Dune, TDI Form $1B Multi-Family JV

Together, they will mine core markets from coast to coast for development sites in locations where demand for premier rental properties is on the upswing and for opportunities to snap up Class A apartment assets.

March 8, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user Bohman

The real estate investment community is growing progressively more keen on the rebounding apartment market, and Dune Real Estate Partners and TDI Real Estate Holdings L.L.C. are prepared to capitalize on the sector’s increasingly favorable fundamentals with the creation of a new $1 billion joint venture. The team just closed TDI/Dune Real Estate Investments L.L.C., a vehicle for the acquisition and development of multi-family properties across the country.

TDI brings its capital market capabilities to the table and Dune, formed last year, brings a leadership group with decades of experience in every facet of the multi-family world. Together, they will mine core markets from coast to coast for development sites in locations where demand for premier rental properties is on the upswing and for opportunities to snap up Class A apartment assets. The partners have already completed the $62 million acquisition of a 244-residence apartment project in Los Angeles and the $25 million purchase of a 288-unit property in metropolitan Dallas/Fort Worth.

The joint venture’s timing couldn’t be better, as any number of signs are pointing to an impending surge in demand for multi-family product. In 2011, the apartment market will experience its first across-the-board decline in vacancy rate since 1990, if not earlier, according to a report by Marcus & Millichap Real Estate Investment Services. The release of pent-up demand following the recession-induced nosedive in household formations, a drop in turnover rates, slowly increasing job growth and declining homeownership levels are the factors that will continue to fuel the cry for more multi-family accommodations. And for investors, the upside is demand is moving closer and closer to outpacing supply. The amount of new product scheduled to deliver in 2011 will be 46 percent less than the total of units that reached completion in 2010. It’s a perfect storm for apartment developers and owners.

For Dune, news of the closing of TDI/Dune comes on the heels of the company’s announcement of its acquisition of the eight-property, 2,580-residence Magazine Portfolio in a 50-50 joint venture with Pantzer Properties Inc. The $460 million purchase marked the biggest multifamily transaction to occur in the U.S. since 2008.

TDI and Dune are among a bevy of investment entities that have joined forces to capitalize on the apartment market renaissance. In January, Gables Residential and USAA Real Estate Co. announced the formation of a $400 million joint venture allowing for the development of Class A apartment properties.