HOUSTON-Equity Residential Properties Trust has sold the 843-unit Trails at Dominion Apartments to a Dallas-based buyer. The Chicago REIT is systematically selling off properties in the Texas market to focus its capital elsewhere.
Although the sales price is being kept confidential, Centaurus Investments LLC has obtained a $44.72-million acquisition and rehab loan from Calabasas Hills, CA-based ARCS Commercial Mortgage Co. to close the deal. Apartment Realty Advisor principal David Wylie speculates the new owner will spend $3,000 to $5,000 per unit for interior and exterior upgrades to bring the 16-year-old complex at 200 Dominion Park Dr. in line with its class A neighbors.
"The buyer looked at this as a two-year renovation project," says Wylie, who represented Equity Residential. He tells GlobeSt.com that pro forma cap rates most likely will be in the 7% range after the renovation. The sale closed at a sub-6% cap rate. The 89%-leased Trails at Dominion's class B rents are in line with its peers, but they are $50 to $100 below the class A market, he adds.
During the 30-day marketing, the asset attracted 12 offers. Centaurus co-founders and managing directors Cross Moceri and John Griggs ended up with the goods because of their investment strategy. Wylie points out that the complex consists of three different properties operating as one, leaving Centaurus with a variety of options once renovations are complete. "They can run them as three separate assets or as a complete one," he says. "But when you buy them, rehab them and increase the rents, you're likely to be in a much easier range with three smaller deals for someone to buy."
Wylie says Equity Residential is selling Central US properties, possibly to reinvest on the East and West coasts. Equity Residential didn't return calls by press time.
Situated on 50 acres, Trails at Dominion Park has one-, two- and three-bedroom floor plans. The apartments, 551 sf to 1,486 sf, rent for $550 to $1,400 per month.
Besides Wylie, the ARA team included principals David Oelfke, Matt Rotan and David Mitchell. Larry Sneathern, senior vice president of the central region for ARCS, arranged the 10-year loan, with seven years of interest-only payments at a fixed rate of 6.07% and a 30-year amortization schedule.
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