SAN JOSE — A big downtown San Jose apartment building has been bought by real estate investors who express optimism about the South Bay’s economic prospects despite post-coronavirus uncertainties.
The James, a luxury apartment complex in the heart of downtown San Jose, has been bought for a price of just under $74.3 million, the buyers said.
The 190-unit, six-story apartment building is considered a Class A residential complex, according to the new owners, an alliance of Archway Equities and Virtú Investments, both real estate firms with decades in the business. The purchase price works out to roughly $390,800 a unit.
The new owners see plenty of potential in the Silicon Valley market and its primary city, San Jose.
“It’s an opportune time to enter the San Jose market, which we feel will bounce back faster than many of the other Bay area submarkets,” said Sankeerth Pulusani, managing director with Beverly Hills-based Archway.
Larkspur-based Virtú Investments says it saw its joint purchase with Archway of The James as a way to jump back into commercial real estate purchases.
“After a multi-year hiatus from acquisitions, we are excited to step off the sidelines for an opportunity to acquire a strong asset at a substantial discount to intrinsic value in a sound market with attractive supply and demand fundamentals,” said Michael Green, a principal executive with Virtú Investments. Virtú will manage The James.
Berkadia commercial real estate brokers Brett Betzler, Kaohu Berg-Hee and Rachel Parsons marketed The James apartment complex for sale on behalf of the seller, Fairfield Residential. Freddie Mac provided the financing for the deal, which was arranged by Brian Eisendrath of Institutional Property Advisors.
The purchase of the James is just the latest among several acquisitions in recent years of large apartment properties in downtown San Jose.
Here are the highlights of recent deals for downtown San Jose apartment complexes:
— A 101-unit apartment complex at 138 Balbach Street was bought in 2021 for $53.5 million. The residential property was renamed and is now known as The Ryder Apartments. That’s about $529,700 a unit.
— Centerra, a prominent 21-story residential tower with 374 units located at 77 North Almaden Avenue, was bought in October 2022 for $185 million. That equates to around $494,700 a unit.
— Vespaio, a residential, office and retail mixed-use development, was bought in July 2023 for $83.5 million. The price for the 162-unit complex works out to approximately $512,400 a unit. But the price isn’t an exact comparable because the property includes significant ground-floor and second-floor commercial spaces.
In July 2022, Miro, a 28-story twin-tower residential complex with 630 units, landed $345 million in long-term financing, in a sign of confidence in the downtown San Jose market.
The new owners of The James believe the deal was successfully concluded in part because Fairfield and other sellers are now offering properties at lower prices, compared with prior price levels. The shift can make properties more likely to entice buyers.
“More and more sellers are meeting the market,” said Sean Moghavem, Archway’s president. “This has created selective opportunities to acquire high-quality assets in supply-constrained coastal markets with strong multifamily fundamentals.”
Even with inflation running at sky-high levels, combined with the effect of soaring interest rates — which makes it more expensive to borrow money for financing instruments such as mortgages — lower prices can still make apartment properties attractive.
The seller in the deal, an affiliate of Fairfield Residential, developed and completed the James in 2019.
Amenities within The James include a resort-style pool, fitness center, a resident clubhouse, conference rooms, dog-washing station, outdoor meeting areas, fire pits, barbecues and a bike-storage facility.
The James appears to be a magnet for renters. The complex was 95% leased at the time of the property deal.
The buyers also noted that a growing number of tech firms have begun to outline mandates for their workers to return to the office for more time each week.
Tech titan Adobe has been steadily returning workers to its four-tower office headquarters complex in downtown San Jose.
Zoom, another tech stalwart based in downtown San Jose, announced a return-to-work mandate.
“We are believers in the recovery of the South Bay,” Archway executive Pulusani said. “We expect more workers to return to the office, which will only strengthen the demand for well-located, high-quality rental housing.”