JLL Orchestrates 4,568-Unit Texas Apartment Portfolio Trade

Jones Lang LaSalle's capital markets experts have masterminded the sale of a 4,568-unit apartment portfolio in Texas, roping in a joint venture involving Ascension Commercial Real Estate L.P. and Moriah Real Estate Co.

August 3, 2011
By Barbra Murray, Contributing Editor

Sheffield Square

Jones Lang LaSalle’s capital markets experts have masterminded the sale of a 4,568-unit apartment portfolio in Texas, roping in a joint venture involving Ascension Commercial Real Estate L.P. and Moriah Real Estate Co. to acquire the group of Class B properties in Houston and Austin. As for the identification of the seller and the figures on the price tag, JLL is not exactly naming names or giving numbers.

The previous owner of the portfolio is a private partnership that made the sale in conjunction with a lender, Capmark, in a discounted payoff. Of the 15 assets, only one, the 192-unit Aubry Hills, is located in Austin. The remaining properties have addresses in Houston, where the 804-unit Sierra Pines, the 556-unit Walnut Bend and the 480-unit The Meadows top the list in size. Completing the group are the 316-unit Pointe at Steeplechase; the 307-unit Hayes Place; the 304-unit Spring Meadows; the 296-unit Shadow Creek; the 291-unit Princeton Club; The Berkshire with 227 units; the 193-unit Bay Place; the 190-unit Sheffield Square; the Park on Burke, which offers 160 apartments; the 156-unity Timber Run; and the smallest of the properties, the 96-unit Bay Crest Village.

JLL represented the sellers and the buyers in what turned out to be quite a complicated process — a drawn-out, three-year process. “There were tremendous issues,” J. Michael Lewis, managing director with JLL, told Commercial Property Executive. “Lawyers were like honeybees on this. It was a very, very difficult transaction.” Along with Lewis, managing directors Greg Austin and Chip Nash, as well as vice president Wade Schmitz, spearheaded the transaction.

Now that Ascension and Moriah have their names on the deeds, the joint venture will invest approximately $20 million to upgrade the portfolio, which they acquired at a substantial discount to replacement cost with financing arranged by LMI Capital. It will be money well spent given the anticipated payoff, as Houston’s apartment market is booming.

The source of demand for rentals in Houston can be described in three words: jobs, jobs, jobs. “This is the oil belt and there are a lot of jobs,” Lewis said. “Houston is a major headquarters for oil companies, plus you have the Port. And more companies are moving to Texas because of its business-friendly environment.” The absence of a state income tax is hard to resist.

The multifamily market also benefits from a decline in development over the last few years due to the difficulty of obtaining equity as well as the challenging permitting process. It has all resulted in a perfect storm, he says. “Apartment occupancies have just taken off and some rents are up 6 to 7 percent.”

JLL has been keeping itself busy in the multifamily sector across the country. Recently, acting on behalf of SRH/CMS Berkshire LP, the firm closed the sale of a 1,984-unit portfolio in metropolitan Baltimore to Harbor Group International for $190.1 million. Within the last year, JLL has catapulted from the thirteenth spot to the third on the list of the top real estate services firms in the apartment sector.