SUNNYVALE, CA-The 410-unit Arches apartment community here has changed hands for $51 million. The new owner is San Diego-based MG Properties. Silicon Valley-based Blossom Oaks Company was the seller.The 37-building complex is located at Highway 101 and the Lawrence Expressway, amongst several large technology employers. Built in 1972, it was 97% leased when the sale closed late last week. Amenities include remote access security gate, Spanish tiled pitched roofs, two swimming pools, saunas, recreation rooms, san volleyball courts and a children’s playground. William Huberty and Doug Yoder of CB Richard Ellis had the disposition assignment. Huberty tells that SIH had held the asset for more than 25 years and did not have the property on the market. MG’s capitalization rate on the investment is 6% based on in-place rents, says Huberty, who heads up CB Richard Ellis’ Multi-housing Investment Group in San Francisco. Included in the purchase price is a $2-million penalty MG paid in order to pre-pay the loan SIH had on the property. Huberty says it behooved MG to pay the penalty because it received a very good deal on a new Freddie Mac loan through Irvine, CA-based Sierra Capital. MG Properties chief executive Mark Lieberman tells the $38.5-million loan has a variable interest start rate of 3.33% with a ceiling cap of 6.15%.MG Properties manages over 50 apartment communities comprising about 4,820 apartment units in San Diego County, Inland Empire, Northern California and Phoenix. During the past seven years, the company’s main focus has been the acquisition of value-added properties through newly established partnerships. The company acquired 1,100 units in nine properties in 2003 and this year plans to acquire over 1,800 units. The Arches acquisition is MG Properties’ first acquisition in the Silicon Valley, however MG anticipates acquiring several more properties in the Bay Area and Northern California region on behalf of its investors. Lieberman says the acquisition represents a major step in MG Properties’ strategy to geographically diversify its portfolio and redeploy equity from asset sales it has targeted. The Arches acquisition was funded primarily with from the $24.1-million sale of the 150-unit, Libby Lake Apartments in Oceanside (San Diego County), CA on a tax-deferred basis. MG’s typical hold in three- to five years, says Lieberman.

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