$33M Suburban Sale Seeds 264-Unit TIC Play

PLANO, TX-Trammell Crow Residential has cleared an eight-year hold from its books, getting $33 million from SCI Investments for the 264-unit Reserve at Charles Place. Within three weeks, SCI had sold out the tenant-in-common stakes to 22 investors with the average buy-in pushing roughly $450,000.

The 28-building development, spanning 16.3 acres at 4701 Charles Place in West Plano, was acquired with a 10-year, interest-only loan at a 6% fixed rate from Wachovia Bank, Scott Derrick, chief acquisition officer for the Los Angeles-based SCI, tells GlobeSt.com. "We weren't the highest offer, but we had done business before with the seller," he says. "Trammell Crow Residential understands our certainty of execution. We were in second place, but they told us they knew we would get the deal done."

Derrick says the trade was finalized with a 30-day due diligence and 30-day close, seeding a plan for a five- to seven-year hold. The deal closed at 6.25% cap rate, according to Bill Rose, SCI's vice president of acquisitions in Dallas who teamed with Derrick and chief investment officer Andrew Van Tuyle on the purchase. The Atlanta-based seller had Brian O'Boyle and Jerry Lamm with Apartment Realty Advisors in Dallas manning the sale.

Derrick says the 95%-leased asset, positioned at the high-profile intersection of Parker and Preston roads, has upside in its economic vacancy. "It's really 15% economically vacant," he says. "We have 10 more points to go to catch up to 2000 rents."

Rose says SCI already has made some gains as property manager Alliance Residential Co. of Phoenix renewed leases without concessions. The more common concession was one month free for a one-year lease, but some last year were signed with two months' free rent, according to Rose. The average rent is $1,200 per month or 93 cents per sf.

Completed in 1998, the Reserve at Charles Place is overwhelmingly two-, three- and four-bedroom townhouses, of which 82% have attached garages. A minimal number of one-bedroom units are 867-sf designs, but the largest layout totals 1,703 sf. "It's very unique in that it caters to families and there's very little competition in the area," Derrick says.

The complex's composition and location set up a possible exit strategy via condo re-sales. "We feel a condo conversion is a definite option down the road," Derrick says.

The acquisition pushes SCI's investment in Texas to $150 million in three multifamily and two retail properties. Derrick, who's holding a couple more contracts, says another $300 million is expected to be spent in Texas before this year draws to a close.