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SAN ANTONIO-Upside potential has motivated the Irvine, CA-based Bascom Group LLC and equity partner, Cross Atlantic Investors LLC, to acquire their first property in the city, the 149-unit Legacy Townhomes. The partners will invest an additional $5,000 per unit into upgrades, eyeing a plan to increase rents by about $100 per unit when renovations are completed.

Jerry L. Hess, acquisitions manager for Bascom Group’s Dallas team, says location and upside prompted the deal with Deerfield Townhomes LP of San Antonio. The 10-year-old complex at 1947 Larkspur Dr. is positioned on nine acres in the far north submarket, where comparable properties are trading for $60,000 to $65,000 per door. The equity partner is Austin-based Cross Atlantic Investors LLC, the US investment arm of Deutsche Structured Finance GmbH in Germany.

“There is very little well-located townhouse product in the market, which was one of the things that initially attracted us to Legacy,” Hess says. “When we dug into it, we saw that rental rates did not reflect the value of the attached garages, washer-dryer connections and very large average unit size, which really differentiated it from comps in the market.”

The 96%-leased complex has one-, two- and three-bedroom apartments ranging from 732 sf to 1,224 sf. Rents are between $665 and $1,040 per month. Hess says renovations will begin in March and be completed within 24 months.

Hess tells GlobeSt.com that the complex has been underwritten for a three-year hold. “If we can execute our business plan more quickly, we’ll consider a sooner exit,” he says.

Hess says Bascom likes the San Antonio market although there are no further deals in the pipeline. “We’re looking for quality, value-add investment opportunities, which can help us take advantage of the rental rate growth and strong occupancies in the market,” he says. “The best assets for the Bascom portfolio are those with good value-add potential.”

Ryan Epstein with Marcus & Millichap Real Estate Investment Services’ San Antonio office brokered the transaction. Holliday Fenoglio Fowler LP’s Dallas team of senior managing director John Brownlee and associate director Travis Anderson arranged financing through Christopher Holden, principal with Prudential Mortgage Capital Co. in San Francisco. Dustin Williamson with Cross Atlantic Investors handled the equity requirements.

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