INSIDE THE DEAL: Apartment Generates Buyer Interest Despite State of Markets

By Keat Foong, Executive EditorRosenberg, Texas—It is still possible to sell apartments in this market, and the Brazos Ranch transaction brokered by Apartment Realty Advisors (ARA) provides an example of deals that are closing. “In light of the current environment, everyone involved in the transaction was thrilled to get Brazos Ranch closed. Deals are still happening but the finish line is not as easy to reach as it once was,” says ARA Houston Principal David Wylie.  Wylie represented the Houston-based seller, Judwin Properties Inc. Steve Alvis of NewQuest represented the buyer, Inland Real Estate Acquisitions Inc., the purchasing arm of The Inland Real Estate Group of Companies Inc., headquartered in Oak Brook, Ill. The Inland Real Estate Group of Companies is a diverse group of real estate companies including REITs, both exchange listed and non-listed. The off market-sale garnered a high level of investor interest despite the state of the capital markets, according to ARA. A handful of bids, less than five, were received, Wylie indicates.  The owner, who also developed the property, was exploring a refinancing versus sale, and tested the market before deciding to sell Brazos Ranch, which is one of its properties in the Houston market, says Wylie. ARA being their advisor, “We talked to a few groups when we learned they may want to sell,” says Wylie. Wylie attributes buyer interest to the quality of the asset and the reputation of the builder, as well as the strength of the high-population-growth and barrier-to-entry submarket of Rosenberg. Also, the property was leasing quite well, at the rate of about 30 per month, and close to stabilization. Rosenberg is in the southwest suburb of Houston which enjoys a high population growth, says Wylie. There are two other Class A apartment complexes in the submarket, but the county has restrictions on future development in terms of density, he says. Amenities include a clubhouse, swimming pool, business center, fitness center, basketball court and covered parking. The buyer was well capitalized, and put in low leverage on the Fannie Mae-financed deal which traded quickly. The property was sold at 7 percent cap (on a stabilized basis), and Wylie says that apartment sale prices are currently about $70 to $110 per unit in comparable Houston submarkets.