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In Contrarian Play, Multifamily Investors Still Taking a Chance on Houston

Per Unit Prices Still on an Uptick and Deal Volume Remains High
February 22, 2016
Despite the collapse in oil pricing, multifamily investors have not shied away from acquiring Houston apartment projects.

Although last year’s deal volume of about $3 billion was $500 million less than in 2014, it was still $500 million higher than in 2013, according to CoStar data.

The average sale price per unit for Houston multifamily property also continued to climb from about $50,000/unit at the start of 2013 to about $110,000/unit at the end of 2015.

And investors appear to be targeting the energy-dominant market again this year. Advenir acquired the former Broadstone Stone Park Apartments, a 480-unit apartment community at 6160 East Sam Houston Pkwy N in Houston. The sale price was not disclosed.

The sale marked Advenir's third acquisition in 2016 and it plans to acquire in excess of $350 million by year-end. Advenir said it has acquired over 1,100 apartment units in the Houston MSA over the last nine months.

The firm plans to invest approximately $4 million to renovate and modernize units and common areas at the newly renamed Advenir at Stone Park.

"The Houston region, although currently under a microscope, is a market we will continue to grow our portfolio in and believe we are doing so at a significant discount to purchase prices less than nine months ago," said Todd Linden, chief acquisition officer of Miami-based Advenir. "We are very strategic in our submarket and property type selection within the Houston MSA and believe that our investors we will be rewarded with significant appreciation as oil prices normalize over the next few years."

Last week, Fort Worth-based Panther FW Investments, in partnership with Commerce Capital Partners of San Antonio, purchased the 536-unit Wilshire Place Apartments in Houston for an undisclosed price. This acquisition marks Panther’s fourth property in Houston, expanding its presence to over 1700 units.

Last month, BRT Realty Trust through a joint venture in which it has a 75% interest, acquired the Retreat at Cinco Ranch, a 268-unit complex in Katy, TX, for $40.3 million, inclusive of $30.8 million of mortgage debt. The mortgage matures in 2026 and bears an interest rate of 4.44%.

And also last month, a joint venture acquired the 225-unit Haven at Westgreen in Katy for an undisclosed price. HFF secured acquisition financing for the newly-built, 225-unit apartment community located at 510 Westgreen Blvd.

HFF worked on behalf of the buyer, a joint venture between co-general partners CAF Capital Partners, The Rainier Cos. both of Dallas, and an unnamed party, to place the three-year, floating-rate bridge loan with PCCP LLC.

Willy Walker, chairman and CEO of multifamily lender Walker & Dunlop, noted this month is his company’s quarterly earnings conference call, that, from a lending standpoint, Houston’s multifamily fundamentals are still strong.

“Multifamily fundamentals appear extremely strong right now at this time in the cycle,” Walker said. “And should we have a slowing in growth in the U.S. economy, many of those people that might aspire to own a single-family home are unlikely to be able to get to that and will likely be renters for some time to come.”

Other major multifamily investors are scouring the market as well. Brookfield Property Partners, which owns about 5,300 multifamily units in Texas, is one.

Brian Kingston, CEO of Brookfield Property Partners, said he considers the company to be a value-based investor, which he said often means being contrarian.

"Given that we do have a fairly large presence in places like Calgary and Houston, we feel like we’ve got a pretty good finger on the pulse of what’s happening on the ground there,” Kingston told investors this month. “I don’t think there’s anything imminent that’s noteworthy to report at the moment, but we’re certainly spending time in those markets. And there could be some interesting opportunities given what’s happening.”

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