In a significant real estate transaction, an investment firm based in Salt Lake City has recently secured the Palisade apartment complex, a 300-unit property in the vicinity of San Diego's well-known Westfield UTC mall. This deal, with a staggering value exceeding $200 million, is currently being hailed as one of the most expensive multifamily acquisitions in the region over the past year, possibly setting a record in California as well.
This noteworthy acquisition by Property Reserve Inc. involved the purchase of the Palisade, a modern structure completed in 2019, located at 8800 Lombard Place in the University Town Center area of San Diego. The transaction amount, approximately $203 million or around $677,000 per apartment, was confirmed through CoStar's data analysis and public records from the county.
The property was previously under the ownership of New York's JP Morgan Chase. They had initially invested $119 million in October 2021 to fully acquire the property from their former joint venture associate, the mall operator Unibail-Rodamco-Westfield, setting the entire property's value at $238 million at that time. URW, the original developer of the high-end Palisade apartments, had constructed it on a land parcel originally part of its Westfield UTC mall and later sold a 50% stake to JP Morgan.
According to recent CoStar data, the Palisade sale is not only the largest apartment deal in San Diego in the past year considering the total price but also the largest across all commercial property types in the region. Additionally, it ranks fourth in the largest apartment deals over the last five years and third in California's multifamily transactions this past year.
This sale price per unit for Palisade significantly surpasses the average of $503,000 for UTC apartments and the $399,000 regional average in San Diego, as per the past year's data. Joshua Ohl, CoStar Group's Senior Director of Market Analytics in San Diego, pointed out that despite the high sale price, the cost is still below the current estimated construction costs for similar properties in the same area. He also noted Palisade's prime location in the UTC area near the Westfield mall, making it a sought-after asset in the region.
URW, in a 2021 statement, had mentioned that their sale of a half-stake in Palisade to JP Morgan reflected a 15% increase over the property's latest appraisal, emphasizing the high value of residential and commercial buildings near their flagship assets and the importance of densification projects in such locales.
URW's development of Palisade followed its extensive renovation and expansion of the Westfield UTC mall, an investment exceeding $1 billion, highlighting a trend among mall operators to integrate mixed-use elements like apartments into retail centers. URW, based in Paris, has been divesting several of its U.S. properties, including malls and adjacent assets, over the past three years to refocus on European and other markets, though Westfield UTC has not been part of these sales.
Market analytics data from CoStar revealed a significant increase in apartment property sales in the San Diego area encompassing University Town Center and La Jolla, reaching $553 million over the past year, a 205% rise from the previous year. This area also boasts some of the highest average monthly rents in San Diego, despite a 3.5% decrease over the past year.
Another major deal in San Diego, closing in late December, involved The Artisan, a 265-unit property in downtown's East Village, bought by San Francisco-based Jackson Square Properties for approximately $107.8 million. This sale, too, was reported to be below the replacement cost for relatively new construction.
The parties involved in the Palisade transaction have not yet commented on this latest deal, as per requests from CoStar News.