3 Silicon Valley Communities Sell for $70M

Image by Scott Webb via Unsplash

A private seller has divested three communities in Silicon Valley for approximately $70 million.

The portfolio totals 190 units at garden-style communities. JLL’s Ryan Wagner, Brandon Geraldo and Matt Kroger led the team representing the undisclosed seller and procured three unique buyers for each of the communities.

According to JLL, 37 percent of the units are one-bedroom floorplans that average 731 square feet and the other 63 percent are two-bedroom units that average 1,004 square feet. All three communities are located within a seven-mile radius of each other, near U.S. 101 and Interstates 1880 and 280. The portfolio comprises the 72-unit Appletree property in Campbell, Calif., that was built in 1971, and the 68-unit Vista Pointe and 50-unit Cedartree properties, both of which are located in Santa Clara, Calif., and were built in 1969.

All three of the communities have the opportunity for value-add renovations that would lead to increased rent potential, JLL said in a statement. Wagner, a senior managing director at JLL, said in prepared remarks that well-priced and high-quality communities are still attracting investors despite current market conditions. Last year, a 590-unit community in San Jose, Calif., developed by a joint venture between Bay West Development and Forum Real Estate Group attracted a $284 million construction loan.

Solid growth in Silicon Valley

Rent averages have been rising continually in San Jose. According to Marcus & Millichap’s 2023 second quarter report for the San Jose multifamily market, average rents hit $3,040 a month in March following a 7.4 percent increase year-over-year. For 2023, the report forecasts a 3.7 percent increase that continues the market’s rent growth momentum, although at a slower pace.

The report noted that the San Jose multifamily market was experiencing a slowing development pipeline with only an expected 2,300 units to be completed in 2023, representing only a 1.3 percent increase in local apartment inventory. Nearly 9,000 units are under construction across Silicon Valley as of March, but completion dates extend into 2025. The lag in construction has led to a 4.4 percent vacancy rate that will remain relatively steady throughout 2023, according to the report.