Hines received “one of the lowest loan spreads in the past year” on $25 million in financing attached to its recent buy of a 95-unit multifamily property in Daly City, according to CBRE, which arranged the loan.
The fixed rate from a life insurance company on the five-year loan for 88 Hillside was 5.40 percent, according to a CBRE spokesperson, which is “extremely low and accretive given where current benchmark yields are.” Loan records show that the lender is State Farm.
The spokesperson declined to comment on how CBRE’s Debt and Structured Financing team in San Francisco was able to secure such a low rate. But Mike Walker, one of the agents on the deal, said in a statement that the low spread is a “tribute to the compelling real estate and relationship opportunity with Hines.” The other CBRE agents on the deal were Jesse Weber, Andrew Behrens and Brad Zampa.
Hines did not immediately reply to a request for comment on both the financing and the apartment buy, which closed in December for $44 million, according to the transfer tax on the deed. The loan from State Farm closed on February 3, according to public loan documents.
The seller was Equity Residential, an Atlanta-based REIT that acquired what had been built as a condo project from San Diego-based OliverMcMillan in 2011. In an article from the time, GlobeSt.com said that Equity paid $41 million after making an “unsolicited offer” on what was then an unfinished project.
JLL marketed the property for sale without an advertised price and said in its marketing materials that the property at the corner of Mission and Hillside Blvd, just south of San Francisco, about a 0.36-acre site owned by the city of Daly City.
“Current ownership has worked with the city to execute a Disposition and Development Agreement (DDA), affording an investor the potential future ability to develop additional units,” the marketing materials stated, adding that one level of 88 Hillside’s underground garage is owned by the city as a separate condominium ownership and would become available to the new owners of 88 Hillside in the event of a development of the site.
The property currently has 95 units across five buildings, with 14 below market, and just under 110,000 square feet, including 14,700 square feet of retail space. The property is currently 96 percent leased, according to CBRE. Units range from one- to three-bedroom floor plans, but most are two or three bedroom townhomes with two bathrooms and an average average unit size of 1,150 square feet. Amenities include in-unit laundry, private balconies, smart home technology, 142 parking spaces, and outdoor community spaces. Existing retail tenants include a full-service Filipino-Spanish fusion restaurant, a dentist’s office, and a corner children’s entertainment center.
Multifamily rents on the Peninsula had the highest growth quarter-over-quarter in the Bay Area, according to CBRE data. In the third quarter of 2024, North San Mateo County rent grew nearly 5 percent, the brokerage said. The multifamily vacancy rate in North San Mateo County was 2.6 percent that quarter, below the Bay Area’s 4.6 percent average.
“The property’s location, with close proximity to the Daly City BART Station, is easily accessible to top employers in both San Francisco and the inner Peninsula,” Walker said. “With great demographics and strong market fundamentals, the property is well positioned for future rent growth.”
The Daly City deal was one of several apartment buys for Hines in the Bay Area last year. It kicked off 2024 by buying a San Jose apartment complex for $118 million and last fall, it bought an apartment building in San Francisco’s Duboce Triangle for $38 million.
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