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DALLAS-A 13-year owner sold the 436-unit Surrey Row Apartments just six months before the tax credits start to burn off on the affordable housing project in South Dallas. The transition to a market-rate investment will be completed by December 2005.

The Dallas-based Brama Ventures paid the full price of $11.7 million for the class B development at 7272 Marvin D. Love Freeway at the junction of Interstate 20 and US Highway 67, Christopher A. Thomson, partner on the buy side, tells GlobeSt.com. Brama Ventures was one of three in a best-and-final call that attracted offers from eight investors with affordable housing credentials, says the deal’s broker, Armand W. Tiberio, associate director for Marcus & Millichap’s Seattle office.

The state and federal tax credits will burn off on half of the 82%-leased development in December and the balance a year later, Thomson says. The 29-building complex, believed to be the handiwork of Trammell Crow Residential, was built in stages in 1988 and 1990. Units range from 558 sf for an efficiency to 1,116 sf for a three-bedroom, three-bath design. The monthly rents run from $380 to $799. Units average 786 sf; median rent is $549 per month.

Thomson says the plan calls for $1.2 million of upgrades, inside and out, and a nudging of rents to the market rate. “We’ve got very modest increases in mind. We just want to get the occupancy up and let nature take its course,” he explains of a plan with a $35 per month window in the rent upside.

The complex comes with ample upside, given a positioning near the Executive Airport, where a $7-million renovation is under way, and close to a proposed H2O Water Park. Thomson and partners picked up Surrey Row for $26,800 per unit, but a neighboring property already at market rate recently changed hands for $36,500 per door.

Brama Ventures, putting its Alpha-Barnes Real Estate Services in as manager, obtained a 10-year loan at an 85% LTV and 5.75% fixed-rate interest plus a three-year call through its life insurance company partner, according to Thomson. Brama, which owns or manages 11,500 units, typically holds an asset for three years. The financing, Thomson says, allows “complete flexibility” for resale when the time comes.

Tiberio says the seller of the 14.4-acre property “sold because they were in the deal originally for tax credits. It was an internal decision to move on.” He says the deal went full cycle in 60 days with the short list dropping to two offers “due to bond requirements to transfer the tax credits.” Thomson says Brama’s ability for a quick close won the nod.

Tiberio, who specializes in Section 42 and HUD properties, and Norman Eastwood in Marcus & Millichap’s Dallas office represented the Portland, OR-based seller, Surrey Row Ltd., which had Lennar Affordable Housing as its servicing agent. According to the Dallas Central Appraisal District, Surrey Row is assessed at $9.5 million.

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