DFW's Class C Multifamily Sales Heat Up

"Offers are picking up for that range of properties," says Peter J. Hartnett, senior adviser for Hendricks & Partners in Dallas, who closed two back-to-back deals for 308 units in Irving and Dallas. "The easy-to-sell deals are between $1 million to $4 million. The main thing is the buyers have the equity to put down."

The uptick also is bringing more local investors to the closing table versus the scene a few months ago when class C deals were mostly won by 1031 exchange investors from California. "We are seeing a slowdown in California buyers in that the properties in California aren't selling as fast," Sean Bushe, loan officer of La Jolla Bank's Dallas region, tells GlobeSt.com. "The market here is getting better and local investors are starting to go back into the market." Bushe's closings for the recent flurry accounted for 101 units in Irving and Mesquite.

Improved operating conditions across all classes are backing the exchanges, according to Tom Burns, also a senior adviser in Dallas with Hendricks & Partners. "What we're seeing is operations improve for class A and B, but trickling down to class C," he says. "Everyone's operations have improved across the board. Class C is still weakest, but it's still doing good and coming up strong." Burns and Hendricks' colleague George Deuillet had the highest sale of the recent deals, getting fairly close to the $5.75-million ask for the 180-unit Cooper Park Apartments at 812 Cooper Square Circle in Arlington.

Hartnett's contribution to the stack was the 136-unit Spanish Trace Apartments at 136 E. Grauwyler Rd. in Irving, listed at $3.15 million, and 128-unit Terrace Hills Apartments at 1130 E. Ledbetter Dr. in Dallas, marketed for $3.42 million. The 90%-leased Spanish Trace, closing at $3.3 million, went to a local investor, who is poised to pick up another class C complex. The 98%-occupied Terrace Hills passed to 1031 exchange investors, Manuel and Tania Vargas of Fullerton, CA, who placed a bid for 99% of the ask on the first day that the listing hit the market, Hartnett says.

Mark Brandenburg with Holliday Fenoglio Fowler LP's Dallas office arranged financing Spanish Trace through Artesian Capital of St. Louis Park, MN. Kirk Slimmer with TransLending Corp. in Denver arranged financing for Terrace Hills through LaSalle Bank in Chicago.

Spanish Trace, positioned on 4.8 acres, is a mix of one- and two-bedroom units averaging 791 sf with a median rent of $607 per month. The 7.8-acre Terrace Hills has one-, two- and three-bedroom apartments, averaging 833 sf. The average rent is $499 per month.

Bushe's deal flow was the 30-unit Pioneer Court at 4002 W. Pioneer Blvd. in Irving and 71-unit Crossroads Apartments at 2901 Live Oak St. in Mesquite. A Fort Worth partnership, Winkle Pioneer Court Ltd. borrowed $950,000 to buy the 98%-leased Pioneer Court for close to the $1.4-million ask. Crossroads was bought for nearly $1.35 million by a private investor from Dallas, who borrowed $1.17 million for the 90%-leased property.

Bushe says La Jolla Bank provided three-year loans with a 5.25% fixed-rate interest for the borrowers. The Crossroads deal included rehab capital, he says.

The one-building Pioneer Court, already mapped for condos, has units ranging from 500 sf to 850 sf; rents go from $550 to $850 per month. Crossroads' one-bedroom units are 723 sf; two-bedrooms, 792 sf. Rents are $450 and $475, respectively, on an all-bills paid basis.

John Trombello, an independent broker from Dallas, sold Pioneer Court. Jeff Naquin with the William Jennings Co. in Fort Worth brokered the Crossroads deal.

Burns and Deuillet, working on behalf of local seller, turned over the 95%-leased Cooper Park to Tri Pro Management Inc. of Dallas. The one-, two- and three-bedroom apartments are 50% filled by graduate students from the University of Texas at Arlington. Units average 921 sf; rent is running $569 per month. Burns says the buyer assumed a loan with Wachovia Bank to make the close.