NAPA -- Fifty-four rental townhomes and a 124-unit apartment complex on the Sheveland Ranch property in south Napa sold to a San Francisco real estate investment firm for $39.5 million.

[caption id="attachment_72460" align="alignright" width="360"] Saratoga Downs Apartments (image credit: Ridge Capital Investors)[/caption]

Affiliates of Ridge Capital Investors, LLC (415-967-7800, ridgecapitalinv.com), purchased the Sheveland Ranch townhome parcels and the adjoining Saratoga Downs Apartments complex off Atrium Parkway from affiliates of the San Ramon-based developer and manager, Whitecastle Development and Castle Management, according to Marcus & Millichap agent Vince Schwab, who brokered both sides of the April 15 sale.

The first of the 27 Sheveland Ranch duplexes were completed in 2011, and the last dozen units were finished in September of last year. The 54 townhomes, which have three or four bedrooms and an average 1,900 square feet, are all leased. Saratoga Downs was built in 2006 and had one vacancy at the time of sale.

"They were not that interested in a project this small," Mr. Schwab said of Ridge Capital's reaction to the 54 townhome parcels when contacted with the offer. "The seller would only sell them tied together."

[caption id="attachment_72461" align="alignright" width="300"] Sheveland Ranch townhomes (image credit: Castle Management)[/caption]

Over the first year of its ownership, Ridge Capital plans to bring the property’s physical quality and overall tenant experience to the top of the market via a substantial augmentation to the existing clubhouse, amenities and interior unit finishes. FPI Management, Inc. will manage the property.

“Saratoga Downs at Sheveland Ranch offers the most diverse range of unit types and sizes in the market, and is the only property to offer new townhomes up to four bedrooms in size in a neighborhood environment,” said Trevor Wilson, Ridge Capital managing director. “Upon completion of our repositioning program, Saratoga Downs will offer the highest-quality rental living experience in the Napa Valley, a market that has shown resilience in downturns and a healthy bounce back over the last 24 months."

The Napa rental housing market currently has 96 percent occupancy and rental increases of more than 15 percent in the past two years, Mr. Wilson noted.

This is the fifth investment for Ridge Capital Investors in the last 12 months and its third with Rancho Santa Margarita-based Redwood Real Estate Partners.

This past fall, the firm bought 137 Brentwood apartments for $19.6 million with Redwood, SunPower Corp.'s 185,000-square-foot San Jose office campus for $34 million with San Rafael-based W3 Partners, 45 San Mateo apartments for nearly $11 million with Redwood Real Estate Partners and a 97,000-square-foot former Fairchild Semiconductor facility in San Jose for $13.5 million with Contrarian Capital Management.

Over the next 12 months, Ridge Capital said it plans to invest $50 million of equity in both multifamily and commercial properties in the Bay Area.

Multifamily property sales have been active in the Bay Area in the past 12 months, according to Jeff Mishkin, head of Marcus & Millichap's San Francisco office.

"[Capitalization] rates are holding their own at historic low levels," he said. "Rents are still creeping up in area like in Napa."

Drivers of the activity include low financing interest rates, concerns among investors about returns from alternatives, worries last year about looming tax-law changes, relatively little new development in the Bay Area, according to Mr. Mishkin.

The Sheveland Ranch townhomes, which have a total of 102,687 square feet, were sold for $18.8 million, equivalent to $348,148 per unit, $183 per square foot, 14.2 times gross rental income or a capitalization rate of 4.59 percent. Rents average $1.05 a square foot, including 20 percent of the units under below-market-rent agreements.

Saratoga Downs sold for $20.7 million, equal to $166,935 per unit, $179 per square foot, 10.3 times gross rents or a cap rate of 5.72 percent. Rents average $1.12 a square foot, including affordable-housing units.

Union Bank financed 65 percent of the purchases.