The Grubb & Ellis Co. team of Don Ostroff and Will Balthrope and Marcus & Millichap's new Dallas leader, Chris Thomson, confirm that a significant pool of institutional money is now bankrolling class B and C trades. Available money, bountiful offers and ample product for the picking are escalating the region's transaction volume. "We're seeing names look at B and C that we never would have seen two years ago," says Thomson.
Since January, Ostroff and Balthrope have listed 4,000 units of class B and C product, with 2,500 units already falling under contract. Marcus & Millichap, which calculates its volume in dollar amounts, has $56 million of comparable product listed in the DFW region and $96 million in proposals in hand across Texas.
Admittedly, class B has most of the attention, reflecting a definite about-face in institutional buying habits from a year ago. It's a trend that is starting to pop up all over the country, but DFW is leading the way because it's a market where everyone wants to be in good times and bad, mainly due to the region's reputation for job growth, the brokers concur.
The Grubb & Ellis team estimates offers are up at least 50% for available properties. They are receiving anywhere from 15 to 29 offers for vintage product, which is perceived to be able to withstand the recession's pressure far better than the luxury line. They say the yield is simply greater for mature properties in today's economy.
The trend is being driven by more than the opportunity to add value and reap profit down the road. The class A market seemingly has lost its glitter as vacancies creep higher, concessions continue and profit margins sink. Meanwhile, class B and C properties are fetching higher prices than they did six months ago, report Ostroff and Balthrope.
Buyers are coming from "coast to coast and all larger markets, including Canada," Ostroff confides. Since the first of the year, every multifamily broker in town has shown the sights to out-of-towners looking to park their allocations in Texas, particularly DFW and Houston. "It's surprising at the number of institutions looking at class B deals," Balthrope says, "but we're glad they are."
Marcus & Millichap's Norman Eastwood, a senior investment associate in Dallas, is experiencing the same kind of class B and C volume as the Grubb & Ellis team, says Thomson. He says Eastwood has closed $33 million in class B and C deals since the year's start. His listings now total $119 million, with $18 million under contract. Overall, the firm is sporting $174 million of proposal volume for some 3,500 units in class B and C lineups. The bottom line, Thomson says, is "people are looking for something that works financially." And Dallas, he adds, "is on everyone's short list.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.