DALLAS-A handful of weeks after the successful close of the 216-unit Boulevard at Deer Park in Houston and the 560-unit Vistas at Hackberry Creek, Pure Multi-Family REIT LP has entered into an agreement to acquire the 264-unit Windsong Apartments. If all goes according to plan, the Vancouver, BC REIT will close on the $16.5 million transaction later this month.
Located at 17717 Vail St. in far north Dallas, the complex was developed in 1986 and recently underwent renovations to the office, swimming pool and tennis courts. According to a press release from the Canadian REIT, the purchase price represents a cap rate of 6.89%; the buyer will finance the transaction with cash and proceeds from a new credit facility.
Pure Multi-Family director of investor relations Andrew Greig tells GlobeSt.com that the REIT was set up late in 2012 to acquire apartments in the U.S. Sunbelt. "We set up the REIT to buy clusters of apartments in major sunbelt cities," Greig notes, adding that the idea is to raise funds in Canada and buy assets in the United States. "The growth is better in the states," he observes.
Pure Multi-Family's parent company also oversees Sunstone Realty Advisors, which has been an active apartment-buying company in Phoenix, Dallas and Houston since 2009. Furthermore, though company president Steve Evans operates out of Vancouver, Greig says he's been buying Dallas-area apartments since the early 1990s, and knows the submarkets quite well. Because of that, the REIT began acquiring assets in Dallas in early 2013, has made inroads into Houston and is also starting Phoenix acquisitions. In other words, the company is targeting areas with solid job and population growth, as well as rental rate growth prospects.
The REIT's main focus is on class A assets. Greig notes the REIT isn't daunted by competition from other buyers for quality multifamily properties in these highly sought-after markets. This is because, compared to the commercial real estate market in Canada, he points out, the US has a remarkably healthy pipeline. Greig says he's finding upwards of three deals a day in his in-box – and that's just from Dallas.
"In Canada, the market is 10 times smaller, and there isn't the tax rollover as in the States," he goes on to say. It's not uncommon to have buyers in Vancouver acquire apartment complexes and hold them for decades because of the tax situation, Greig adds.
There is also the cap rate issue. Where US investors might be hesitant to jump into an asset with a 5% or 6% cap rate, the Canadian buyers aren't so shy, because their own real estate is more expensive. Greig points out that Canadian real estate comes with a 2%-4% cap rate.
Because of these trends, as long as Pure Multi-Family can continue to raise funds – which Greig acknowledges depends on the equity markets in Canada – the REIT will continue pushing into Sunbelt states. The ultimate goal, he notes, is to become a multibillion-dollar REIT.
"If we can buy apartments with limited maintenance, zero repair, are relatively new, and in environments with job growth and population growth, we're satisfied," Greig says.
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