SANTA CLARA — A big apartment complex in Santa Clara near a train station has been bought for more than $100 million in a deal that suggests investors continue to scout for residential projects to buy despite a murky economy.
A comparison of prices, however, suggests the per-unit values for apartments have begun to dwindle during the last 12 to 15 months at a time of sky-high interest rates and stubbornly elevated inflation.
Prado apartment complex has been bought for $125 million, according to documents filed on Feb. 27 with the Santa Clara County Recorder’s office. The residential property is located at 3560 Rambla Place near the intersection of Lawrence Expressway and Kifer Road.
Alliance Residential, a real estate firm that invests in and develops rental residential properties, bought the 251-unit Prado apartments, county property and state business records show.
Arizona-based Alliance Residential also obtained a $73.5 million loan from Iowa-based Athene Annuity and Life Co. at the time of the purchase, the county documents show.
San Ramon-based Summerhill Homes Apartment Communities, which developed the Prado apartments, sold the complex to Alliance Residential, according to county public records.
The Prado apartment complex was built in 2021.
The per-price unit for the Prado deal was $498,008. This is one of several apartment complexes of a fairly large size that were bought in recent months in the South Bay.
Here are a few examples of what investors have been paying on a per-unit basis in recent deals:
— Southwood apartments in Palo Alto, 100 units. The price was $59.9 million, or $599,000 a unit.
— Villa del Sol apartments in Sunnyvale, 124 units. The price was $62.3 million, or $502,400 a unit.
— Diridon West, 249 units in downtown San Jose. The price was $117.5 million, or $471,900 a unit.
— Modera The Alameda in downtown San Jose, 168 units. The price was $78.2 million, or $465,500 a unit.
The recent transactions, measured on a per-unit basis, suggest that values for apartments are trending lower than the purchase levels that were common before the spikes in inflation and interest rates in the last year or two.
Before the upward surge for interest rates and inflation, here are examples of some per-unit prices:
— The Platform Urban Apartments in San Jose near the Berryessa BART station, $575,506 a unit. The deal occurred in 2022.
— The Village Residences in Mountain View, bought for a jaw-dropping $963,700 per unit. This deal was completed in 2019.
With interest rates rising, it is getting tougher for apartment buyers to justify purchases unless the prices are sufficiently low for the residential complexes.
Plus, an uncertain economy has undermined real estate values on a broad front.
