$465M in Two Sun Belt Portfolios Hit Market

Frisco, TX-based Hall Financial Group is selling 7,700 units of class B product in Texas, New Mexico, Arizona, Indiana and Michigan. The asking price is $317 million. The Bailey Family of Little Rock, AR has 3,902 units of mostly class A and B up for sale in Arkansas, Louisiana and Texas. Its asking price is more than $148 million. It's a first-time offering for both portfolios and both have assumable debt.

Interest is sizzling from US and foreign investors as word gets out about the availability of the product. Norman Eastwood, a Dallas-based director of the National Multi Housing Group for Encino, CA-based Marcus & Millichap, says the Bailey portfolio has secured 110 confidentiality agreements in just 2 1/2 weeks. Tom Warren, associate partner in Dallas for Phoenix-based Hendricks & Partners, says 50 inquiries have come in for the Hall portfolio and "the ink's not even dry on the marketing material."

In both cases, the coming to market is a direct result of the Wall Street strain. Reliable word has it that other high-profile Sun Belt owners will be putting up their portfolios to catch a piece of the seller's market.

"There are far more buyers in the marketplace today than there is product for sale," Warren tells GlobeSt.com. He and Tom Burns, a senior investment adviser in Dallas, hold the Hall listing. There is no deadline as yet for offers, but there is a game plan to have a buyer in hand by year's end, with an eye on a first-quarter 2003 closing.

The 30-property Hall portfolio, riding at 92% to 93% occupancy, is anchored by nine properties or 2,122 units in Dallas and eight properties or 2,043 units in New Mexico. Warren says the preliminary interest is coming from US investors, but then the contract has just been let.

The offer for the 17-property Bailey portfolio ends in the first week of November, but the team is toying with an extension. Eastwood and Marcus & Millichap's Paul Davis in Detroit are handling the disposition for the 94%-occupied package, built between 1960 and 1998. To date, interest has come from as far away as India, Germany and Italy.

Eastwood's not privy as to why the Bailey family is selling the bulk of its commercial real estate assets, which has 2,200 of the units positioned in its homeport. He, like Warren, says there's a good chance that a single buyer will claim the prize. Of course, both packages are up for sale as a bulk buy or there for the cherry-picking.

Warren says Southwest US multifamily complexes are bringing historical highs. Today's cap rates are under 8% for well-located, class B properties. But, he also points out, that Southwest bidding frenzies historically fail to push prices above asking tickets.

The Hall offering equates to about 75% of its multifamily holdings, says Donald Braun, president of Hall Financial Group. "This is not meant to suggest that we are getting out of the multifamily market," he stresses to GlobeSt.com. The "for sale" properties are merely a response to the appetite for the favored product. Proceeds will be deployed into other real estate, including newer multifamily, and other opportune investments, according to Braun.

For owner Craig Hall, he's parting with more of the properties that helped amass his fortune. Last year, he sold 18 properties or 3,100 units in Arizona, Florida, Indiana, Michigan, Tennessee and Texas, predominantly vintage product acquired in the mid-1970s through early 1980s.