Oakland’s Lake Merritt Apartments Sell
Submitted January 30, 2012, 1:16 PM
Thirty-seven apartments in the Adams Point district near Oakland’s Lake Merritt have sold for $4.8 million, or not quite $130,000 a unit.
The buyer is a private individual who owns additional apartments in the same neighborhood and is bullish on the district’s prospects, said broker Kristopher Lamont of Oakland-based Bay Apartment Advisors. The boutique East Bay brokerage represented the buyer in the transaction.
The 266 Adams St. property is close to a Whole Foods, the 19th Street BART station and the Uptown district of downtown. Pandora Media Inc., the personalized radio service, also has its headquarters in downtown Oakland at 2101 Webster St., between the complex and the BART station. Pandora completed its first public offering of stock in June 2011.
The capitalization rate, or first-year yield, on the transaction was in the low 5 percent range, Lamont said. The gross-rent multiplier, a metric commonly used to evaluate apartment sales in Oakland, was in the low 10s. The Adams Point property should garner above-market rents, the broker said.
Kevin Turner of Marcus & Millichap Real Estate Investment Services represented the seller.
The acquisition was the second half of a 1031, tax-deferred property exchange in which the buyer sold 15 apartments in San Leandro for $1.6 million to trade into the downtown Oakland complex, which is in a more urban setting with higher household incomes and more professional workers, Lamont said. The sale is the fourth large apartment building in Adams Point brokered by Bay Apartment Advisors in the last 10 months.
Lamont specializes in Oakland and East Bay apartment complexes of 50 units or less typically acquired by small local, private landlords.
The median price of an East Bay apartment, now $114,600, has been falling at least since 2007, when it was more than $125,000, according to Marcus & Millichap research. Apartments selling for $5 million or less constituted 40 percent of the market in the last year, according to Marcus. Seventy percent of the East Bay’s inventory is Class B or below.
Spillover demand from San Francisco tenants will drive East Bay rents higher this year, Marcus predicts. In the fourth quarter, Oakland metropolitan area rents were more than a third lower than those in San Francisco, despite a 3.2 percent uptick in effective rents to $1,242 a month in 2011. Existing owners, including banks with foreclosed properties, are holding on to assets in anticipation of rising values, too, further starving would-be buyers of opportunity, the brokerage said.
“While certain areas of Oakland are experiencing declining property values and rents, the more secure and vibrant areas such as Adams Point are seeing an uptick in both tenant and buyer demand, especially around Lake Merritt,” Lamont said.
