August 7, 1998

California property investment firm likes prospects for Seattle

By JERRY CRAIG
Journal city editor

A California-based property investment company has decided that the best way to participate in the hot Puget Sound multi-family housing market is to invest in existing properties and upgrade them rather than develop new ones.

The latest project for Metric Property Management, a division of Metric Realty, San Francisco, is Overlook at Magnolia, a 335-unit complex of 11 mid-rise apartment buildings on the east side of Magnolia overlooking Fishermen's Terminal.

At the Overlook: Dale Gruen and Kathy Adamec of Metric Realty. Photo by Jerry Craig

An estimated $4 million renovation now under way includes an upgraded clubhouse and leasing office, more attractive landscaping and redesigned surface parking areas.

On the outside, the buildings' textured granite stucco ("marblecrete") finish and wood trim will be repaired and updated and the design motif changed.

Life safety and accessibility features such as decentralized locks will be added. There will be enhanced emergency lighting, improved elevators and wheelchair ramps.

Remodeled units will have new carpeting, paint, lighting and appliances.

The unit mix at Overlook consists of one-, two- and three-bedroom units and the 5,128-square-foot penthouse occupied for many years by the project's original owner-builder, Ragnar Pettersson. Pettersson's unit, featuring wraparound deck and views of Shilshole Bay, the Ballard Locks, Queen Anne Hill and downtown Seattle, is expected to be leased to a corporation.

According to apartment manager Theresa Daily, the apartment complex, built in phases between 1968 and 1975, hasn't had a major renovation in 25 years and is now substantially out-of-date.

Metric Property Management, which currently manages more than 18,600 apartment units nationwide, is no stranger to the Seattle area, having made various investments here over the past 15 years, according to Dale Gruen, portfolio manager for Metric.

Recently the company sold the 202-unit Heronfield apartment complex in Kirkland to a pension fund. Last December it purchased two apartment properties in Kent -- the 100-unit Arbor Chase and 175-unit Country Home. They are currently being renovated.

Gruen describes the acquisition of the Outlook and the two Kent properties as a "value added investment strategy." The company looks for older properties, generally in close-in urban areas, that lend themselves to cost-effective enhancements. Many times, explains Gruen, the previous owner didn't make the required capital investments to maintain them properly.

Negative factors in deciding whether or not to buy include a declining neighborhood, poor basic construction and certain design features such as small floor plans, says Gruen.

The company normally buys properties as long-term investments. Rarely are apartments converted to condominiums, Gruen adds.

Metric Property Management employs over 500 people nationwide and has regional offices in Atlanta, Denver, Dallas, Houston, Minneapolis, Orlando, Fla., Philadelphia, Scottsdale, Ariz. and White Plains, NY.

Metric also manages 400,000 square feet of retail space and 1.2 million square feet of office/industrial space nationwide.

Puget Sound with its growing population and booming economy is a very attractive housing market right now, says Gruen. "We are definitely looking to acquire additional properties here."

Gruen admits that rents must go up to pay for all the improvements but says that every effort is made to lessen the hardship for current tenants. Sixty-day notices about rent increases are given instead of the traditional 30-day notices. Tenants are given money for storage and moving expenses.

Kathy Adamec, property manager for Metric, explains that a number of options are given to tenants. If they decide to have their units remodeled, they are provided with another furnished unit elsewhere in the complex. They may also decide to stay in their unit without a remodel. In that case, the rent increase would be less.

Gruen says Metric surveyed rental properties in the Seattle market and found that rates at Overlook were "hundreds under the market rate" for comparable properties.