Klingbeil Capital pays $459K per unit for San Jose apartment complex

$53M deal third-priciest in city in recent years

Klingbeil Capital’s James Klingbeil with Via Reggio Apartments (USC Lusk Center for Real Estate, Klingbeil Capital Management)
Klingbeil Capital’s James Klingbeil with Via Reggio Apartments (USC Lusk Center for Real Estate, Klingbeil Capital Management)

Klingbeil Capital Management, which has made almost $2 billion in U.S. apartment acquisitions over the past two decades, has paid about $53 million to expand its Bay Area portfolio.

The San Francisco-based company acquired the Via Reggio Apartments in San Jose for about $459,000 a unit, according to a deed filed with the Santa Clara County Clerk-Recorder’s Office on Wednesday. Completed in 1988, the 116-unit complex at 1277 San Tomas Aquino Road sits on almost 3 acres and contains a mix of studios, one- and two-bedroom apartments, all of which are market rate. The property was fully occupied at the time of sale and had no bad debt or delinquent rent payments on its ledger, CBRE’s Jefrey Henderson said in an interview.

Henderson and CBRE colleague Jon Teel represented the seller, a family office that purchased Via Reggio for an undisclosed fee in 1996, according to title service records. CBRE listed the complex for sale unpriced in early May. Klingbeil represented itself in the deal.

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The sale is San Jose’s third-priciest over the past two years in terms of overall and per-unit prices, according to CBRE data. The only ones to top it: Ivanhoe Cambridge’s $196.7 million acquisition of the 396-unit Avana Almaden in November, and Carmel Partners’ approximately $53.5 million purchase of the 101-unit One38 Apartments in August, which was sold out of receivership.

San Jose’s apartment market is at or near the top of the list of those that have benefited the most from the return-to-office trend. Its average monthly rent was $2,570 on June 22, up 19 percent from a year earlier and placing the city third nationally on rent nationwide for the 30-day period ending that date. While the market continues to rebound from the pandemic’s impact, apartment sales in San Jose have been hard to come by in the age of remote work, Henderson said. Area landlords don’t want to be caught “selling early” before rent growth tops pre-pandemic levels, which it started to do this quarter, he said.

Klingbeil will upgrade Via Reggio’s common areas, amenities and interiors, said the company’s Robert Conn, who didn’t disclose additional details on its plans other than it obtained a loan from Fannie Mae to finance the property’s acquisition. Average in-place rents were $2,265 a month when it hit the market for sale, Henderson said. That’s below market, providing its new owner with the upside to push monthly rents “well north” of $300 a unit, he said. Conn declined to comment on how much Klingbeil plans to increase Via Reggio’s rents, if at all, in the near term.

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