Multifamily

Capital sources of all types see opportunity in the apartment sectors of core Texas markets, which regularly lead the nation in employment and population gains. With so many investors trying to park money in this space, sales prices have risen, cap rates for multifamily properties in major markets have compressed and lenders are competing among themselves to finance acquisitions. When lenders compete, borrowers win. For multifamily lending in sizable markets, value-add borrowers are seeing tighter spreads on their loans, a factor of both more lenders entering the space and the Federal Reserve’s decision to raise short-term interest rates. But rising land and construction costs have also contributed to skyrocketing prices on newly built multifamily product, which has weeded out some potential investors. Rather than shun the market entirely, however, many of these buyers are targeting Class B and C assets for value-add plays that will attract residents who can afford higher rents. In Texas, these kinds of deals are being executed at record paces. “The transaction velocity for value-add multifamily deals has been at historical highs in this cycle,” says Warren Hitchcock, senior vice president in NorthMarq Capital’s Houston office. “The significant amount of capital flowing into the space, combined …

To say the multifamily investment market in Dallas-Fort Worth (DFW) is healthy would be an understatement. With nearly 36,000 units across 183 properties sold in the first half of 2018, according to Real Capital Analytics, a more accurate assessment would be that the sector is — figuratively — on fire. Investor demand for workforce housing remains at an all-time high. With strong economic fundamentals, buyers remain bullish on the DFW multifamily market. Historically low interest rates have attributed to cap rate compression as buyers continue to search for value-add opportunities. While cap rates remain compressed, the yields are still very attractive when compared to alternative investment options. With listings averaging more than 125 confidentiality agreements, 20 tours and 15 offers, the competition has become intense. Winning a deal in today’s market takes more than a strong offer — it takes a good reputation, determination and aggression. Buyer Strategy Buyers can differentiate themselves and establish a competitive advantage by having the equity partner, lender, contractors and management company involved in the transaction prior to the initial offer. Sellers have grown accustomed to tight timelines, limited contingencies and significant non-refundable earnest money at contract execution. In this competitive of a market, sellers …

Growing up in Lubbock in the 1990s, cotton fields were everywhere. No growth existed in the southwest part of town, and few new apartments were built. Today those same cotton fields are housing developments; the southwest part of town is filled with high-quality retail and more than 2,000 apartment units have been delivered since 2015. Lubbock is thriving behind its sub-3 percent unemployment rate, strong agricultural sector, university with 40,000 students and a very strong healthcare sector. Available capital and financing options are plentiful. Many have taken notice, however, which has affected rent growth and vacancy in the market. Economic Overview One of the biggest misconceptions of the Lubbock economy involves the role of the oil and gas industry. A myriad of investors often incorrectly tie Lubbock with Midland/Odessa in this regard, ascribing to Lubbock the historical swings of an energy-based economy. But the comparison is pure apples to oranges. Although energy does have an impact, Lubbock boasts more economic diversity than many of its West Texas neighbors. A direct result of Lubbock’s diversity is the unemployment rate, which is one of the lowest in the state at 2.7 percent. This strong performance in the job market stems from an …