A San Diego apartment sale topping $200 million near a popular regional mall may be the region’s priciest multifamily deal of the past year and among the largest in California, as buyers find opportunities to acquire well located properties at prices below the cost of new construction.
Investment firm Property Reserve Inc. of Salt Lake City acquired the 300-unit Palisade apartment property, built in 2019 at 8800 Lombard Place in San Diego’s University Town Center neighborhood, for about $203 million or $677,000 per unit, according to CoStar data and county public filings.
The seller was New York-based JP Morgan Chase, which paid $119 million in October 2021 to buy out its original joint venture partner, mall operator Unibail-Rodamco-Westfield, in a deal that valued the full property at $238 million. URW developed the upscale Palisade apartment building on a parcel that was formerly part of its Westfield UTC mall, and subsequently sold a 50% stake in the apartment property to JP Morgan.
CoStar data as of Jan. 3 showed the sale of Palisade was the San Diego region’s largest apartment deal of the past year by total price and also the biggest deal for any commercial property type. It is also the region’s fourth-largest apartment deal of the past five years by total price, and the third-largest multifamily deal of the past year in California.
CoStar data showed the per-unit price paid for Palisade was well above the average $503,000 for UTC apartment properties and $399,000 average for the San Diego region during the past 12 months. But like other recent big deals in San Diego and California, the total price is below what it would cost to build those properties in the current economic climate in the same neighborhood, said Joshua Ohl, senior director of market analytics for CoStar Group in San Diego.
“There are few buildings as well situated in the region as Palisade, and the sale shows that buyers are still interested in core assets in San Diego at high prices, particularly for one located in UTC at the Westfield mall, which may be one of the top retail and experiential destinations in the region,” Ohl said.
URW said in a 2021 statement that the sale of its half-stake in Palisade to JP Morgan reflected a 15% premium to the property’s latest appraisal at that time, “signaling the relative premium of residential and commercial buildings in close proximity to URW’s flagship assets and the value of densification projects in these locations.”
URW’s development of Palisade in 2019 followed its completion during the prior decade of more than $1 billion in expansions and improvements to the Westfield UTC mall, which was originally built in 1977. The mall operator is among several that have added apartments and other mixed-use components to existing retail centers.
Paris-based URW during the past three years has sold off several of its U.S. mall and other adjacent properties as part of plans to focus operations in Europe and other regions, though Westfield UTC has so far not been sold.
CoStar Market Analytics data showed the San Diego area that includes University Town Center and the adjacent village of La Jolla posted $553 million in apartment property sales during the past 12 months, up 205% from the prior year and by far the biggest tally for any San Diego neighborhood. The UTC-La Jolla area also has among San Diego’s highest average monthly rents at $3,154, even after rents declined 3.5% over the past year.
Another big San Diego deal that closed in late December involved the 265-unit property known as The Artisan, built in 2018 at 1601 Broadway in downtown’s East Village neighborhood. Purchased by San Francisco-based Jackson Square Properties from Scottsdale, Arizona-based Alliance Residential for about $107.8 million or $407,000 per unit, it was San Diego’s sixth-biggest multifamily sale of the past year by total price, according to CoStar and public data.
“The Broadway deal sold for below replacement cost for relatively new construction that may not need any renovations in the near term,” Ohl said. “Similar to the UTC transaction, core assets in the region continue to attract investors.”
The buyer and seller in the latest deal for Palisade in UTC did not immediately respond to requests from CoStar News to comment.