New-York based investment firm Blackstone Group is planning the purchase of 66 residential complexes in San Diego for more than $1 billion from the Conrad Prebys Foundation, a local charity. According to officials with the Blackstone Group, the transaction is anticipated to close in the second quarter of 2021 subject to customary closing conditions and approvals.
“Blackstone has long been a big believer in San Diego, with multiple investments across our real estate business …” Kathleen McCarthy, Global Co-Head of Blackstone Real Estate, said. “We look forward to ensuring that these properties continue to provide the community with a high-quality rental option at a good value.”
These assets are expected to receive $100 million in improvements for upgraded common areas, maintenance, enhanced security and resident amenities, according to those familiar with the planned transaction.
In an effort to support the goals of its COVID Financial Hardship Fund, Blackstone said it will continue with efforts to keep rent affordable while keeping tenants from being evicted amid the pandemic. Additionally, residents making 80 percent or less of the area median income – approximately $95,100 according to San Diego County records – are expected to find the majority of the units acquired through the planned transaction affordable.The expenditure is also anticipated to create more than 500 jobs, according to industry experts.
Currently, San Diego ranks as one of the tightest rental markets in the U.S., according to a recent report from Marcus & Millichap. In the first quarter of 2021, the brokerage firm reported a vacancy rate of 3.3 percent, which was the same as reported in the fourth quarter of 2020. Despite this, rental rates continue to increase. In the first quarter of 2021, rates increased by 3.6 percent from the fourth quarter of 2020, averaging $2,143 per month.
In the transaction, Blackstone is partnering with TruAmerica Multifamily, a Los-Angeles-based investment firm. The company manages a $10.6 billion portfolio across 4,780 markets on both the east and west coasts.
“It is an honor to be selected along with our capital partner Blackstone as the steward of the Prebys portfolio. We have been an active owner and operator of quality workforce housing in the United States for nearly a decade and this acquisition adds to our already significant holdings in the San Diego area. We will rely on economies of scale to make needed improvements to the assets while still keeping rents affordable,” Noah Hochman, TruAmerica Multifamily Co-Chief Investment Officer and Head of Capital Markets, said.
All proceeds from the transaction will benefit The Conrad Prebys Foundation, in effort to help the nonprofit organization continue its charitable programs in the city of San Diego. With the mission of improving quality of life for San Diego residents, the organization supports medical research, healthcare, higher education youth development and more. This transaction will primarily assist them by supporting grant distribution for these efforts.
“The sale of the real estate portfolio, built by Conrad Prebys himself, will enable transformational change in our community, as the proceeds of the sale will support grant distribution primarily in SanDiego. Conrad Prebys was a sharp businessman who found true joy in the act of giving, and I believe he would be honored to see the result of his life’s work dedicated to continuing his philanthropic legacy,” Dan Yates, president of The Conrad Prebys Foundation, said.
