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Bahraini Bank Buys One-Fourth of Transcontinental Realty’s Multifamily Portfolio

Largest HUD-Approved Sale in History
January 22, 2014
Dorado Ranch Apartments
Dorado Ranch Apartments
Looking to take some profit from its apartment property investment, Transcontinental Realty Investors Inc. (TCI) and Pillar Income Asset Management Inc. sold more than quarter of TCI’s multifamily portfolio to a joint venture between Bahrain-based International Investment Bank (IIB) and Atlas Residential Management for $250 million, or about $104,200 per unit for the 2,400 multifamily units.

Atlas Residential Management, through an affiliate named Alliance Holdings LLC, owns and manages multifamily apartments throughout the U.S. and will manage the acquired properties.

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The deal included nine TCI apartment properties (accounting for approximately 2,000 of the 2,400 units sold,) with a gross portfolio price of $190 million, or about $95,240 per unit. The properties included in the transaction are primarily in the Dallas-Ft. Worth area (five properties) with one property each located in Amarillo, El Paso, Houston, and Odessa, TX.

As of Sept. 30, TCI owned 45 apartment communities totaling 8,033 units.

Pillar Income Asset Management is a Dallas-based real estate management company that manages and advises TCI.

The remaining two properties sold were managed by Pillar and owned by another of its affiliates. The two properties sold for $60 million or about $148,150/unit.

Existing senior debt for the portfolio, which is insured by U.S. Department of Housing and Urban Development (HUD) was assumed during the transaction, with Macquarie Bank Ltd. providing $71 million in mezzanine financing.

The transaction was the largest transfer of physical assets portfolio ever approved by HUD.

Daniel Moos, president and CEO of TCI, said the transaction occurred at an opportune time as Atlas was looking to expand its portfolio at the same time TCI was looking to selectively prune its asset base.

"Though TCI’s strategic focus remains strongly committed to growing our multifamily portfolio, this deal provided us with an excellent opportunity to sell off a number of properties in various markets scattered around Texas," said Moos.

For the buyer, the transaction is expected to provide an opportunity for its investors seeking stabilized cash yields to participate in the booming Texas economy and its robust multifamily market. "Our bank has been seeking investment opportunities in the U.S. over the last couple of years and believes that this Class A portfolio will meet the return expectations of our investors given that the US multifamily market is poised for continued growth," said Aabed Al Zeera, CEO of IIB.

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