Creative Solutions Amid Caution in DFW Multifamily Deals
The DFW market is still stable in the New Year as buyers are looking to acquire properties and owners are still selling, with one example being Fox Creek’s ownership planning to increase rents to market norms.
CARROLLTON, TX—Rising interest rates and tempered rent growth have demonstrated caution in some investors and encouraged a more conservative approach to opportunities in the metroplex, according to a fourth quarter multifamily report by Marcus & Millichap. More discernment is emerging based on a property’s quality and location, and buyers are adjusting investment criteria when considering the intricacies of today’s market environment.
An example of this caution amid stability is the sale of Fox Creek Apartments, located at 1910 Josey Ln. The purchase price was undisclosed. The confidential purchaser plans to implement a value-add strategy with interior upgrades and exterior replacements.
On behalf of its client, Wellington Realty sold the property led by the investment sales team of Caleb Jones, Tammy Shaffer, William Hubbard and Curtis Sung.
“The significance of this transaction is that as we move into 2019, many people are unsure about the economy; however, the DFW market is still stable in the New Year as buyers are still looking to acquire properties and owners are still selling,” Sung tells GlobeSt.com. “In addition, new ownership acquired this value-add asset and plans to increase rents to market norms and update a variety of units.”
Fox Creek Apartments is a late 60s vintage asset with 172 units. The property sits on more than 6 acres and consists of 11 buildings that are less than a mile away from Interstate 35 and 2 miles away from Lyndon B. Johnson Freeway, providing access to the entire metroplex. Property amenities include a pool, on-site laundry center and ample parking.
“The purchaser will benefit from a stable DFW multifamily market with moderate rental market growth and rental increase with upgrades,” Jones says. “Being in a centralized location with nearby employment and entertainment, Fox Creek Apartments allows a convenient location for workforce residents. With over 5,000 employers in the vicinity and 55% of households renting, this should bode well with the growing housing market.”
Cap rates for class-C properties have compressed and first-year returns average on par with those for class-B complexes. Some investors with long-term hold strategies are using the opportunity to trade into higher-quality assets now offering similar initial yields. Sales of properties priced between $1 million and $10 million made up 43% of sales during the past 12 months. The average first-year return for these properties was 6.1%, according to the Marcus & Millichap report.