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Real Estate Bisnow (HOU)
Allen Matkins (Trends) LHOU

Multifamily Monday:
Why Deals Just Keep Getting Bigger

Mac Haik Enterprises is a sponsor of the Future of The Energy Corridor next Friday, Oct. 31 (register here). Its latest project is Energy Tower IV, featuring 450k SF of Class-A office space on 17 floors and located at the gateway to The Energy Corridor (click here for more info).

Multifamily has been getting ever hotter, but now it's also getting bigger. We sat down with HFF's multifamily power team (they've sold $1.1B so far this year) to learn why.

1. Portfolios Over Individuals

Portfolios typically earn a 3% to 7% higher price than individual communities, according to HFF director Chris Curry and senior managing directors Todd Marix and Todd Stewart. The big benefit is on the debt side because the assets can be lumped into one loan that underwrites better for lenders. The highest sales numbers come from portfolios where the buildings are all similar in geography or asset class, but Chris is also working on some non-homogenous portfolios now that also earn premiums. 

Todd Marix says the trick is to build the best pool of properties. The team just awarded a winner for a 10-property portfolio that totals nearly 3,500 units primarily in Houston but with a couple of Dallas and Austin assets—they're primarily B properties but also have some As and a well-located C. The portfolio earned the best pricing by breaking up into five transactions. (The gentlemen tell us this was a particularly tricky deal because all the communities have assumable debt and all had different partners on the seller side.)

2. Bigger Deals

Deal size has increased dramatically over the last few years. In 2012, the average was $26M; that leapt to $36M in '13, and is at $40M so far this year. Todd Stewart tells us they've had 10 deals this year top $50M (and three more of those gargantuans in title). Those are balanced out by a lot of smaller transactions too—Todd Marix says his team is known for those mega deals, but actually 56% of its closings are Class-B and –C. Overall, the Todds and Chris have closed 29 transactions totaling $1.1B this year, and have $375M in title. With $400M out on the market now, they could wrap up with a nearly $2B year. Pictured is Arcadian West, which the team just sold to a pension fund—its Energy Center location and value-add opportunity make it Main and Main of investors appetite.

3. Big Yields Draw Foreign Capital

We've never been in the limelight like we are now. We're particularly appealing to China, Canada, the Middle East, and Australia, and Todd Stewart just spent the day driving around Houston with a bus of high net worth investors from Monterrey, Mexico. The big draw: We offer a significantly better yield than these investors can find elsewhere. Pictured: Yorktown Crossing, which Greystar delivered two years ago, and which just sold to a Canadian buyer. (Todd Marix says it's that buyer's third acquisition here, and it's hungry for more.)

Kastle (Premier) HOU
Fidelity National (Lolly) HOU

How Much Does a New Apartment Cost?

Want to live in a new apartment? With help from Apartment Data Services' Bruce McClenny, we found out what you'll need to plunk down each month. The Inner Loop, which PMRG hopes to capture in 2929 Weslayan, is pre-leasing now for December first move-ins. All you'll need to join the resident roster is about $4,977 per unit. (Rents range from $2,364 to $14,000.) Pictured, property manager Misty Meredith showed off the view from the 40th floor.

Montrose has made a name for itself as one of the most active development submarkets in the country. The average one-bedroom resident is spending $1,632 a month, which is right where rents start at the Morgan Group's new Pearl Midtown. (Pictured, CEO Mike Morgan.) The Sovereign at Regent Square will cost you a bit more, running anywhere from $1,750 to $3,395 a month. Down the road, the Galleria arguably started the cycle the most prepped for Millennial living, and new development is dramatically driving rents. The average one-bedroom apartment there is $1,267/month, but a unit at the new Broadstone Post Oak could cost you $2,675.

In Downtown, the new up-and-coming residential market, SkyHouse Houston starts at $1,765. Pictured, developer Novare Group prez Jim Borders. It's got a ways to go to catch up with the father of Downtown living, One Park Place—living there starts at $2,335 for a basic one-bedroom unit, and two bedrooms could take up to $13,630 from your monthly check.

And of course, we can't overlook our most booming suburb. The Woodlands might be all the buzz, but its multifamily developments are still at a nice discount to the Inner Loop. The Alexan Auburn Lakes—shown off here by PPI co-CEOs Barb Gaffen and Michael Zaransky, who developed the property with TCR—averages $1,225 for a one-bedroom unit. Broadstone Sierra Pines will run you a little more, up to $1,594/month. Apartment Data Services prez Bruce McClenny says researchers are having to create a new Spring submarket now; the area never had properties before, and they don't fit in with the high-dollar Woodlands communities.

Briarhollow (BakersPoint) HOU
Moody Rambin (Ashford16)
Bisnow (Sales-Checklist)

Don't Miss Future of the
Energy Corridor: Oct. 31!

The Energy Corridor has become Houston's second-largest employment center, with over 28M SF of office/mixed-use space and another 17M SF projected by 2030. All that construction activity means the submarket looks different every few weeks. We'll discuss that and more at Bisnow's Future of the Energy Corridor summit on Oct. 31. Join us at the Omni Westside at 7am for great networking and insider info from the submarket's biggest developers. Register now!

12 Days Until the Top Under 40 Developers / Investors
Meet in Miami

The top developers and investors under the age of 40 descend on the Ritz Carlton in South Beach for Bisnow's first annual "Ascent" multi-day summit. See who's attending and apply to be considered for one of the few remaining spots here.

How Crowdfunding Is Disrupting the $1Trillion Real Estate Industry

There's something special about the Hard Rock Hotel Palm Springs in California. (No, not the fact it contains a spoon used by the back-up guitarist from Poison. That's not memorabilia—he just likes to eat there.) The hotel was funded, in part, by crowdfunding, the online fundraising model that raises cash from vast numbers of investors. We're fascinated by the topic and suspect you might want to learn more, so Bisnow has produced—gulp!—a free video for you. It'll explain how crowdfunding—often associated with financing dubious art projects—has already raised more than $135M worth of debt and equity since exploding onto the scene in 2012. We'll be launching this FREE, brand new video featuring Fundrise chief Ben Miller this coming Thursday. Stay tuned!

At 6000 degrees Kelvin, the surface of the Sun is actually one of its coolest spots. Both the Sun's interior and its corona measure in the millions of degrees Kelvin. Send your news to Catie Dixon, catie@bisnow.com.



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