Federal Realty Sells Santana Row Apartments to Waterton

Another apartment complex in Santana Row has traded hands in the second such deal in the San Jose mixed-use neighborhood in the past year.

Chicago-based Waterton bought Misora, a 212-unit luxury residential property between Olin Avenue and Olsen Drive, for $148.5 million, the Mercury News reported. Federal Realty Investment Trust, the principal developer and owner of Santana Row, was the seller.

The deal works out to $700,500 per unit, a sign of strength for Santana Row compared to other South Bay multifamily properties that have commanded lower per-unit prices in recent transactions. Last May, Federal Realty sold Levare, a 108-unit apartment building at 3003 Olin Avenue in Santana Row, to Hines for $73.9 million, or $684,300 per unit.

Last month, the 336-unit Fay apartment tower in downtown San Jose was foreclosed on due to a loan default; the lender for the development assigned a property value of $110 million, or $327,400 per unit, to the building. Last September, Stockbridge Capital Group sold the 230-unit Linq apartment complex in San Jose for $97.6 million, or $424,000 per unit. That same month, Greystar sold the 948-unit Park Kiely complex in San Jose for $370 million, or $390,295 per unit.

Waterton is planning to revamp Misora under its ownership. Units will get new vinyl plank flooring, lighting and plumbing fixtures as well as quartz countertops, new backsplashes and stainless steel appliances.

Santana Row has seen a surge in demand for housing driven by the tech sector in the “high-barrier-to-entry district,” Ben Slack, Waterton’s director of acquisitions, said, predicting continued “favorable market dynamics and strong supply-demand fundamentals” in the region. Chicago-based Waterton now owns 920 apartment units in the Bay Area.

Federal Realty isn’t done building new apartment complexes at Santana Row. Last year, the Maryland-based firm began construction of a 258-unit apartment complex at 358 Hatton Street, across Hatton Street from Misora. That project marks Federal Realty’s first new residential development in a decade. The decision to sell Misora is part of the company’s ongoing strategy of “pruning [and] reinvesting” its real estate portfolio, Don Wood, CEO of Federal Realty, said.

— Chris Malone Méndez