Trion Properties Purchases Rare CA Value-Add Community
- Jul 29, 2016
Redwood City, Calif.—Los Angeles-based private equity firm Trion Properties, whose niche focus is on value-add multifamily investments, has acquired Buckingham Apartments, a 48-unit value-add multifamily property in the Silicon Valley submarket of Redwood City, Calif.
Strategically sited between swiftly growing employment hubs in San Jose and San Francisco, Redwood City is itself home to a burgeoning array of high-tech companies. This positions the property for success in catering to unprecedented renter demand throughout the region.
Trion Properties plans to rebrand Buckingham Apartments. The community is located off El Camino Real, one of Silicon Valley’s major thoroughfares. It is in close proximity to major employers such as Oracle, EA Sports, Google, Facebook and other Fortune 100 companies.
Many organizations have made Redwood City their home in recent years, due to the rapid price escalation in nearby areas like Palo Alto. Google recently acquired one million square feet in the area and Stanford University plans a 1.5-million-square-foot satellite campus in Redwood City. The property’s proximity to tech jobs, higher education and public transit alternatives such as Caltrain should spark resident demand, Trion Properties believes. That should boost cash flow and create increased net operating income for this property.
Fifty-two years old, the 100-percent-occupied property presents the chance to make significant value-add renovations that can maximize rent growth upon lease rollover.
“The asset needs work; that fits with our strategy,” Trion Properties Director of Acquisitions Farhan Mahmood told MHN. “We reposition and rebrand properties, and while the old owner had maintained the property, they hadn’t done much to upgrade. We felt we could transform the property, making it more attractive to Millennials and other young professionals.”
Trion Properties will also furnish a handful of units. “Redwood City is a great market for that,” Mahmood said. “Hotel occupancies in Redwood City are at an all-time high. Executive suites are at something like 99 percent full. This wasn’t the basis for our acquisition, but it is something we’re going to experiment with, and it will be gravy if it works out . . . Units that are furnished and that have six-month rental terms are getting $1,000 more per month.”
Trion Properties plans a major rehabilitation of the interior and exterior of the community. Installation of new vinyl wood plank flooring, modern cabinetry, quartz countertops and new kitchen appliances, along with tonal painting, represent the major interior renovations.
In common areas, the company intends to give the entryway an entirely new design, revitalize hallways and establish a lounge where residents can meet and greet each other and build a sense of community among neighbors.
“We’re shooting for investor returns in the high teens to about 20,” Mahmood said.
Continental Funding Group arranged the financing for the $15 million purchase from a private investor. Robert Johnson and Adam Levin of Marcus & Millichap represented both the buyer and seller in the off-market transaction.
The major challenge, Mahmood said, was ensuring the building systems were up to par. “When you buy a [property] built in the 1960s, your due diligence is everything,” he reported. “We had many vendors going out and checking electrical, plumbing, the roof. We really took a deep dive to make sure this property is one we wanted to take on.”