Is San Antonio Multifamily Faltering?
Multifamily rents trended down in the trailing three, causing some recent reports to be bearish on San Antonio. But experts at Bisnow’s annual San Antonio Multifamily Summit didn’t bat an eye. (It takes more than a little bear to scare a true Texan.)
Over 200 attendees attended the event at the Sheraton Gunter Hotel San Antonio to hear the latest on the sector.
Deverick & Associates managing director Deverick Jordan (here with colleague Jason Ribelin) says our job growth is keeping him bullish. Besides, the dip came in our slow leasing season, and we’re still well above historical trends of rent growth. Deverick, who’s running for city council in Grapevine (Rock the Vote!), says Class-A product in San Antonio is getting 5.25% to 6.5% cap rates, depending on location.
Greystone managing director Jef Elm has seen a lot of value-add deals come up for funding in the last 60 days. Most are companies with Class-B minus properties earning $0.90/SF rents that want to put in $4,000 to $5,000 per unit and bring rents over $1. Lots are taking advantage of bridge loans (you can push rents and then refi). Greystone launched a bridge program in July and is on track to do $1B in the first year; they're a great way to alleviate time pressures to get a HUD loan and have favorable terms. Jeff, who just funded a permanent $39M FHA loan on Renaissance at Canyon Springs, was cheering on the Kansas Jayhawks through March Madness (until they lost on Sunday)—in college, he coached sorority basketball and brought on Kansas head coach Bill Self as his assistant. Their team did well, until it lost to a team coached by Spurs GM RC Buford.
Berkadia SVP Brant Smith says it’s starting to feel like 2004 again (we're all still listening to Usher and pretending Zooey Deschanel is interesting), with very aggressive lenders pushing leverage over 80%, basing on forward-looking rents, and adding I/O. We went from a disciplined 10 CMBS lenders to 39 of them very quickly. Luckily, conservative equity is governing the market. He pinpointed a spot of opportunity: The under-$25M market has been underserved, but is increasing now.
Our moderator, Bury principal Coy Armstrong, had predicted multifamily development would’ve slowed a while ago. But instead, he’s as busy as ever designing new properties and has no break in sight.
ARA principal Pat Jones (catching up with AREA’s David Adelman) is tracking 9,000 units in the dirt now, but says they’re spread out across the city. (It's the biggest game of Whack-a-Mole ever invented.) That’s keeping any one submarket from being overbuilt. Besides, cautious equity is making sure only the best sites get developed. Pat says the Broadway Corridor is changing the game for San Antonio multifamily—it has all the pizazz and mid-rise product (a sector we’ve never had) that institutional investors like. That said, he pegs 1604 and I-10 as the most dynamic area in San Antonio.
Our sponsor BBL Builders has four multifamily communities under construction in Texas. Its Lyndsey Cherry and Bridgett Bell tell us three are in Corpus Christi (including Bay Vista Phase II, a high-density 164-unit community). The other is White Rock Trail Apartments, a 362-unit complex in Dallas.
Our sponsor First American Title’s Garin Clark and Larry Pearson will have some new neighbors soon in the office. The company is building up its team—it recently hired Larry, David Earl, and Megan Clay, and three more employees are coming on board next month. Garin tells us First American recently landed probably the largest transaction in the San Antonio market, but couldn’t divulge the details.
Check back next week for more coverage from our event, including our exciting developers panel!