Pivotal Group Acquires 21-Property, 3,200-Unit Texas Apartment Portfolio

Pivotal Group, in a joint venture partnership with an institutional investor, just completed the purchase of a 21-property portfolio of Class B apartment communities from TRA Midland Properties in an off-market transaction.

February 24, 2012
By Barbra Murray, Contributing Editor

Woodview Apartments, one of the properties in the portfolio.

It’s quite a growth spurt. Pivotal Group Inc. has added 3,200 apartment units to its holdings with the stroke of a pen. The investment company, in a joint venture partnership with an institutional investor, just completed the purchase of a 21-property portfolio of Class B apartment communities from TRA Midland Properties L.L.C. in an off-market transaction. The parties involved are not talking price tags; however, the assumption of existing debt totaling approximately $130.6 million was part of the deal.

The debt on the group of assets comes in the form of a loan under the Fannie Mae DUS product line that the seller, represented by Grubb & Ellis in the transaction, had secured through Arbor Commercial Mortgage in 2008.

Pivotal will invest in renovations at the Class B, garden-style apartment communities, and capitalize on demand spurred by strong population growth and job creation in markets that are also characterized by limited new supply. It is an investment strategy that is becoming more common across the country. With competition for Class A product pushing up prices for premier properties, more money will turn to the Class B sector this year.

“Investors looking for better deals should do well with select, value-added purchases for mismanaged or lower-grade properties where new operators can boost revenues and rents with fix-up strategies — and maybe take advantage of a better jobs picture in the future,” according to the new real estate trends report by the Urban Land Institute and PwC. “There can be plenty of upside if the employment outlook improves. In the worst case, owners secure decent occupancies and cash flows without immediate rent spikes.”

At the beginning of the year, Continental Realty Advisors snapped up a 1,200-unit portfolio in Louisville, Ky., and announced plans for roughly $2.5 million in property upgrades.