As interest rates and the 10-year Treasury have moved this year, Dallas-based Knightvest’s investment strategy has stayed the same — it continues to buy and sell.
In July, the firm acquired the 240-unit Encore Apartments in Plano, Texas, in an off-market deal from a family that had owned the asset for over a decade after buying from the original developer. Knightvest is renovating the unit interiors, modernizing the property amenities and adding a resident lounge.
“[The family] rarely sells,” David Moore, Knightvest founder and CEO, told Multifamily Dive. “And then we got a phone call from a good friend of mine who wanted to see if we had an interest in buying that property. He knew we would have an interest because we owned the next-door property.”
In October, Knightvest purchased the 362-unit San Cierra Apartments, built in 2008, in a northwest Houston submarket. The company plans to upgrade amenities, complete interior renovations and add private yards.
“We loved that it's a townhome product with 1,300 square feet of average-unit size, adjacent to Whole Foods and in a great submarket,” Moore said. “We love big units right now because of where mortgage rates are, and it's a great alternative to a home.”
In November, Knightvest acquired the 308-unit Arya Grove Apartments in northeast San Antonio, giving it six assets in San Antonio. The firm plans to renovate units, make enhancements to the common areas and amenities of the property and rename the community Sagebrush Apartments.
“We actually own a property about 2 miles away, and we have had it for about seven years, so we really know the submarket,” Moore said. “The original interiors are from 2006. They’re dated interiors with white appliances and Formica cabinets.”
More to come
Since its founding in 2007, Knightvest has invested over $10 billion to acquire over 60,000 units across high-growth metro areas in Texas, Arizona, the Carolinas and Florida.
“We've basically had the approach that we are going to buy and sell in both up and down markets,” Moore said.
Still, there are hurdles. Like other firms, Knightvest has seen the value decline on properties it bought in 2021 and 2022. “They’re worth less than what we paid,” Moore said. “So, we're going back to lenders and saying, ‘We need at least a two-year solution, but would prefer three and will do a small paydown. I think a lot of groups are doing that.”
In the vast majority of cases, the lenders are cooperating. “We do a moderate paydown,” Moore said. “We'll buy an interest rate cap that gets us to cash flow neutral or even a little cash flow, and we agree not to do any distributions to equity.”
As it works with lenders, Knightvest continues to make buys. The firm has three more properties under contract. Once those close, it will have eight acquisitions for the year and a similar number of dispositions. “Our plan next year is probably something similar,” Moore said.
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