The Frisco, TX-based Hall Financial Group's structured real estate finance division provided $2.2 million in preferred equity to Performance Properties for the capital improvements. The property is located east of the Alamo Heights district, just off Interstate 410.
The improvements include extensive renovations to the exterior, including landscaping, a refurbished parking area, wrought iron railings to replace wooden railings on balconies and power-washing the brick exterior, says Mike Jaynes, Hall's senior vice president. Interior improvements will include new appliances, countertops, cabinets, carpeting andcrown molding, he adds.
Performance Properties, a Dallas-based real estate firm that specializes in under-performing multifamily properties in major Texas markets, is the general contractor on the project. The work is expected to be completed by early next year.
Although the property has an occupancy of 97% to 98%, its rental rates have been about 74-cents per sf while the market is closer to 85 cents per sf. Rent will likely settle somewhere between those two marks, he predicts. "There's room for increasing the rent--even before the rehabilitation," Jaynes says.
Performance and Hall bought the property from a family-owned real estate partnership based in Bethesda, MD. "Our collaboration with Hall Financial Group was essential for a workable solution for the project," says David McQuaid, president of Performance Properties.
Hall will receive a 10% return on its investment and one that will be capped at a 22% internal rate of return once the property is sold or mortgaged, according to Jaynes.
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