SACRAMENTO, CA - Decron Properties has traded a 264-unit multifamily property in Sacramento, CA and cash to Sequoia in a direct exchange for a two-property 504-unit apartment portfolio in Simi Valley, CA in a transaction valued at $193 million.
“A direct exchange is highly unusual and had never been executed by either Decron or Sequoia and a lot of pieces needed to fall into place in order for this transaction to occur,” said Decron Vice President of Acquisitions & Finance Daniel Nagel. “It started with Institutional Property Advisors (IPA) representing both parties in their respective sales. When we learned that Sequoia Equities was as interested in our Sacramento property as we were in their Simi Valley portfolio, we asked the brokers to find a creative way for both companies to achieve their business goals at a time where deal volume has slowed significantly and inventory has become extremely limited.”
“This could have never worked if we had not previously closed multiple transactions with both Decron and Sequoia,” said Stan Jones, IPA executive managing director “Both firms have a great reputation and are active buyers in the marketplace. Putting the two transactions together while understandable was fraught with risk. We are pleased at the result and our ability to assist two important clients achieve their investment goals.”
While the transaction took no more than 70 days to complete, the complexity of the deal required more than 15 lawyers across five law firms to close.
Decron acquired the 372-unit The Villas and the 132-unit Overlook located on Country Club drive within one-half-mile of each other in the 4,000-acre master planned community of Wood Ranch. Together the properties represent the largest multifamily asset in Simi Valley, a bedroom community 45 miles north east of downtown Los Angeles.
Both highly amenitized properties were built in 1986 and feature one- and two-bedroom floor plans that cater to young working professionals that have been priced out of home ownership in the affluent suburban Ventura County neighborhood where the median home price is $762,000. The Villas boast two resort-style swimming pools, two tennis courts, and a putting green on a 15-acre site. The Overlook includes a swimming pool and spa, fitness center, and sports court on a low-density eight-acre site.
Serving a population of more than 162,000 the inventory of multifamily housing in the Simi Valley/Moorpark submarket totals only 6,523 units, according to IPA. Of the 702 units in the construction pipeline only 102 are entitled.
“The Ventura County economy continues to be driven by strong job growth in high-tech, clean energy, and healthcare,” added Greg Harris, IPA executive managing director. “Highly educated professionals are migrating to the area from Los Angeles and beyond, for the jobs, great schools and quality of life, but are finding quality affordable housing options difficult to come by in one of the most supply constrained multifamily markets in Southern California. The confluence of demand drivers and limited supply creates a compelling value-add story.”
Sequoia took title to Broadstone at Strawberry Creek, a 264-unit gated apartment community in the Sacramento suburb of Elk Creek. Broadstone was Decron’s first investment in Northern California when they acquired the property in June 2012.
“This was an excellent investment that performed very well for us over the five-year hold period,” added Nagel. “While Sacramento continues to boast sound market fundamentals for multifamily investment, we were operating inefficiently because we only had one asset in the submarket. The equity from the sale of Broadstone is being deployed to meet our current strategic focus in more core California markets adjacent to major employment centers which includes first ring submarkets around Los Angeles, Orange County, San Diego, Silicon Valley and East Bay (Contra Costa and Alameda County) where we believe sustained rent growth can be achieved over time.
Stan Jones, Philip Saglimbeni and Salvatore Saglimbeni in IPA’s Palo Alto office along with Gregory Harris, Kevin Green, and Joseph Grabiec in the firm’s South Bay/Encino office represented Decron and Sequoia in the complex transaction.