By Jon Peterson
Chicago-based Waterton Associates has paid $80.5 million or $157,000 per unit to buy the 512-unit Taluswood Apartments in Mountlake Terrace, according to multiple sources that track the sale of apartments in the Seattle market.
Rick Hurd, chief investment officer for Waterton, declined to comment on the purchase price. He stated in an e-mail that as a practice the company doesn’t disclose the purchase price and cap rate on its purchases.
“Seattle is among 15 markets being targeted by Waterton. Taluswood, the firm’s second acquisition in north suburban Seattle in the last 12 months, benefits from its location at the north end of Lake Washington, just a mile east of I-5 and five miles west of I-405. The community’s proximity to major expressways, along with planned light rail expansion to Mountlake Terrace, allows for convenient access to nearby employers,” said Hurd.
The cap rate on this transaction was 5.7 percent, according to sources that track this kind of information in the Seattle market. This return is based on the current rent being produced by the property.
The seller of the property was Vancouver-based Holland Partners. The company was represented in the sale by the Seattle office of CBRE. The listing agent was Eli Hanacek, a senior vice president. “The sellers had owned the property since 2011 when they acquired the asset for around $125,000 per unit. They had completed renovating around 50 percent of the units. The new owners are planning on finishing the rest of the renovation,” said Hanacek.
Taluswood was built in 1986. The property has a current occupancy of 95 percent. The asset is located in the Mountlake Terrace/Shoreline sub-market in Seattle. This area has a current vacancy of somewhere in the range of three percent to four percent. No new construction is happening in the sub-market at this time.
Waterton acquired Taluswood for its commingled fund, Waterton Residential Property Venture XII. Earlier this year, the same commingled fund paid $20.2 million to buy the 155-unit Martha Lake complex in Lynwood.
Waterton is getting very close to completing the planned $500 million capital raise for Venture XII. Among the investors in the fund are Oregon Public Employees Retirement Fund with a $100 million commitment and the Orange County Employees Retirement System with a $75 million commitment. The real estate manager will be putting some of its own capital into the fund as a co-investment. This will be four percent of the total capital commitments up to $20 million.
The investment strategy is to buy value-add apartments in a variety of markets around the country. Waterton looks to acquired properties that are in in-fill suburban and urban markets. The targeted returns for Venture XII are no less than a 12 percent net IRR.