By Jon Peterson
Grosvenor Americas is looking to earn just over a 5 percent cap rate on its $40.2 million acquisition of the Somerset Green townhouse apartment project in Bellevue.
“This return would be based on the property’s current net operating income,” says Mark Purdy, a vice president and investment general manager for Grosvenor. He works out of the company’s regional office in Calgary, Alberta.
He believes that the price point of the acquisition was very attractive. “We purchased the property at around $400,000 a door. This compares very favorably to replacement cost, which I would think would be somewhere in excess of $500,000 a door. Another issue to consider is that the larger units that we have in Somerset are not being built today. The average size for our units is around 1,100 square feet. The trend is to build smaller units that are somewhere in the range of 800 to 900 square feet,” said Purdy.
This transaction will be the first residential acquisition that Grosvenor has made in the Bellevue market. “We think that the Bellevue market is an attractive area to own properties in and is a good compliment to the other properties that we own in the Seattle region in places like Bothell and Woodinville,” said Purdy.
Somerset Green was sold by San Francisco-based Carmel Partners. A company representative declined to comment when contacted for this story. The listing agent on the sale was the Seattle office of Berkadia. The agents involved were Kenny Dudunakis, Ben Johnson and David Sorensen.
Somerset Green was developed over a two year period in 1986 and 1987. The occupancy at the time of the sale was 95 percent. This puts it in line with the overall occupancy of the greater apartment market in Bellevue.
Grosvenor acquired the complex on an all-cash basis. The buyer sees that the property attracts a wide range of renters. “We get some families, students who attend the colleges in the Seattle area and young working professionals,” said Purdy. The new owner will be spending $5 million to make some upgrades to the property. This will include both the interior and the exterior of the units.
Purdy is a very strong believer in the greater Seattle market for residential properties. “Seattle has a very strong economy and should continue to see a lot of job growth over the next five years. This will make the area a good place to continue to expand our residential portfolio in,” he said.