The Houston apartment market has faced struggles over the past couple of years. Expenses, primarily insurance costs, have skyrocketed, and high-profile problems, specifically with the foreclosure of four Houston apartment properties totaling 3,200 units from Dallas-based Applesway Investment Group, have pushed down prices in the city.
“In conjunction with the operational issues, the floating rate problem, the foreclosures and that narrative and the expense load that's ever-increasing, it was causing some people to turn away,” Ben Kriegsman, director of acquisitions for Dallas-headquartered real estate investment and asset management firm Lion Real Estate Group, told Multifamily Dive.
As some investors turn away, it creates opportunities for others. When the owner of Stone Creek at Old Farm, a 190-unit, class B-plus property west of downtown Houston, decided to sell, Lion saw an opportunity to secure an off-market deal with a seller it had done business with before. Dallas-based REIT NexPoint Residential Trust was the owner of the property, according to Yardi Matrix.
“We felt really good about the basis,” Kriegsman said. “The going-in yield was fantastic. We were fortunate to have worked with the seller we've worked with and have a great relationship with.”
Value-add deal
Lion, which focuses on acquiring value-add and opportunistic multifamily properties, bought the property on behalf of its Fund III investment vehicle.
“We historically have pursued 70’s, 80’s and 90’s vintage product,” Kriegsman said. “What we're finding in this fund is that we're getting a really good basis and able to go up in the vintage scale a little bit. This property is 1999 vintage.”
Lion liked Stone Creek at Old Farm’s large floor plans, townhomes with garages and location. “It's in a very nice submarket off of Westheimer Road,” Kriegsman said. “If you go a little bit to the north, you end up in a neighborhood with really beautiful, million-plus-dollar homes.”
Lion plans light renovations at Stone Creek at Old Farm, including new countertops, backsplashes, lighting packages and stainless-steel appliances where necessary. Exterior and amenities upgrades have already been completed.
“To the seller's credit, they've gone through and done a pretty nice renovation already,” Kriegsman said. “Basically, we're doing a coat of paint, replacing the flooring and maybe putting in a backsplash. A lot of the units had stainless steel appliances. So, really, there's not a whole lot that we need to do.”
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