Bascom's First 2007 Salvo Bags 1,076 Units

DALLAS-The Bascom Group LLC has come out of the 2007 starting gate with a double deal for 1,076 apartments in the metroplex. Before the first quarter ends, the Irvine, CA-based investment group plans to roll in a couple more thousand units in Greater Dallas and Houston.

The buyer, now in charge of 7,247 apartments in Texas, has scooped up a pair of class B-plus assets in Bedford and North Richland Hills. "We are still looking at class Cs, but with the fundamentals improving in the Texas market, we're seeing fewer and fewer distressed properties," Ryan M. Akins, Bascom's regional director in Dallas, tells GlobeSt.com. "We've been seeing better quality assets that allow us to achieve our returns." Historically, Bascom's goal is an internal rate of return in the high teens to low 20%. And this year in Texas alone, the investment group is looking to spend $250 million on multifamily properties.

In recent months, comparable class assets have been bringing upward pf $30,000 per unit at area closing tables. The just-bought properties are the 240-unit Harwood Hills at 2452 Highway 121 in Bedford and 836-unit Equestrian Pointe at 8500 Harwood Rd. in North Richland Hills. Bascom and equity partner, the Carlyle Group of Washington, DC bought Harwood Hills in an off-market deal with Sabre Realty Inc. of Dallas, the developer of the 22-year-old asset. Bascom's equity partner was Pacific Coast Capital Partners LLC of Los Angeles on Equestrian Pointe, which was marketed for $29 million by the Holliday Fenoglio Fowler team of Roberto Casas, William Miller and Adam Sloan on behalf of Chicago-based PPM Finance Inc.

In keeping with past practice, Bascom will use renovation as a path to additional upside. About $5,000 per unit will go into the Harwood Hills property and $8,500 per apartment has been earmarked for Equestrian Pointe, according to Bascom's Dallas team, which includes Jerry Hess, acquisitions manager, and James Dargenio, senior analyst. Work, which is just ramping up, will take 18 to 24 months to complete.

Hess says Harwood Hills, which was 80% leased at sale time, is projected to yield an 11% rent hike after the renovation. The 16-acre asset is a mix of one- and two-bedroom units, averaging 861 sf. Rent now averages $704 per month.

Harwood Hills is within one mile of another Bascom-Carlyle Group holding, Oak Creek Apartments. "It's a clean deal in a strong submarket, making it a great value-add play," Hess says. In addition to interior overhauls, the upgrade plan calls for a putting green and fitness center.

Equestrian Pointe will be overhauled and re-branded, with the new name to be decided. In 2005, the seller paced the property through a $1.5-million renovation. "That positions us to really focus on the value-add aspects of the property," Dargenio explains. "With the aggressive amenity package and uniqueness of the property, we want to create a new market niche--not necessarily one competing with class A properties, but right below them."

Equestrian Pointe's makeover will add a coffeehouse and Internet bar, soccer field and clubhouse plus a host of apartment upgrades in the 81-building complex, situated on 42.8 acres. The 89%-leased package of one-, two- and three-bedroom units averages 865 sf. The monthly rent averages $658. The post-renovation plan calls for a 30% rent hike, according to Dargenio.

John Brownlee with Holliday Fenoglio Fowler in Dallas set up debt financing with Stamford, CT-based GE Capital and Lee Norman with George Smith Partners of Los Angeles brought in the equity partner for Equestrian Pointe, the first deed for a $20-million buying pool with Pacific Coast Capital. Norman also arranged Harwood Hills financing through Capmark Finance Co. In both cases, Akins says they did an 80% loan-to-cost ratio to underwrite three-year holds.