Veritas, Ivanhoe Sell Bay Area Apartments for $541 Million

PCCP has placed a $540.5 million wager on 1,770 apartments on both sides of the bay, marking the largest Bay Area multifamily deal this year.

The Los Angeles-based investment firm founded by William Lindsay, Donald Kuemmeler and Aaron Giovara closed on its purchase of 76 apartment buildings in San Francisco and Oakland, the San Francisco Business Times reported.

The seller was San Francisco-based Veritas Investments and Canada-based Ivanhoe Cambridge. German American Capital loaned PCCP $430 million for the acquisition.

The deal works out to $305,367 per unit.

A slice of the deal came to light last week with the news that PCCP had scooped up eight apartment buildings from Veritas in Oakland. They were but a sliver of the colossal purchase.

Veritas and the Montreal-based Ivanhoe bought 66 apartment buildings in San Francisco and 10 in Oakland between 2018 and 2021 for nearly $750 million, or $423,729 per unit.

The investment by PCCP is a 28 percent discount from what the buildings traded for around six years ago. Its opportunity buy comes as apartment rents in San Francisco “are among the fastest growing in the U.S.,” Ted Egan, chief economist for the city, told the Business Times.

PCCP, now among the largest multifamily investors in San Francisco, will retain Veritas as manager of its former 1,770-unit portfolio.

That’s a win for Veritas, led by Yat-Pang Au, once the largest apartment landlord in the city.

A year ago, Veritas lost a third of its multifamily holdings in San Francisco, after defaulting on $1 billion in loans tied to 95 rent-controlled properties.

In an unprecedented public auction, Toronto-based Brookfield and locally based Ballast Investments took control of 2,150 units in 76 of the apartment buildings after purchasing nearly $1 billion in debt tied to the properties.

The recent purchase by PCCP comes as investors are increasingly bullish on San Francisco apartments. Fortress Investment Group and Artemis Real Estate Partners have waded into the multifamily sector in a calculated bet on a market rebound.

Oakland’s multifamily market is still catching up. Newly built apartments, mostly in and around Downtown, have recently traded at major discounts, or surrendered to lenders.

The 10 Oakland buildings acquired by PCCP are largely clustered in Adams Point and Cleveland Heights, near Lake Merritt.

Veritas and Ivanhoe joined forces in 2014 to buy up San Francisco apartments with an initial $50 million purchase of nine buildings. By early 2016, they owned 45 buildings in the city, then added more than 30 more.

The portfolio sold to PCCP represents just part of the multifamily assets that Ivanhoe and Veritas acquired over the last 10 years, according to public records. At the end of last year, Ivanhoe had $342 billion in assets under management.

PCCP, founded as Pacific Coast Capital Partners in 1998, has $25.3 billion in assets under management, with offices in Los Angeles, El Segundo, New York, San Francisco and Atlanta, according to its website.

Despite its recent spending spree, the company in January defaulted on a $72 million loan secured by a six-story office building in Santa Clara.

— Dana Bartholomew