DALLAS-The Irvine, CA-based Bascom Group LLC is marching into Texas with $500 million to fund a fast-paced play for value-add multifamily properties. The push begins with letters of intent for 1,000 units in Dallas/Fort Worth and 500 apartments in Houston.
Bascom's man on the ground is Ryan M. Akins, who arrives in Dallas today. The firm's newest regional director, now in his third week with Bascom, was multifamily acquisitions director for the Sares-Regis Group, also in Irvine. A support staff will be hired locally.
Akins tells GlobeSt.com that the expectation is 10,000 to 15,000 units will roll into the portfolio with the initial funding pool, a melting pot of domestic and international investors. Bascom historically puts 20% equity into closing its deals.
The nine-year-old firm intends to pattern the push after its Arizona rush, which began in May 2004 with $400 million to spend. To date, the firm's doled out nearly $173 million for five properties, accruing about 4,300 units.
Texas has long been on the radar screen for co-founder and managing director Jerome A. Fink, but the time wasn't quite right, says Chad R. Sanderson, business development manager. "He's been keeping his eyes on Texas for years and never thought it was the right time to get in," Sanderson says. "Now, he thinks it's ready."
What makes it "ready" is the number of foreclosures and distressed properties in Austin, Houston and Dallas/Fort Worth. "With what we're seeing in Texas, we anticipate a high volume of deals at a fast rate," Akins says, citing projected holds of three to five years. "We are working with a lot of brokers out there. We are seeing a lot of deals bought two to three years ago in the mid-$30,000 now selling in the low $20,000 per door."
Sanderson says the value-add play includes properties saddled with "ugly debt" as well as those with more commonplace pressure points like low occupancies and give-away rents. The firm's studies show there is an increasing number of property owners in financial distress due to conduit loans with fixed-rate interests in the 8% to 8.5% range. "The fundamentals have eroded so much in Texas that they're not able to float the debt service anymore," he contends.
With Texas prices lower than the West Coast, Akins says the historical class B and C buyer expects to pick up a few class As in the three metros. The criteria is complexes with 150 or more units, $8-million minimum ask and renovation projections in the $2,000 to $8,000 range. The trick will be not to "over improve," Akins says. "We'll have to be careful about not bringing our California habits to the Texas market because you don't have the same appreciation."
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