By Jon Peterson
Walnut Creek, Calif.-based Sequoia Equities makes its first apartment deal in the Seattle market with the $93 million acquisition of the 351-unit One Thousand 8th Avenue Apartments in Seattle located in the First Hill neighborhood.
“This is our first entry into Seattle. We have been hanging around the “rim” of Seattle for some time with a greater level of interest for the past three years. There are several metrics we find attractive about the greater Seattle market. These would include job growth, quality of life, educated population and the diversity of employers,” says Pat Reilly, general partner and vice president of acquisitions.
The acquisition of One Thousand 8th Avenue gives us a great foundation which we plan to build on with more purchases
The cap rate on this transaction was in the low four percent range. This return is based on the property’s existing rental income. The transaction included 78 percent debt. Sequoia was able to utilize a relatively new loan program for acquisitions/rehab through Freddie Mac to secure this level of debt.
Sequoia bought the property from Acacia Capital Corporation out of its San Mateo, Calif. office. The seller was represented in the deal by Berkadia out of its Seattle office located on 601 Union Street, and the listing agent was Kenny Dudunakis, a senior partner with the firm. Both firms did not respond to phone calls seeking comment for this story.
Sequoia does think that there will be an opportunity for the new owner to bring up the rents in the property. “The average rent at the property is just over $1,400 per month. That’s on the low end for rents in the adjacent submarket and downtown core. With the property’s strong location and 14-story of views, Sequoia believes we can create a living environment valued at least $200-$300 above current rents,” said Reilly.
The apartment complex was first built in 1949. At the time of the sale, the occupancy was 98.8 percent.
Sequoia is not concerned about all of the new apartment units being added to the downtown market. “After an extensive amount of research, Sequoia thinks that the First Hill/Capitol Hill sub-market will not directly compete with the new Downtown product coming on line. We understand that there will be instances in which we will share traffic. However, our target market is specifically seeking out the First Hill address due to proximity to employment and quality of life in the historic borough,” said Reilly.
First Hill is known as a medical and research hub. The asset Sequoia acquired is located within walking distance to four such facilities. Tenants in the apartment complex could also walk to Seattle University and much of the Seattle downtown core office space.
Sequoia is planning to be more of an active player in the Seattle market going forward. “Since we self manage, and did not have a base of operations prior to this closing, we have been very selective on Seattle apartments from a size and location basis. The acquisition of One Thousand 8th Avenue gives us a great foundation which we plan to build on with more purchases,” said Reilly.