FORT WORTH-Marking its fourth closing this month, the Bascom Group has added the 784-unit Breckenridge Apartments in South Fort Worth to its turnaround roster, paying a Texas nonprofit "north of $20,000" per unit for the largest single-parcel multifamily property in Tarrant County. Another $7,000 to $10,000 per unit will be spent to reposition a 1980s-era complex that's fallen on hard times.
The Breckenridge Apartments at 4500 Campus Dr. is the largest complex that the Irvine, CA-based investment group has bought to date in its seven-month shopping spree in Texas. This time, though, Bascom has taken the deed with a first-time equity partner, Dallas-based Highland Capital Management LP.
Bascom's newest challenge has a dearth of deferred maintenance, but is an untapped pocket of upside potential with "an unparalleled amenity package," explains Ryan Akins, regional director in Texas for Bascom. The 38.73-acre development, which rose in 1983, has three clubhouses, each shuttered due to needed repairs, two drained swimming pools and several sports courts in need of resurfacing. Common areas and apartment interiors will get a full-body makeover. Akins says the plan includes the addition of several park-like areas with barbecue facilities, business center and fitness facility.
Breckenridge Apartments spent nearly a year on the market. The plan was to close the deal in late 2005, but the seller backed out after an uptick in leasing to Hurricane Katrina evacuees and issues arising from a mineral rights provision, according to Scott Lamontagne, who heads up a multifamily group for Marcus & Millichap Real Estate Investment Brokerage Co. "We brought Bascom back to the table and were able to negotiate a deal," says Lamontagne, an associate director of the brokerage house's national multi-housing group and teammate of investment associate Nick Fluellen. At the end of the day, Lamontagne says the seller held onto mineral rights, a valued play since the complex sits atop the Barnett Shale, a gas reserve responsible for pumping billions of dollars into the economy each year.
"It definitely took a unique buyer," Lamontagne says about the last market-rate asset in the non-profit's portfolio. "We had a lot of lookers and several offers, but in the end Bascom truly was the natural fit." The seller of record, AHC Breckenridge Associates LLC has Austin-based Wentwood Capital Advisors LP as its asset manager. Mission Housing was leasing and managing the complex, which was 77% occupied at sale time.
Akins says Commercial Services Inc. of Dallas will immediately start renovating the complex. Greystar Management Co., also from Dallas, will lease and manage the mix of one-, two-, three- and four-bedroom units, which average 844 sf. The sweet spot to the repositioning is existing rents average $451 per month, with just a 30-day free perk to burn off on a one-year lease. Akins says the post-renovation plan includes rent hikes of 25% to 30%.
Breckenridge Apartments' size and condition kept many private buyers and institutions from chasing the deal. "Institutions typically don't have the resources to execute the deep value-added strategy that we are planning and most private buyers are unable to get favorable financing for a deal this size and in this condition," Akins explains. Bascom is planning a two- to three-year hold. "This is a property that's going to be extremely attractive to institutional buyers after we execute our business plan," he vows.
Besides Akins, the Bascom team included Jerry Hess, acquisitions analyst for Texas, and Chad Sanderson, business development director in the headquarters office, who coordinated financing. George Smith Partners of Los Angeles arranged financing through GMAC Commercial Mortgage Co.'s Los Angeles office. The closing takes Bascom's Texas portfolio to 3,656 units, of which 1,649 were acquired this month.
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