KW, Guardian Life Partner on $84M San Jose Apartment Purchase

Beverly Hills-headquartered Kennedy Wilson Multifamily Management Group and New York City-based Guardian Life Insurance Co. of America have shelled out $84 million for Avalon at Blossom Hill, a 324-unit apartment property in San Jose, Calif., about 50 miles south of San Francisco in the Silicon Valley submarket. Teaming up for the first time, the companies, backed by senior debt supplied by Freddie Mac, took the multi-family asset off the hands of its developer AvalonBay Communities, and will rename the garden-style complex (pictured) Saybrook Pointe. Real estate services firm CB Richard Ellis Inc. had marketed the property free and clear of debt with a $91 million price tag. Carrying the address of 401 Briar Ridge Dr. on a 7.5-acre parcel at the intersection of Highway 85 and Highway 87, Saybrook Pointe was originally developed in 1995 and features 16 three-story residential structures, a one-story fitness facility, and parking spaces to accommodate 549 vehicles. KW Multifamily and Guardian will spend about $4.5 million to reinvent the former Blossom Hill, located just a block away from rail service, as a premier, luxury apartment community. For KW Multifamily, the transaction dovetails with the company’s objective of purchasing and repositioning under-valued apartment properties in California, as well as the Pacific Northwest region. San Jose has one of the strongest apartment markets in the country with an average vacancy rate of 3.7 percent, according to a report by Marcus & Millichap Real Estate Investment Services. Despite a decrease in job growth and the country’s obvious economic issues, the future still looks rosy for the city, as the lack of affordable homes in the high-tech haven of Silicon Valley will continue to shore up demand. Investors remain attracted to the market’s desirable fundamentals, but the number of transactions has decreased due to the credit crisis and the widening gap between asking prices and offering prices, which could account for the $7 million discount KW Multifamily and Guardian got on the asking price for their newly acquired asset. KW Multifamily, a division of three-decade-old real estate services and investment concern Kennedy Wilson, pursues value-added opportunities in partnerships established with clients. The company engages in the acquisition, repositioning, management and leasing of apartment properties across the Western U.S., having purchased approximately 14,000 apartments in California, Oregon and Washington since its inception. Guardian, established more than a century ago in 1860, is one of the country’s biggest life insurance companies. Along with its subsidiaries, Guardian had $41.3 billion in assets, on a consolidated statutory basis, as of the close of 2007