Commercial April 9, 2022

Hunt for ‘Undervalued Opportunities’ Lands LA Investor in San Francisco Bay Area Suburb

Benedict Canyon Equities Adds to $4 Billion Multifamily Portfolio With Martinez, California, Purchase

Benedict Canyon Equities has closed on the Hayden apartment complex at 486 Morello Ave. in Martinez, California, a fast-growing suburb in the San Francisco Bay Area. (CoStar)Benedict Canyon Equities has closed on the Hayden apartment complex at 486 Morello Ave. in Martinez, California, a fast-growing suburb in the San Francisco Bay Area. (CoStar)

A Los Angeles investor with a penchant for acquiring multifamily properties in fast-growing neighborhoods at a bargain is diving into a San Francisco Bay Area suburb with its latest $41.5 million purchase.

Benedict Canyon Equities closed on the 108-unit Hayden apartment complex in Martinez, California, according to Contra Costa County filings, where it plans to roll out its tried-and-true strategy of upgrading renovated properties to capitalize on rising rents. The deal with seller Pacific Urban Investors, a Silicon Valley firm, closed in late March.

The purchase price for the complex at 486 Morello Ave. shakes out to about $384,260 per unit, according to CoStar data. That’s below the roughly $401,500-per-unit average investors have paid for similar deals in the Martinez area, where rents have climbed by more than 5% over the past year as a result of rising demand and the neighborhood’s relative affordability compared to other Bay Area suburbs.

The typical renter in Martinez, about 30 miles northeast of Oakland, for example, pays an average $2,100 a month compared to the East Bay average of more than $2,350 per month.

For Benedict, the sale is the investor’s latest swing at targeting what it calls “undervalued opportunities” and repositioning them to capitalize on accelerating demand. The firm, which said in a statement that it has a multifamily portfolio valued at nearly $4 billion, said its sweet spot is acquisitions priced between $20 million and $45 million located in dense, urban neighborhoods and with plenty of room for improvements.

That strategy has played out well since the pandemic’s onset as renters have traded expensive city apartments for less expensive, more spacious alternatives in suburbs or secondary markets. What’s more, the population shifts since early 2020 are expected to continue as factors such as remote and hybrid work allow employees to live farther away from commercial hubs.

The multifamily market in Martinez hasn’t posted nearly the same levels of growth as other previously overshadowed markets such as Sacramento; Reno, Nevada; Tempe, Arizona; or Boulder, Colorado. However, proximity to the Bay Area Rapid Transit System, major thoroughfares connecting the neighborhood to nearby San Francisco or Silicon Valley, as well as dwindling supply has helped elevate its standing in the broader region’s multifamily market.

Investors have funneled more than $235.7 million over the past year into the city’s apartment market, according to CoStar data, exponentially higher than the roughly $36.5 million reported over the prior 12-month period.

The strengthening multifamily market has proven to be a boon for Pacific Urban Investors, which acquired the Hayden complex in November 2019, just months before the pandemic took hold. According to CoStar data, the Silicon Valley investor paid $30.3 million for the property, or about $280,560 per unit.

Neither Pacific Urban nor Benedict immediately responded to CoStar News’ requests for comment.