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SEATTLE-Pacific Property Co. of Palo Alto has acquired 2900 on First, a well-leased 135-unit apartment property here that includes 14,000 sf of retail and 200 structured parking spaces in a seven-story building. The sale price was $28.25 million.

Built in 1989, the property was one of the first apartment buildings constructed following the city’s decision to create a 24/7 mixed commercial and residential neighborhood in Belltown. The seller, Equity Residential, acquired the property as a stabilized asset in 1996 for $11.75 million and invested another $3.25 million in the property over time.

Pacific Property CEO Al Pace tells he expects to push the investment’s sub-5% capitalization rate north of 6% within 18 months via renovations and rental increases. “Concessions and inventory are declining and so the actual rent growth–and, therefore, the NOI–is more significant than one might think,” says Pace. “We think there is $150 (per unit per month in rent) sitting on the table without doing anything to the property.”

Indeed, one of the listing brokers, CB Richard Ellis EVP Jon Hallgrimson, tells that when the property was brought to market in the spring, rental rates included two weeks free rent, “but by the time we called for offers in June, the entire market had filled up, there were no concessions and hefty rental increases.” Hallgrimson says he also sees opportunity to increase parking revenue.

Pacific Property now owns three apartment properties in the Puget Sound region and is in the process of acquiring a fourth. Most of the company’s value-add investments are underwritten as three-year holds, says Pace.

CBRE’s Frank Bosl co-listed the property with Hallgrimson.

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