The Lane on the Boulevard – L.A. Company Grabs Peninsula Apartment Building Near Google, Box Projects
San Francisco Business Times
April 1, 2015
A real estate group that specializes in housing extended-stay corporate workers shelled out $84 million Tuesday for a Redwood City apartment building a few miles from new projects by Google and Box.
Singapore-based Mapletree Group paid $780 a square foot for a 141-unit luxury building at 2580 El Camino Real that will be operated by Los Angeles-based Oakwood Worldwide, which specializes in corporate housing. The seller, Summerhill Apartment Communities, collected the most money per unit for a multifamily building on the Peninsula this year.
“There’s job growth and new jobs and migration in that area,” said Kristen Zimmerman, vice president of real estate investments for Oakwood Worldwide. “Redwood City was one of our ideal submarkets within Silicon Valley. We love the downtown areas with a great walkability. Clients love being close to workplaces and restaurants and transit.”
Redwood City has hit the development gas lately, fueled by a 2012 downtown plan, Box inking a lease in the downtown Crossing/900 project and Google buying part of the Pacific Shores office project last year. That’s come in tandem with the city’s construction of more than 1,500 housing units since 2007 – the most in San Mateo County, according to the Association of Bay Area Governments.
Although the completed Redwood City building is about three-quarter leased already, Oakwood plans to use the rest of the units for its corporate clients that use rooms for consultants, contractors and relocated workers. The company is mum on its clients, but said it works with three-quarters of the Fortune 1000 companies.
Oakwood can leverage the job growth of the Bay Area, which has dipped below 4 percent, and the kind of tech employers that bring in visitors from overseas for long-term stays, Zimmerman said. She added that the per-night and per-square-foot rates beat hotel prices.
This was second big Silicon Valley pickup in the past eight months by Mapletree and Oakwood, which paid $70 million, or roughly $380,000 per unit, for 184-unit complex in Sunnyvale in August.
Mapletree acquired a 49 percent stake in Oakwood Worldwide’s corporate housing business in Asia last year. The joint venture team announced last year it would spend $4 billion buying and furnishing apartments globally.
Going ‘above and beyond’
Summerhill, the seller, got the project approved and started building in 2012. The Redwood City complex is about a mile from the burgeoning downtown core and it averages pretty small units at 765 square feet, but it is filled with amenities like a fitness studio, a chef’s kitchen, a swimming pool and spa and an outdoor fireplace.
Summerhill also made deep investments to make the surrounding area friendlier to more upscale tenants, such as buying out the lease of an adult book store (with a rundown exterior and neon sign) across the street and paying to landscape a neighboring Public Utilities Commission site, said Robert Freed, president of Summerhill.
“They went above and beyond,” said Stanford Jones, part of the brokerage team at Marcus & Millichap that represented the seller. “It’s consistent with what has been happening for last couple of years in Redwood City and what will continue in next three years or so – a transformation of the whole city.”
He added that the surrounding “expensive communities” such as Menlo Park, San Carlo and Atherton put the pressure on for Redwood City to add “job-centric, tech-employed” residents.
Those jobs not only drives housing demand, but is making companies and institutions more aggressive to find space for employees. Stanford University, for example, pre-leased for faculty and staff an entire 167-unit complex in Los Altos developed by Sares Regis Group of Northern California. Facebook wants to build its own housing for employees.
That’s also opened doors for corporate housing companies like Oakwood.
Those companies “are aggressively looking for units. The demand on the corp housing needs are very strong,” said Robert Freed, president and CEO of Summerhill. Not enough housing is getting built because “we have an overabundance of NIMBYs in this area. You’re going to see companies try to acquire places for their employees to live in order to stay competitive in Bay Area.”