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IRVING, TX-In a first-time joint venture, Buchanan Street Partners and Houston-based CNC Investments have christened a dedicated $30-million equity pool with the deed to a 316-unit, class C multifamily property. The value-add play translates into a $10.5-million investment.

Craig Reed, vice president for the Newport Beach, CA-headquartered Buchanan, tells GlobeSt.com that the pool will be used to acquire $150 million of class B and C multifamily properties in the Southwest. Negotiations already are under way for several more Texas properties, he says. The portfolio’s first piece is Hillcrest Apartments at 3149 W. Walnut Hill Lane in Irving’s top-tier submarket, Las Colinas.

Reed says the marketed holding, sold by a limited partnership from Dallas, closed at $7.3 million. Another $2.2 million is earmarked to renovate the 89%-leased complex. He says construction will ramp up in 30 days to address deferred maintenance issues and upgrade the complex, inside and out.

As part of the fund’s structuring, CNC will take over leasing and management of Hillcrest Apartments, a 75-25% split of one- and two-bedroom units. The average unit is 754 sf. Rents range from $460 to $625 per month. Reed says upside will come from “raising rents, tightening occupancy and managing costs better.”

The JV’s “programmatic fund” targets acquisitions in the 100-unit or more category for a three- to five-year hold. The pool’s dedicated to CNC, which owns more than 36,000 apartments in the state. But, Reed says a similar value-add program could be made available to other partners down the road. Going forward, CNC will scout deals and handle negotiations, he says. The fund’s sweet spot will be properties with all-in costs hovering $20 million, with some exceptions like Hillcrest, according to Reed. “The discount to replacement cost,” he says, “was pretty attractive. What we bought this at compared to the replacement was a pretty healthy spread.”

Reed credits James Richards with Live Oak Capital Ltd. in Houston for teaming CNC and Buchanan for the play, which took about four months to fine-tune before rolling out the fund. Norman Eastwood with Marcus & Millichap Real Estate Investment Brokerage Co.’s Dallas office brokered the sale of the 31-year-old Hillcrest Apartments.

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