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MESQUITE, TX-Richmond, VA-based McCann Realty Partners has started its march into Texas, getting a second multifamily asset for its second fund as it lays the groundwork to build as well as buy. The first claim in the state is the 508-unit, class A Barons Apartments.

Bought from Dallas-based Mockingbird Properties, the Barons Apartments at 2101 E. US Hwy. 80 was acquired through the Silver-McCann Apartment Group II LP, which plans to pick up another $120 million of multifamily properties before 2007 ends and up to $200 million in the next two years. McCann and Silver Cos., with headquarters offices in Washington, DC and Boca Raton, FL, opened their second fund in January with the $28-million purchase of the 300-unit Shiloh Valley Overlook Apartments at 2100 Shiloh Dr. in Kennesaw, GA.

McCann Realty, now marking its second year, was founded by John McCann, former chairman and CEO of Richmond-based United Dominion Realty Trust Inc. and two veteran sidekicks, Brand Inlow and Fleet Wallace. McCann Realty’s plan is to solo on development and use the funds to buy existing complexes.

One month ago, McCann added another UDR veteran, Mark E. Wood, as development director. The plan is to let Texas seat the firm’s first ground-up development. Inlow says letters of intent have been placed for two sites, with one in Houston as the most likely candidate for the first project. All four Texas metros are on the development radar screen as well as the acquisitions itinerary. As developments come on line, the decision will be made to hold and roll to a fund or sell to a third party.

“We didn’t buy the Barons with the expectation it would be the last one in Texas,” Inlow, principal and acquisitions director, tells GlobeSt.com. “We’ve been looking at a number of markets and we thought it was a good time to enter the Dallas/Fort Worth area. This opportunity came at the right time. We had just started looking.” The Barons close was made with a 10-year loan at a 5.84% fixed-rate interest from the New York City-based Lehman Brothers.

The Barons Apartments, assessed at $25 million by Dallas County, was listed for $37 million by Wells Asset Management Inc. partners Robert Aiello and Mike Wells. Mockingbird’s president Mitch Vexler developed the 16.2-acre first phase in 1999 and 15.8-acre second phase in 2002. The submarket’s allure is little to no construction and none in the approval process pipeline, Inlow explains.

Inlow says about $1,000 per unit will be put into grooming the Barons for a three- to seven-year hold. The 22-building complex was 90.2% occupied at sale time. The one- and two-bedroom units are a 65-35% mix, with apartments averaging 775 sf. “The demand in Mesquite is for one-bedroom product,” he says. The Barons’ one-bedroom units are 99% leased while the two-bedroom apartments are hovering at 90% occupancy. Amenities include 97 apartments with garages, two clubhouses and two swimming pools. Lincoln Property Co. of Dallas has been hired to manage the Barons.

Inlow says the upside is burning off concessions and the market turning “to create rent growth.” The average monthly rent, net of concessions, is $734.

Although there’s no gentlemen’s agreement with Vexler, Inlow didn’t rule out future deals with the developer, who has projects underway in North and Central Texas. “He’s a great guy,” Inlow says, “and we would like to buy from him in the future.”

McCann and Silver launched their first fund in April 2005, deploying $100 million in 18 months in the Mid-Atlantic and Southeast. The second fund added Texas to a buying plan for assets with at least 150 units, 1980s or newer construction and class A or class B. To date, the partners’ two funds have amassed six properties.

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