DFW Multifamily Overbuilding Risk is Less Than in Prior Downturns
One of those properties now underway is the Reserves at San Marcos, which will feature 376 units, 298 of which will be reserved for tenants earning up to 60% of the area median income.
SAN MARCOS, TX—Dallas-Fort Worth continues leading the nation in supply with 16,991 units expected to deliver in the next 12 months, according to Transwestern. One of those properties now underway is the Reserves at San Marcos, which will feature 376 units, 298 of which will be reserved for tenants earning up to 60% of the area median income. The remaining units are intended to be market rate and 28 units will be accessible to disabled residents.
Apartments will be available in one-, two-, three- and four-bedroom configurations, ranging in size from 650 to 1,350 square feet. The project set on 21 acres is expected to be completed by 2022.
KeyBank Real Estate Capital recently arranged a $43.8 million construction loan and permanent financing on behalf of Carrollton, TX-based Target Builders for the ground-up development of the affordable multifamily property. Key Bank Real Estate Capital’s community development lending and investment team purchased the private activity tax-exempt bonds as part of the funding structure. Key Bank’s Commercial Mortgage Group secured the $43.8 million of permanent loan financing for the property via Freddie Mac that includes a $41 million tax-exempt loan and a $2.8 million taxable tail, both of which are fixed-rate loan structures.
The forward commitment period is 36 months and upon successful conversion, the permanent loan term will be 15 years with a 35-year amortization schedule. CREA LLC syndicated the 4% low-income housing tax credits.
Robbie Lynn of Key Bank Real Estate Capital’s commercial mortgage group and Hector Zuniga of Key Bank Real Estate Capital’s community development lending and investment team structured the financing.
Lynn indicated that numerous services will be offered to residents beyond the property’s affordable component.
“Supportive services will be offered to residents, including services surrounding health and exercise such as healthy living education, exercise and nutrition education/classes, and financial and tax prep education,” Lynn tells GlobeSt.com. “Other social, after-school tutoring and shuttle services are also being considered.”
From 2018 to year-end 2020, the Dallas-Fort Worth region will have delivered as many units as the Los Angeles and Houston metros combined. With that being said, the top three submarkets leading in inventory growth are Rockwall/Rowlett/Wylie (+21.2%), Carrollton/Farmers Branch (+12.2%) and Frisco (+9.3%), according to a Transwestern report.
And at present, the risk of overbuilding is less than prior downturns. Even if all 26,610 units in the pipeline delivered and leasing activity dropped to zero, market-level occupancy would drop to 91.5% or 100 bps above all-time lows during the Great Recession, says Transwestern.