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Dec. 31, 2013

TruAmerica Contiues to Grow with Two Class A Acquisitions

By Mike Ratliff, Senior Associate Editor

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The Vineyards

TruAmerica Multifamily is a step closer to reaching its goal of a $1 billion portfolio by mid-2015 thanks to its two most recent acquisitions—The Vineyards in Gilroy, Calif., and Arcadia Luxury Townhomes in Federal Way, Wash. The Los Angeles-based firm is a joint venture between Robert Hart and The Guardian Life Insurance Co. that launched in July 2013. It has been a busy first five months, as the company is on track to have a $500 million portfolio by its first birthday.

Last Friday, the firm announced the $38.3 million acquisition of The Vineyards, a 170-unit community located roughly 30 minutes from San Jose in Gilroy, Calif. In addition to being the largest and highest quality market-rate community in the submarket, the less than decade-old property offers a quick commute due to its central location between San Jose and Monterey, Calif. TruAmerica plans to continue expanding its footprint in the Bay Area, and had previously acquired a 168-unit community in San Jose for $38 million earlier this year.

The Vineyards was well taken care of by the seller and developer, Matteson Properties, and should enjoy future rent growth in Gilroy, which currently has an empty apartment pipeline. Amenities include a pool, fitness center and clubhouse. TruAmerica plans to make capital upgrades to unit interiors by replacing carpet in the living areas with plank flooring. Minor common area upgrades will include new pool furnishings, updated fitness center equipment and landscape improvements.

“We will dial it up a little bit. It fits our play of buying product a little bit below replacement cost,”  Robert Hart, CEO & President of TruAmerica tells MHN. “We are trying to build a cross section of apartments in the semi value-add space over the next two-and-a-half years. Major targeted metros range from San Diego County up through Seattle.”

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Arcadia’s Patio

And true to Hart’s words, TruAmerica announced its first acquisition in Washington yesterday with the $54 million purchase of Arcadia Luxury Townhomes. The 309-unit asset is located in Federal Way, Wash., about 20 minutes from Seattle. Hart is familiar with the submarket from his time as CEO & President of Kennedy Wilson Multifamily Management Group from 2000 to June 2013. While with Kennedy Wilson, Hart oversaw approximately 1,200 units in Federal Way (part of  the 12,o00 units Hart oversaw in the Western U.S.). The city’s market vacancy rate of 3.3 percent certainly made the acquisition attractive.

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Arcadia’s Clubhouse

Additionally, Arcadia Luxury Townhomes is the only townhome-style asset in the area. TruAmerica has plans to capture additional premiums in rent through enhancing onsite amenities by creating a new business center and a dog park, as well as by upgrading the fitness center. Ground level flooring will also be replaced with luxury vinyl planking. Renters are drawn to Federal Way in part by the relatively low rents at $1.10 to $1.15 per-square-foot, according to Hart. Rents in Seattle are approaching $4.00 per-square-foot, while immediate suburbs like Bellevue are at $2.50.  In addition to being an affordable alternative to priced-out units in Seattle, there is no major apartment development in the Federal Way pipeline. This bodes well for Hart and TruAmerica. Strong macro demographics and market fundamentals help as well.

“I think that we are in a new paradigm shift towards increased apartment living as both boundaries of demographics—whether young or older—are moving towards congregated living in urban areas,” Hart says. “Wages have to rise, but there will be steady rent growth and demand, particularly in urban areas. Texas is doing phenomenal, Seattle is coming to its own as a 24-hour city, and SoCal is just a very mature market.”

The sale of Arcadia Luxury Townhomes was brokered by David Young, Corey Marx and Seth Heikkila from the multifamily division of Jones Lang LaSalle. The Vineyard’s transaction was brokered by the Jones-Saglimbeni team of IPA, a multifamily brokerage division of Marcus & Millichap.

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