SAN ANTONIO-REITs and pension funds, looking to reconfigure portfolios, are exiting the second-tier multifamily market of San Antonio in growing numbers. Meanwhile, the outflow is driving an inflow of capital as private investors and non-profits eye good deals in the city’s main product, class B.

“It’s (San Antonio) not a Dallas-Ft. Worth, Houston or Austin,” Will Balthrope, Grubb & Ellis Co. associate. Balthrope is a native of San Antonio and considered a leading specialist for his hometown although he’s based in Dallas.

Slower rent growth than is found in San Antonio’s sister metropolises and portfolio realignments by 90% of the city’s institutional owners are pushing the brisk trading, Balthrope tells Chicago-based Equity Residential Properties Trust has three properties on the market and Richmond, VA-based United Dominion has 11. In all, San Antonio has more than 20 class B complexes, totaling 5,000 units, up for grabs. It’s been nearly three years since the market was this active in the Alamo City.

San Antonio’s changing investment persona has been a boon for Balthrope and his partner, Don Ostroff, first vice president. This year alone, the team’s marketed 10 class B properties. Of those, most have sold or are under contract. Just a couple remains unspoken for in the heyday of trade in a market that supports about 50,000 class B units of the total 100,000-unit inventory. “It’s a good niche in San Antonio,” says Balthrope. The buy-sell trend has spiked the average per unit cost $5,000 in the past year. The $35,000 per unit selling price is now at an all-time high, says Balthrope.

It’s not a sign that San Antonio is bottoming out. The market is stable; rent growth historically tips the scale at 2%; occupancy always is high; and the risk is low. “It doesn’t mean it’s a bad market,” Balthrope stresses. “It just has different characteristics. It’s slow but steady.” There are few class A properties to be found because tenants able to afford units upward of $800 per month most often just go ahead and buy houses, he says.

Balthrope says there are a few institutions seeking out buys in San Antonio in a strategy to make good on what others are selling. But, he admits, they are few and far between. The most active buyers today are private investors and non-profit organizations. Non-profits, which accounted for 30% of the 2001 buys, lean toward the region because Bexar County provides a host of affordable housing programs for acquisitions.

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