Institutional Interest Returns for DFW Multifamily
DALLAS—Institutional investors are begin-
ning to seek out multifamily opportunities
in the Metroplex. “Most institutions are
still focused on coastal, high-barrier-to-
entry markets, but they can’t find core
product,” says Ryan Epstein, a director
with the Balthrope Group of Institutional
Property Advisors, a Marcus & Millichap
Real Estate Investment Services company.
“As the capital gets more anxious, institu-
tions are expanding their criteria to
include major metros, and Dallas-Fort
Worth is at the top of that list.”
The entire spectrum of institutional
investors, from public and private REITs to
pension funds and life insurance compa-
nies, is looking for investment opportuni-
ties in North Texas, according to Will
Balthrope, senior director with the
To that point, Associated Realty Corp.
recently acquired San Raphael, a class A
apartment community in Dallas. The 222-
unit property markes the Cleveland,
OH-based REIT’s first buy in Texas in many
years. “Dallas-Fort Worth is at the top of buy-
ers’ list for several reasons,” Balthrope says.
“Our job growth forecast for the next five to
10 years is outstanding. Also, our job losses
were minimal during the recession, our
population is expected to continue to grow
and our construction pipeline is very low.”
So far this year, Real Capital Analytics
has tracked the sale of 39 properties for a
total year-to-date volume of nearly $673
million. That number has already eclipsed
2009’s total of $651 million.
“Pricing has improved over the course
of the year and cap rates have dropped
dramatically, due in part to the low cost of
debt, but also demand from investors who
are willing to pay higher prices,” Balthrope
says. He estimates suburban garden-style
assets are trading for $90,000 to $140,000
per unit compared to $70,000 to $90,000
last year. Urban infill properties are trad-
ing for $140,000 to $200,000 per unit
versus $100,000 to $120,000 in 2009.
Distress Investors Find Deals in TX
Investor demand for shopping centers has changed drastically over the past few
years. Previously, every shopping center, regardless of location, could achieve pro
forma underwriting returns, which allowed investors to leverage their acquisitions at
very high loan-to-values. Therefore, almost all retail offerings found a buyer.
With the onset of the recession, retail took a major hit, but fundamentals have
now returned to real estate and Texas, in particular, is attracting the attention of
the investment community. The number of offers generated on retail assets is a
good indication of investor interest. For example, a grocery-anchored center in Austin recently received 21 offers, as did a
power center in Dallas-Fort Worth.
This is due, in part, to the state’s
spike in citizens, a trend that is
expected to continue. The US Census
In regard to distressed assets, the population and residential growth of Texas
resulted in substantial new retail construction projects from 2005 to 2007. Most of
these projects were underwritten with very aggressive pro formas, in both rent-growth and sale-price expectations. Developers built properties on very low return-on-cost projections. These construction loans are now coming due and both the
lender and developer have difficult decisions to make. The developer has the risk of
forfeiting their equity while the lender may have to discount their loan to market.
In Texas, we anticipate the supply of distressed offerings will outpace core avail-abilities throughout 2011. By way of example, RealPoint estimates that there are
$139 billion of specially serviced loans that are 30 days past due in Texas.
The state’s growth both helped and hindered retail investment sale activity from
2005 to 2007. As investors apply fundamentals to their underwriting, we expect the
growth of Texas will lead the way to a very active retail sales market.
By Doug Hazelbaker
DALLAS—Perry Jones has joined the commercial retail division of the Weitzman
Group as a vice president. Previously, he
was co-founder of J&B Commercial LLC, a
retail tenant rep firm specializing in restaurant concepts.
For more executive moves plus
job opportunities, please visit
Phoenix Industrial Take-Up
Hits Four-Year High
Completions vs. Absorption
Quarterly (in Thousands of SF)
3Q 08 1Q 09 3Q 09 1Q 10 3Q 10
Source: Marcus & Millichap Research Services,
US Census Bureau
Doug Hazelbaker is a senior managing director in the Dallas office of Holliday Fenoglio Fowler LP.
He may be contacted at email@example.com. The views expressed here are the author’s own.
The Phoenix industrial market posted 2. 2
million square feet of net absorption during
the third quarter, the largest gain in four
years. The overall vacancy rate dropped 80
basis points to 14.4% compared to the second quarter, while rents were virtually
unchanged from the second quarter at $6 per