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Multifamily Monday
Auction (July29) L-HOU
July 15, 2013

Multifamily Monday

We hear plenty about how institutional properties are selling like hotcakes. But older assets are lighting up the transaction world as well, with record competition, pricing, and cap rates.

ARA VPs Zach Springer, Russell Jones, and Matt Saunders lead the firm's local private client group, which focuses solely on properties built before 1990. (Grunge music ruined development.) Russell says the team was closing 15 to 20 deals totaling $150M to $175M each year from '06 to '12. But in 2012, that skyrocketed to 36 deals valued at $310M, and year-to-date the team has already closed 22 deals totaling $265M. Plus, it has 12 assets ($225M) under contract and 16 properties listed at $185M, so we might see some seriously massive stats for 2013.

money grows
The trio says their listings are attracting much more interest than before. Each deal is getting 15 to 20 offers, and they've been going into second- and third-best and final rounds. (And you thought the NBA playoffs were exciting.) Most sales today are stable value-add opportunities, and for the first time those assets are getting hard money on Day 1. (In '09 and '10 the team was seeing that for distressed deals, but it's new for that to extend to stable properties.) There's historical cap rate compression; the team just sold an 800-unit Class-C asset that they expected to close around a 7.5% cap, but it ended at a 6.5% cap after multiple best and final rounds.

Willowick Apartments
The team could tell in January this was going to be a great year because B and C buyers practically across the board had doubled their funds. The explosion of interest in pre-'90s-era properties is probably due to killer fundamentals. Russell, Zach, and Matt say 60% of Houston's absorption is in the Class-C market. The asset class saw 4% rent growth last year, and is projected to repeat that this year. The team just sold a 500-plus-unit property for $8M higher than they'd sold it a few years ago at the same cap—the seller did no renovations, so the increase was pure market appreciation.

TCR Building Four

TCR Scot Davis
Construction is under way on Alexan Creekside, a 380-unit community in Tomball. Trammell Crow Residential is developing the project, and senior managing director Scot Davis (snapped this morning) tells us it's one of four projects totaling 1,200 units the firm is developing. Two are with Behringer Harvard: Allusion West University (231 units, delivers in December) and The Muse (271 units, opens late next spring). It also has two other Alexan communities under way: Alexan Enclave (in the Energy Corridor, 354 units, opening next spring) and Alexan Heights (352 units, breaks ground in October at 6th and Yale, opens early 2015). Scot tells us TCR aims to diversify its product type and submarkets, so we'll see it building all around the Houston metro.

Alexan Creekside Rendering
Here's Alexan Creekside; Scot says TCR picked the site because Tomball is one of the fastest-growing areas in the country and is underserved for multifamily. It's near The Woodlands' newest village (Creekside Village), the Grand Parkway, and Exxon's campus but has great relative value. The first units will deliver later this year, with some featuring fenced backyards. (Tom Sawyer needs a job.) The property sits on 20 acres at the SWC of Kuykendahl and Hufsmith roads. Scot tells us TCR isn't slowing down; we can expect two or three more properties to be announced this year.

HAA's Honors Awards

2013 HAA Honors Awards | Photograph by Mark Hiebert, HiebertPhotography.com
HAA handed out its annual Honors Awards last month. Above, supplier of the year Liberty Group's Dean O'Kelley and Milestone's Kyle Brown (HAA treasurer) smiled pretty at the ceremony. More than 1,000 multifamily pros were on hand, and 16 properties and 16 individuals walked away winners. Other recipients include Greystar's Kelley Rightmare Suess (portfolio supervisor of the year), Jerry & Sharon Turner (top independent owner), Francis Property Management's Debbie Sulzer (owner/management exec of the year). HD Supply's Jimmie Hotz was named go-getter of the year, and Centra Partners' Tina Cavaco was named honorary life member. Congrats!

Domain 2
Properties were graded based on resident service, physical appearance and appeal, community service, operating performance, and unique features. Domain at City Centre won for the 300-plus-unit mid-rise built between 2000 and 2010 category (we snapped it on a snowy day four years ago). The other winners are Carrington Court, Gardens at Friendswood Lakes, Watermill, Midtown Arbor Place, Parque Del Oro, Steeplecrest, Estates at Bellaire, Venue Museum District, The Bellagio, Grogan's Landing, The Abbey at Eldridge, Deseo at Grand Mission, Gables Post Oak, Cypress Creek at Fayridge Drive, and One Park Place.

What's Next?

letter  blocks
Congrats to Boxer Property's Omar Nasser, who correctly figured out that the next letter in the sequence BCDEGP is T. The trick: the letters have hard "ee" sounds (bee, cee, dee). V and Z would round out the series. By request, we're also picking one person at random from the middle of the pack to win a free ticket, so Omar will be joined by University of Houston director of real estate services Sean York at Bisnow's New Construction & Development Summit.

On a regular 12-hour digital clock how many times would the same three digits in a row be displayed (e.g. 1:11, 11:12, 12:22) in one day? Tell Catie Dixon, catie@bisnow.com.

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