(Read more on the multifamily market.)
DALLAS-Lowering the curtain on a 12-year investment, Henry S. Miller Cos. Inc. has sold the 127-unit Deep Ellum Lofts to Westdale Asset Management Inc. Based on average sales of higher-end class B properties, the three-building historic complex most likely drew at least $13 million due to its renovation, in-town location, high occupancy and prominence in the market.
The sale culminates years of renovation, partnership disputes and stabilization efforts for the project, which traded at 93% to 95% occupancy despite the uphill battle, according to Greg Miller, senior vice president and general counsel of the Dallas-based firm. The off-market deal, sealed in the last weeks of 2007, consisted of the 61-unit Continental Gin Building at 3311 Elm St., 37-unit Farm & Ranch Building at 3300 Main St. and 29-unit Murray Building at 3401 Commerce St.
Miller tells GlobeSt.com that the Henry S. Miller affiliate tried to sell the asset last year, but it hit a roadblock because it had lost part of its parking area due to Dallas-Area Rapid Transit's line expansion. Westdale owns the adjacent building and several others in Deep Ellum so "they have the unique ability to solve the parking issues because of their resources," he explains. "They were uniquely suited to buy this deal."
Despite the parking scenario, Miller says the asset's urban appeal kept occupancy above the norm after the affiliate took over as general partner in mid-2004. Since then, rents were moved to market rate after buying back a $3-million second lien from the city for 60% of the note's value, according to the seller's timeline for the investment, both good and bad years.
"We were able to get out from under the affordable housing, move rents and stabilize the asset," Miller stresses. "The cash flow was very strong, but we were just ready to sell and we had a strong offer from a party able to solve the parking issue."
The one- and two-bedroom lofts range from 250 sf to 1,900 sf, with the average weighing in at 1,006 sf. At sale time, rents had pushed above $1.14 per sf. Deep Ellum Lofts' include 6,000 sf of partially leased, street-level retail space.
Miller says the buildings, built in 1919 on roughly four acres, were pigeon-infested and abandoned when they were acquired. According to the timeline, the original partners had $10 million of debt and equity resting on the plan before they started a massive adaptive reuse that subsequently passed muster for inclusion on state and federal historic registers.
"It was a good deal for our investors," Miller concludes. "The moral of the story is you never give up. But for a period of time there, the property was struggling."
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