HOUSTON-Houston was a region that weathered the Great Recession and following financial meltdown fairly well. Still, the area did have some distress when it came to multifamily properties.
Not anymore, however. These days, the appetite for distressed and foreclosed multifamily properties has switched to an appetite for value-add multifamily assets. Transwestern's vice president of multifamily services Clint Duncan, who recently brokered the sale of Arbor Ridge, tells GlobeSt.com that value-add is a hot commodity in the Houston commercial real estate market.
One reason for the huge interest in value-add assets is because distressed multifamily properties are scarce. "The market is recovering and many distressed owners have been able to refinance," Duncan explains. "Even the tougher assets are doing pretty well, and institutional buyers are starting to look in that area."
Given the interest in value-add, this is a product that's also starting to become scarce. "It's becoming more difficult find because the market is a) hot and b) the number of assets is diminishing," Duncan notes. "If you have a deal with a clear, value-add story, you'll get a lot of play with it."
Houston is not the only region experiencing value-add fever. Wells Asset Management's senior vice president and principal Robert D. Aiello, in discussing the recent sale of Westwind Apartments in Fort Worth, told GlobeSt.com that value-add properties are attracting the eye of many investors – including the institutional types. He explained that the institutional buyers are finding better yield in buying apartments that require a little fix-up, and "that can provide better yield after rehab."
Because of the interest from more parties, Duncan points out that value-add deals are on the way to becoming as rare as distressed assets. "The market is so hyped up, these deals are being swiped the moment they come on the market," he adds.
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