An apartment building in the “epicenter” of one of San Francisco’s most popular neighborhoods has sold for $9.7 million — $540,000 per unit and about $620 per square foot — to a relative newcomer on the city’s apartment scene, Cypress Capital Investments.
Founded by Interstate Equities alum Garrett Brasseaux in 2022, Cypress began making investments in San Francisco’s apartment market last year, Brasseaux said. The company has bought at least three multifamily buildings in the city in less than one year, based on property records.
Brasseaux is a Louisiana native who lived in Southern California before relocating to the Bay Area in the summer of 2020, according to his LinkedIn profile. He had always wanted to start his own company, he said, but was “just waiting for the right time.” When interest rates rose quickly in 2022, he knew there would be “a lot of dislocation across all markets,” though he said it took longer than he thought for the San Francisco market to drop, providing “a better entry point.”
He waited out the market to win the deal at 501 Hayes Street. The 15,700-square-foot building has a prominent corner location across from Patricia’s Green, the park at the heart of the Hayes Valley neighborhood, “an irreplaceable location for both residential and commercial tenants,” Brasseaux said. It has 16 residential units and two ground floor commercial units occupied by contemporary California restaurant Hazie’s and the Hayes Valley location of French bakery Miette Patisserie.
The price is far higher than the city’s average in the second quarter of about $347,000 per unit and $408 per square foot, according to Colliers data. But the commercial tenants account for “a significant portion of the revenue,” he said, making the commercial and residential components each attractive on their own and providing “a strong cash flow profile of over a 7 percent cap rate and positive leverage, which are both rare in San Francisco.”
The property was listed in March at $11 million and “fell out of contract multiple times at prices much higher than where we closed,” Brasseaux said. “We were always clear on where we could execute, and eventually the price fell to a point that we found attractive.”
Dustin Dolby of Colliers represented the long-time owners, the Bogart and Gall families, who had owned the property since 1991, according to public records. They decided to sell to take advantage of an acquisition opportunity out of state, Dolby said. There was significant interest given the location at the “epicenter of the commercial corridor” and several other buyers were pursuing the property, “but ultimately they couldn’t transact,” he said.
“Garrett and his team were the right fit for the asset and will be a helpful newcomer to the Hayes Valley community,” Dolby said.
Brasseaux was represented by Brad Lagomarsino, also of Colliers, who did not reply to requests for comment.
On the hunt
This is not Brasseaux’s first prominent buy. In February, he purchased 635 Ashbury Street for $3.26 million. The eight-unit building is a regular stop for Haight-Ashbury tourists since Janis Joplin once lived there. Brasseaux said he’s a Joplin fan, but the building’s famous former resident did not factor into the investment.
Much like 501 Hayes, 635 Ashbury is a “quality building at the heart of an iconic commercial corridor in the city that offers strong cash flow and positive leverage,” he said.
The Ashbury apartments were sold by apartment owner Veritas in a rare non-portfolio sale for the former biggest landlord in San Francisco. Brasseaux also picked up another former Veritas building, according to public records, paying $4.9 million for 1221 Greenwich Street last October. Veritas bought the eight-unit building located a few blocks from the “crooked” part of Lombard Street in Russian Hill for just over $5.6 million in 2022.
On all three deals, Cypress was able to get financing, with a $6.5 million loan from German American Capital on 501 Hayes, a $4 million loan from Bancorp Bank for 1221 Greenwich, and a $1.9 million loan from JP Morgan on 635 Ashbury, according to loan documents.
Brasseaux said that “nothing is easy” in the current lending environment, but the company has “had success getting great debt terms” largely because Jonah Aelyon, director of capital partners at JLL, has “been a great partner.”
Brasseaux said he couldn’t reveal specifics about investors or fundraising activities but that he was looking to add to his growing portfolio in the city. He has not been intimidated by the city’s strict rent control laws, as he has owned, operated and invested in “all asset classes across the country, including a heavy concentration of multifamily in California,” he said. Plus, the company’s in-house property manager has 25 years’ experience managing operations across multiple markets in the state including San Francisco. He added that Marshall Boyd, chief investment officer at Interstate Equities, has been a “great sounding board as I have been growing the company.”
“Unique” market
Though interest rates have impacted multifamily markets across the country, “San Francisco is unique in that it never saw a post-COVID boom and its values have been under pressure since 2019,” Brasseaux said, which makes it an excellent opportunity, even if its recovery is a long-term proposition.
“San Francisco has always been a boom-bust city, and the foundation of the next boom is forming,” he said. “The AI momentum in the city is real. There is still a lot of work to be done and it will take time, but I believe the city will come back stronger as it always does.”
Last summer, interest rate volatility and negative headlines about the city deterred a lot of buyers, but activity has definitely picked up over the last year with “more players entering the market,” he said.
Overall deal volume is relatively low though, with only about 30 sales of five-plus-unit buildings in the city in the second quarter, according to Colliers. Many sellers are still waiting for a better environment to come to market, Brasseaux said, but he expects volume to pick up in 2025. Leasing demand accelerated over the summer, though tenants are still able to be “selective,” he said.
Brasseaux is selective himself, continuing his hunt for buildings with good bones in good locations to hold for the long term.
“San Francisco is such a unique city with so many beautiful buildings,” he said. “It is an exciting time to be in the market with an opportunity to buy buildings with charm, just like 501 Hayes and 635 Ashbury.”
Read more
Politics
San Francisco
San Francisco chief economist sees “doom,” but not the “loop” in city’s future
Residential
San Francisco
Former home of Janis Joplin in SF attracts multiple bids