MILLBRAE, CA-Waterstone Millbrae, a 136-unit, 114,440-square foot multifamily property in this supply constrained San Mateo County market has changed hands for $33.78 million, according to Marcus & Millichap, which brokered the deal. Located 15 miles south of San Francisco, the property was built in 1971, was recently remodeled and is approximately 95% rented. The price equates to $248,400 per unit and $295 per rentable square foot.

The buyer assumed $23.77 million in combined first- and second-mortgage financing. The 10-year fixed-rate financing has a 30-year amortization, a blended interest rate of 5.7% and a loan-to-value of 70%. The capitalization rate for the new owner is 5.65% based on trailing three-month NOI, according to Marcus & Millichap, whose M&M Capital Corp. affiliate assisted the buyer with the financing.

The new owner is a private Bay Area family with an international connection that exchanged into the property, according to M&M. The county lists several related LLCs as the new owner: OR Property Holdings, MBOR Property Holdings, GOR Property Holdings and VOR Property Holdings. The agent for all of the entities is Marissa Reyes of 329 Alta Mesa Dr. in South San Francisco; she could not be reached for comment.

“This institutional-quality property was purchased by a private investor who needed our help presenting their qualifications to Fannie Mae,” says M&M Capital Corp. senior director Marshall DeWolfe.

The seller was Pacific Property Co., a Palo Alto, CA-based company that was an active buyer prior to the credit freeze and the recession but has been in liquidity more, quietly selling several properties over the past 18 months. Pacific Property Co. paid $25 million for the property in January 2006 and proceeded to renovate the property. Steve Weilbach, responsible for all of the firm’s acquisition and disposition activity, was not available Monday for comment.

Waterstone Millbrae offers one- and two-bedroom floor plans averaging 841 square feet. Community amenities include a swimming pool and spa, a cardio-fitness center, clubhouse and abundant parking. Located at 509 Poplar Ave., the property is approximately one mile from the Millbrae Caltrain/BART station and is close to interstate 280 and 380, and El Camino Real [State Route 82].

The listing brokers were multifamily specialists Stan Jones and Sal Saglimbeni, respectively executive vice president and associate vice president in M&M’s Palo Alto office. Jones tells the Waterstone deal is “an affirmation of a trend in which people are looking very heavily toward the location and the physical plant—things we got away from in the Heyday when everyone was trying to garner yield regardless.”

Jones, who has typically worked with large institutional buyers and sellers such as Wall Street investment banks and publicly traded real estate companies in recent years, says the buyer of Waterstone is also reflective of a trend. “Our transaction volume fell from 56 deals in 2007 to 28 deals in 2008 to probably 14 in 2009,” Jones says. “Of those 14, probably 12 will be private-client driven.”

In general, he says cap rates are trending downward due to “more definition in the market, fewer sellers and a decrease in interest rates.” In addition to that, he says Millbrae generally garners a 75-basis-point cap rate premium compared to San Jose or Oakland because of its location on the San Francisco Peninsula.

“Despite this being one of the toughest economic periods in recent memory, well-located, well-maintained properties are continuing to drive strong interest among many buyers,” says Jones. “Waterstone Millbrae satisfied both criteria.”

Pacific Property was an active buyer up until late 2007; it has been selling ever since, having quietly unloaded 10 properties since that time, according to Real Capital Analytics. In addition to Waterstone Millbrae the company has sold five apartment properties in the past year, according to RCA, three in Southern California and two in the Seattle area. The Seattle properties traded for more than Pacific Property acquired them for while the Southern California properties sold for less.

In July 2009, Pacific Property sold for approximately $5.5 million a 69-unit property in the Seattle area that it purchased in 1997 for $3.3 million. In December 2008, it sold for $30 million two properties in West Covina, CA–1828 E Thelborn St and 1829 E Workman Ave–that it acquired in November 2004 for approximately $37 million. In October 2008, it sold for $36.5 million a 135-unit property in Downtown Seattle that it acquired in September 2005 for $28.2 million. In September 2008, it sold for approximately $9 million a 72-unit property in Oceanside, CA, that it acquired November 2005 for $11 million.

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