset in April 2013 for $4.9 million and sold it for more than double its initial purchase price three years later, at $10 million. Regalia Crest was approximately 60% vacant at the time of acquisition and required an extensive renovation of both the common areas and interior units. The capital improvements included new flooring and kitchen appliances as well as new paint to the exterior.

“We immediately addressed deferred maintenance items and integrated a comprehensive renovation plan to significantly enhance the appeal of the property,” notes Sharkansky. “By performing these much-needed renovations, we were able to bring the property's occupancy rate from 40% up to 94%, further stabilizing the asset and increasing net operating income. This resulted in an attractive property with strong in-place occupancy, which garnered tremendous interest from investors.”

Nate Oleson at ARA Newmark represented Trion Properties as the seller in this transaction. The buyer was a Bay Area-based company.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.