German Fund Hits Market With 18-Property, 4,471-Unit Portfolio

HOUSTON-A German pension fund, faced with finding a single buyer, has brought an 18-property, 4,471-unit multifamily portfolio to market. Industry sources say the class A properties, scattered throughout the Greater Houston and Phoenix metros, could fetch $500 million to $800 million.

DLF Fund, planning to call for offers April 11, was the equity force behind the portfolio's development by locally based Sueba USA and Mark Taylor Inc., a luxury developer from Scottsdale, AZ. The fund has been providing the high-end builders with equity capital since 1984.

G. Craig LaFollette, senior vice president with CB Richard Ellis in Houston, says DLF has brought out the portfolio in response to the strong US capital markets and changes in German tax laws. "If they were to break up this portfolio and sell the properties as single assets, it could eliminate the fund's opportunity for capital gains. It would not only trigger tax liabilities for the assets, but for the entire investment fund," LaFollette tells GlobeSt.com. The package is being marketed by LaFollette's Houston team--including Todd Marix, Jay Massirman and Malcolm McComb--and CBRE Phoenix partners, Tyler Anderson and Sean Cunningham.

Anderson tells GlobeSt.com that the portfolio comes with assumable debt. "It can also be purchased free and clear," he adds.

Anderson says the offering represents all that DLF owns in both markets, but proceeds will be reinvested into more US real estate. "They're working on that plan now," he says.LaFollette and Anderson expect the deal will close in the summer. The best and final will be held in late April.

"The bid period is long for a reason," LaFollette says. "One thing we did is make sure we had enough information available to buyers on the front end so they can make a sound decision. They'll have preliminary surveys, title reports, just about everything they need to help them analyze the best offer."

Though the offering puts a lot of units up for sale in both metros, neither Anderson nor LaFollette are concerned about too much supply outstripping demand. "We have premier market assets here, and in Phoenix, converters have been looking for that type of product," Anderson says. "Plus geographically, the properties are dispersed enough so they won't impact the balance of the market."

LaFollette points out that the situation is slightly different in Houston because the rate of condo conversion isn't as high as it is in Phoenix. However, demand is strong for class A multifamily properties, he says. "The most likely candidates to buy these types of assets haven't been able to find them," he points out. "All of them, in both markets, are exceptionally well located in strong submarkets. We're already getting unprecedented response to this offer."

The Houston assets are located in the Texas Medical Center, Galleria and Energy Corridor. The properties, with occupancies in the low 90% range, were built between 1984 and 2000.

In Houston, the offering takes in 880 apartments in four complexes along El Mundo Street. Up for sale are El Mundo Park, Parque del Oro, San Marin and San Melia. There are another 512 units in three properties along Bering Drive: Mirage Apartments, Miramar Apartments and the Phoenician.

Other Houston assets are the 299-unit Montecito at 2300 McCue Rd.; 66-unit Plaza del Oro at 2700 Holly St.; 314-unit San Montega at 1600 Eldridge Parkway; and 224-unit Versailles Park at 7200 Almeda Rd.

The Metropolitan Phoenix assets, which started to rise in 1995, average 92% occupancy. The portfolio's Scottsdale properties are the 364-Unit Tradition at Kierland at 6633 E. Greenway Parkway; 276-unit Paragon at Kierland at 15440 N. 71st St.; and 360-unit Legends at Kierland at 6735 E. Greenway Parkway.

There are two properties in Chandler: the 208-unit San Brisas at 900 N. Rural Rd. and 240-unit San Palmas at 1111 N. Mission Park Blvd. Also up for sale are the 488-unit San Melia at 14435 S. 48th St. in Phoenix and 240-unit San Montego at 6745 E. Superstition Springs Blvd. in Mesa.