SAN JOSE — A stake in a big San Jose apartment complex has been bought by a Southern California investment group — yet the deal hints at weaker property values for rental housing.
The real estate group paid $93.5 million to buy a ground lease that gives the investors ownership of the two San Jose apartment buildings, one at 6670 Emergent Way and the other at 6520 Gamma Way, documents filed on Aug. 16 with the Santa Clara County Recorder’s Office show.
The property deal for the apartments involved only the buildings and not the land beneath them, according to the public records.
The residential complex is known as Duo Apartments, which totals 301 units in two buildings.
Brokers Sal Saglimbeni and Philip Saglimbeni, both with Institutional Property Advisors, a unit of commercial real estate firm Marcus & Millichap, arranged the property deal.
Los Angeles-based JRK Property Holdings bought the apartment complex, according to state and county real estate and public business documents.
Because the deal involved only the structures above the land and not the land itself, direct comparisons to other apartment transactions on a per-unit price can’t be made.
What is the case, however, is that the apartment buildings appear to have suffered a decline in their values.
That’s because the assessed value of the Duo Apartments was $134.2 million — excluding the value of the land and including only the value of the buildings — as of the end of June 2023.
As a result, the price of the buildings was about 30% below the most recent assessed value.
The just-bought Duo Apartments complex was built in 2020. A 24-hour fitness center, lounge, spa, game room, grill and swimming pool that’s available 24 hours a day are among the amenities. The buildings are five stories high.
High interest rates — the current situation — can prod a potential buyer of a commercial real estate property to seek a lower price to offset the costs of financing a real estate purchase.
As a result, sellers in some instances are under pressure to reduce their asking prices to shave the costs that the next owner will have to face.
JRK Property Holdings, the new owner of the buildings, was founded in 1991. Over the decades, JRK Property and has owned or managed 80,000 residential units in 30 states with a combined value of $18 billion, according to the company’s website.
“By providing extensive improvements to its communities and leveraging its operational experience, the JRK team has consistently delivered exceptional results,” the company states on its website.