Firm Pivots to Core/Core-Plus Opportunities in Market Stall

FARMERS BRANCH, TX—During the market stall of COVID, the Dallas/Fort Worth market fared slightly better than the nation in terms of rents and employment. This is leading many companies to take a good hard look at the region for acquisition opportunities.

Aspen at Mercer Crossing is Excelsa US Real Estate I LP’s latest acquisition, representing its sixth multifamily property buy. The 260-unit multifamily community is located at 1851 Knightsbridge Rd.

Excelsa provided 100% of the equity of the transaction, which represents the firm’s first core/core-plus acquisition of a newly constructed class-A multifamily property, first Dallas MSA acquisition and first Green Globes-certified acquisition. The firm raised an $85.6 million closed-end fund to acquire $500 million in US multifamily properties.

“We have been working very hard to secure our first asset in Dallas. We expected it to be a value-add investment in an older class B- or class-C property,” says David Fletcher, managing director and head of acquisitions of Excelsa. “When the value-add market stalled in March, we pivoted to core/core-plus opportunities. We are very excited about Aspen at Mercer Crossing and are now working hard to secure a second Dallas asset. The strength of the Dallas economy and job market is the opportunity. We will pursue that in class-A, class-B and class-C assets.”

Aspen at Mercer Crossing is an elevator accessible three- and four-story garden-style property delivered in 2019. The unit mix features studio to three-bedroom apartments with large floorplans ranging up to 1,423 square feet. Common-area amenities include a swimming pool, fitness and yoga room, outdoor kitchen, covered foosball and ping pong tables, private gathering area, and dog park. Excelsa hopes to add luxury services, carports and an outdoor exercise area.

“Dallas is holding up very well against the coronavirus. We went to Dallas in late July to conduct property due diligence on a voluntary basis using PPE. We found the community to be resilient and taking the virus seriously,” Fletcher tells GlobeSt.com. “Since then, occupancy has held up well. Rents have held up better than expected. The market is strong because people are doing what they need to do responsibly without being paralyzed by fear. Employment data and rent data validate what we are seeing on the ground.”

The Dallas/Fort Worth multifamily market experienced modest downward movement in market fundamentals in second quarter due to COVID-19 and the economic downturn, according to a report by CBRE. The average effective rental rate declined 0.6% from the prior quarter. Occupancy edged down 30 basis points to 94.3%.

While these trends were unfavorable, especially in a quarter that usually experiences rising rents and occupancy due to seasonal leasing trends, the Dallas/Fort Worth market fared slightly better than the nation in terms of rent loss (US was -1.%).

One factor for the above-average performance is the economy. While Dallas/Fort Worth lost 333,000 jobs during the three-month period from February to May, the 8.6% employment loss was less severe than the nation’s 12.8% decline, says CBRE.