(Read more on the multifamily market.)
[IMGCAP(1)]HOUSTON-Miami-based Alterra Capital Group has entered the Greater Houston market with the $50-million purchase of four class B multifamily properties, totaling 1,348 units in 84 buildings. The quartet consists of Carriage Hill, One Cypress Landing and Woodborough, all in North Houston, and Holiday on Hayes in the Westchase submarket.
The deal was structured with 75% mortgage financing and a 25% private equity investment raised by Alterra, a privately held real estate investment company that specializes in acquiring and repositioning distressed properties. The seller was Milestone Group of Dallas and New York City. A CB Richard Ellis team in Houston brokered the deal.
Alterra has allotted $5 million to renovate and upgrade the properties, according to principals Matt Wanderer, Matt Papunen, Adam Singer and Rob Sena. The new owner also will overhaul management. The work will follow the pattern of previous rehabilitations that the company undertook on apartment complexes in Florida, Alabama, Georgia and Tennessee.
"We had been planning to build a presence in Houston for a long time," Papunen says. "It was a question of isolating the right deal. The acquisition of these four properties simultaneously allowed us to obtain excellent pricing in a tough market while improving our economies of scale in terms of purchasing power and management strategy, ultimately creating a powerful platform for us for future investment in Texas."
Regarding the Houston market, Wanderer tells GlobeSt.com that the partners see a lot of upside potential due to local job growth. "The city's been adding close to 100,000 jobs a year for a few years in a row," he points out. "Houston's economy is built on a basis of oil costing $40 a barrel and oil pricing right now is at nearly $100 a barrel. That supports a phenomenal amount of job growth."
[IMGCAP(2)]In regard to the individual properties, Carriage Hill at 100 Hollow Tree Lane consists of 252 one- to three-bedroom units averaging 772 sf, with rents from $569 to $999. One Cypress Landing at 910 Cypress Station Dr. consists of 464 units averaging 961 sf, with rents from $639 to $835 for efficiency to two-bedroom units. Woodborough at 200 Hollow Tree Lane has 320 one- and two-bedroom units averaging 696 sf that rent for $435 to $739. Holiday on Hayes at 3131 Hayes Rd. contains 312 efficiency to three-bedroom units averaging 803 sf and rents from $490 to $904. All properties have a fitness center, swimming pool, courtyards and covered parking.
Wanderer estimates the apartment rents are priced an average of about $50 a unit below market, based on the scheduled improvements. He says the company began moving staff into place and initiated construction during the closing period. He expects the work will be completed in 90 to 120 days.
Founded in 2003, Alterra Capital Group provides turn-key real estate investment opportunities for investors looking to obtain both annual cash-flow and deal end capital gains. With the closing, the firm's portfolio is now valued at more than $130 million, up from $70 million in 2006. The principals say the goal for 2008 is to grow the portfolio to 10,000 units. Wanderer reports they are currently pursuing deals in Houston, Dallas, Austin and Atlanta.
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