Exclusive: Two Class-C Multifamily Projects Sold
Greysteel closed on two Class-C deals that exemplify the market's demand for product. Senior director Doug Banerjee (right, with Greysteel managing director Boyan Radic) worked a 1031 exchange deal for an out-of-state buyer and a local seller in the 100-unit Class-C The Brazos on Hulen (pictured below) in Southwest Fort Worth. Doug tells us most of the interior units have already been renovated and some exterior renovation work was done, but a local partnership group had some struggles with the asset and wanted to take advantage of a strong seller’s market. Because the asset was in good shape, the buyer can invest some additional capital and push NOI higher.
Doug also repped an out-of-state seller in the disposition of the 100-unit Highland Hills in South Dallas. The property was completely rehabbed (inside and out) after being purchased REO in 2012. Doug says his team coached the sellers on where to spend some additional money (bringing additional units back online, hiring a water conservation specialist, etc.), which enabled the sellers to show a positive trend towards stabilizing the asset. That allowed them to hit a number that made sense and provided a positive ROI even if it took a little longer than originally planned.
Rising interest rates may trigger more multifamily activity early in ’16, but the demand will still be more than the supply, Doug tells us. Interest rates should remain low, but many experts are projecting rates to move up in the second half of 2016. He expects to see quite a bit of deal flow in Q2 to take advantage of lower interest rates before they eventually move up. (He also laments his lack of a crystal ball). Cap rates are very compressed across asset classes, so he doesn’t expect to see them dropping much further, but he believes the amount of competition (buyers) will continue to keep the cap rates down for the foreseeable future even as interest rates start to creep back up.