Donald J. Pierce II, Wesco's COO, tells GlobeSt.com that there aren't any complexes under contract, but the plan is to acquire a minimum of 1,000 additional apartments in Dallas/Fort Worth. Pierce says Austin will be next in line, perhaps in 2009. Wesco's sweet spot is 200 or more units in the $20 million, plus or minus, per deal price range.
Torrance, CA-based Wesco is reinvesting gain from four multifamily property sales in SoCal "at what we consider to be very good prices," Pierce says. "And we're taking our capital and redeploying it in Texas in a value-add strategy."
Its most recent acquisition was Jan. 20 with the purchase of the 204-unit Amherst Apartment Homes at 1121 Amherst Dr. in Bedford. Wesco's buying spree began Oct. 31, 2006, with the purchase of the 334-unit Hidden Ridge at 1290 Hidden Ridge Dr. in Irving. On Dec. 27, 2006, it picked up the 273-unit Country Club Apartments at 1901 Pinehurst Lane and its neighbor, the 244-unit Pinehurst Place Apartments at 2101 Pinehurst Lane. Pierce says $5.5 million to $6 million has gone into renovations, a mix of deferred maintenance and upgrades inside and out, so the complexes can compete with 1990s-era product in their respective submarkets. Amherst's work will get underway soon.
The D/FW portfolio's average occupancy is in the low 90% range, according to Christian Purdie, Wesco's marketing director. He says the in-house management team's goal always is 94% or higher.
Pierce says Country Club and Pinehurst Place were bought as three- to five-year holds. Amherst and Hidden Ridge are planned as five- to 10-year holds.
The buyer zeroes in on class B and class C complexes in "A" locations. For some deals, Pierce says the value add is occupancy driven and other deals are purely renovation and rent hike plays. And in some cases, it's a mixture of both.
"Our expectation is we need to get a return on our capital investment on upgrades in the neighborhood of 20%. It's a tough time on the acquisitions side right now," Pierce admits. "The bid-ask spread is fairly large. We think it will settle out by midyear."
Also by midyear, Pierce says Wesco will have assembled case studies and pro formas to start its hunt for an equity partner to advance its Texas plan. Historically, the private company has soloed.
Pierce says Texas is the only state on the company's radar screen. "When we feel the market is more reasonably priced in Southern California, we will absolutely be a buyer here again," he says.
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