Equity Residential, which owns eight buildings with 452 apartments in Berkeley, as well as the entitlement rights to build the 205-unit Acheson Commons complex on University Avenue, is putting its entire Berkeley portfolio up for sale.
No price is mentioned on the listing documents prepared by Eastdil Secured, Equity’s advisor and broker, but the sale should be in the hundreds of millions of dollars. That could mean millions of dollars in transfer taxes for Berkeley’s general fund.
“There’s an upside and a downside,” said Mayor Tom Bates about the sale. “We will get a tremendous property transfer tax from this, probably around $2 million. The property they have on University will probably get developed. That is also good for us. The downside is whoever buys it may be more aggressive with rents… It is going to put tremendous pressure on our rental properties.”
San Francisco-based Eastdil Secured is marketing the buildings, many of which are in downtown Berkeley, as the “Berkeley Apartment Collection.” The portfolio includes eight buildings with 452 units and an average age of 13 years; 39,891 square feet of retail space; and 289 parking spaces. In one of its emails, the company touts the buildings’ proximity to UC Berkeley and BART, its steady supply of student-tenants, and the fact that rents in Berkeley are rapidly increasing.
“Market rents in Berkeley have increased 57% since 2010, and 13% in the last year alone,” reads the email sent out by Eastdil Secured. “Consistent demand from a large student population, a well-compensated workforce, and a shortage of new Class A supply have combined to generate an average vacancy rate of just 3.6% over the past six years.”
The properties include the Gaia Building at 2117 Allston Way; the Bachenheimer Building at 2119 University; Berkeleyan Apartments at 1910 Oxford St.; Acton Courtyard at 1370 University; The Touriel Building at 2004 University; the ARTech Building at 2002 Addison St.; Renaissance Villas at 1627 University; and Acheson Commons at 2133 University.
Equity, which was started by Chicago businessman Sam Zell, is probably selling its Berkeley portfolio because the apartments don’t fit in with the mix of its other properties in the Bay Area, according to Bates. Equity owns more than 5,000 units in the Bay Area, but has recently been planning — and building — luxury apartments in San Francisco. The company may have decided to concentrate on the market for upscale housing rather than student housing, he said.
“When they look at their real estate holdings they don’t have student housing,” said Bates. “They prefer to have high-rise luxury towers. This doesn’t fit with their corporate plans.”
John Hyjer, Equity’s vice president for investments in Northern California, did not return calls for comment.
Equity Residential acquired most of its Berkeley buildings in April 2007 when it purchased the Berkeley portfolio from Patrick Kennedy’s Panoramic Interests for about $146 million, the largest real estate transaction in Berkeley’s history. Kennedy said at the time that he was the largest landlord for UC Berkeley students.
Equity Residential is probably the second largest landlord in Berkeley. The largest is the Lakireddy family, which owns more than 1,000 units.
Equity Residential has been a force in Berkeley politics. In 2010, it contributed $25,000 toward the passage of Measure R, which created a blueprint for a more densely developed downtown. It passed with 64% of the vote.
Questions have been swirling for months about the fate of Acheson Commons, a huge apartment complex along Shattuck and University avenues. Equity Residential won city approval to develop the property in 2013, but construction never began. Equity has been issued building permits for the site and has arranged for the transfer of two old brown-shingled houses off the property, allowing the complex to be constructed without further bureaucratic hurdles.
Considering low-interest rates and high demand for housing, observers were curious why Equity had not started construction. Hyjer told Berkeleyside earlier this year that Equity still planned to proceed. The company was just trying to time construction correctly so the units could open at the end of the summer when students are coming back to school. The company didn’t want to have units sit empty for any length of time, he said.
Interest in the properties is already strong among Bay Area developers, according to Bates.
“There are a number of people interested in buying it,” he said.
Related:
City’s largest ever apartment building gets go-ahead (07.11.13)
Acheson Commons sent back to Berkeley Rent Board (03.07.13)
1,000 new apartments planned for downtown Berkeley (02.07.13)
Ace Hardware will not move to Andronico’s old space (09.18.12)
Two Berkeley brown shingles for sale. Price: $1 each (07.19.12)
Acheson Commons: Large change for downtown (04.09.12)
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