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HOUSTON-TIAA-CREF’s outmaneuvering of 25 other offers to win an 18-property, 4,471-unit multifamily portfolio has the industry still buzzing about the closely watched deal. Sources familiar with the transaction believe the final price for “the German Portfolio,” as it’s been dubbed, might have topped the $700-million ask set by DLF Immobilien Portfolio KG.

Sources say the New York City-based buyer most likely paid a premium to “buy in bulk” because cap rates were excessively low: 4.5% in Houston and 3.5% in Phoenix. “The fact that Teacher’s was buying this on practically no return tells you how much capital is in place today,” says Teresa Lowery, principal and multifamily expert for Colliers International Inc. in Houston, “and how much pressure there is to get that capital out their doors and onto the street.”

Another unusual aspect about the portfolio is its collection of unlike assets, particularly in Houston. The complexes range in age from the 1989-constructed El Mundo Park at 8300 El Mundo St. to the four-year-old San Melia at 8383 El Mundo St. Occupancies were also all over the board.

“This wasn’t a normal portfolio,” Lowery tells GlobeSt.com. “There were older assets involved and smaller assets involved. Usually pension fund advisers don’t go there so the question becomes whether they have the ability to spin out any of it.”

The one commonality is all 11 in Houston and eight in Phoenix are class A properties. Edward Nwokedi, the multi-housing director in Houston for Cushman & Wakefield of Texas Inc., believes that was the main appeal for the bidding and buying scenario. “They were good quality products in the Medical Center and the Galleria area,” he explains. “Buyers looking at those assets would be well-positioned inside the loop, where much of the money is flowing these days.”

Nwokedi speculates TIAA-CREF could keep the assets as long-term holds, with a possibility of potential spin-offs to condo converters in Phoenix. In Houston, though, “there’s an upside potential for adding some value to them, fixing them up and increasing the rent,” Nwokedi says. “TIAA isn’t a flip artist.”

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