Dinerstein Pays $52M for Apartments in Santa Cruz

It’s still a seller’s market in Santa Cruz.

The Dinerstein Companies paid about $52 million to acquire nearly 100 apartments in the city, one of this year’s priciest per-unit multifamily sales in the Bay Area. It also expands the firm’s California portfolio that already includes student housing and apartment properties in Berkeley, Davis, San Diego and Santa Monica.

The Houston-based firm paid nearly $548,000 per unit to purchase Swenson Builders’ Five55 Apartments complex at 555 Pacific Avenue. Completed in 2018, the four-story building is sandwiched between Santa Cruz’s beachfront and downtown. It was the first of its size in the city in over a decade, according to a 2017 Silicon Valley Business Journal report.

The sale closed on Sept. 28, title service records show. A Dinerstein representative declined a request for comment, while a Swenson spokesperson didn’t follow up.

Nearly 60 percent of the complex’s units are 650-square-foot one-bedroom apartments, with the rest being studios that range from 450 to 520 square feet. Its ground floor includes about 4,700 square feet split between four storefronts, one of which is available for rent. While it’s unclear what percentage of the complex’s apartments are occupied, neither its website nor Apartments.com advertise availability.

Swenson’s development agreement with Santa Cruz regarding Five55, which the San Jose-based developer transferred to Dinerstein as part of the sale, stipulates that a fifth of the complex’s units be rented to low- and very low-income households. Of the 19 apartments, 12 are set aside for low income renters — akin to someone making about $87,000 annually — with the rest affordable to single-person households earning about $54,000 a year.

The Five55 deal ranks eighth on a list of Bay Area multifamily sales over $500,000 per unit provided by CBRE on Oct. 12.

Just ahead of it in the rankings was a sale that closed last week and involved a 92-unit senior complex in Santa Clara. The city rezoned it for general occupancy last year. An entity advised by Zurich Alternative Asset Management paid about $576,000 a unit to purchase the two-year-old building from USA Properties Fund.

The Bay Area’s pricest multifamily deal was Bell Partners’ $206 million purchase of a 260-unit apartment complex in South San Francisco back in May. That worked out to roughly $792,000 a unit for the three-year-old complex.

In Santa Cruz specifically, however, the Five55 deal marks the city’s second-priciest apartment sale of more than 10 units on an absolute and a per-unit basis ever. It’s bested only by The Regents of the University of California’s purchase of 168 apartments last year for $118 million, or nearly $701,000 a unit, according to the analytics firm Reonomy.