In January, Brennen Degner and Paul Pittman launched Platte Canyon Capital with $30 million in capital from funds managed by Inceptiv, a Culver City, California-based private equity firm, to invest $750 million to $1 billion in middle-market multifamily value-add opportunities across five markets.
Earlier this month, the Denver-based multifamily investment firm closed its first acquisition with the off-market purchase of Allure Apartments, a 268-unit community in San Antonio, Texas, according to a news release shared with Multifamily Dive.
After examining newer construction at a discount to replacement cost, Platte Canyon shifted its focus to older properties, which led it to Allure Apartments. The property, spanning 11.5 acres in the Westover Hills submarket, comprises 116 units built in 1984 and 152 units constructed in 2017.
“We feel like we bought a really solid asset for a valuation that aligns more with what 1980s deals would trade for today,” Degner told Multifamily Dive.
The property offers a range of one-, two- and three-bedroom floor plans. Its amenities include a swimming pool, fitness center, clubhouse, playground and barbecue areas.
Platte Canyon plans a $4.7 million capital improvement program to upgrade interior units, add in-unit washers and dryers, make exterior enhancements and improve amenities.
“The sponsor that sold it to us was having some challenges,” Degner said. “So there’s not just physical upside through renovations. There's also operational upside by deleveraging and creating a stronger balance sheet on the property.”
Lessons earned
During the last cycle, Degner learned that chasing the most popular properties didn’t always yield the best results. This time, his approach has changed.
“We’re trying to find opportunities where it's not as crowded of a space, when we see 15 to 20 offers on a deal,” Degner said. “It feels like the market's really pricing in something like that. So we're beginning to implement a little bit of a contrarian view.”
Even though San Antonio is still facing supply pressures, Platte Canyon sees an opportunity for rent growth as new deliveries wind down.
“There wasn't a lot of institutional capital appetite for San Antonio,” Degner said. “There are some near-term supply challenges. We like the fundamentals of the market long term.”
Platte Canyon is targeting properties in San Antonio, Dallas, Denver, Salt Lake City and Austin, Texas. Degner said Dallas is very competitive, Salt Lake City and Denver are “quiet,” and Austin is “frozen.”
“For the most part, the deals that we're spending a lot more time on and getting excited about just happen to be in San Antonio right now,” Degner said.
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