Multifamily Trends to Watch in 2014

Institutional Property Advisors director Scott Lamontagne (snapped last week at an IPA Texas client appreciation dinner in Dallas) says core assets will come back into the transaction market as cap rates remain compressed, despite the plethora of deliveries expected. Value-add is still a segment working in every Texas market, Scott says. And CMBS loans start rolling over in 2014 in a big way (look who finally decided to wake up), which should create additional sales supply in all classes.

IPA just closed the sale of two San Antonio multifamily communities, The Ridge at Bandera and The Meridian. The Ridge is a 120-unit multifamily community in a killer location (Loop 1604 and Bandera Highway). Scott tells us it was recently upgraded, which has created some positive rent growth, but there's still that all-important potential to increase cash flow. IPA Capital Markets' Brian Adams secured $6.8M in acquisition financing for the buyer, a Kentucky company with a Texas asset manager.

IPA Texas executive director Will Balthrope tells us The Meridian has 146 units and was snapped up by a San Antonio-based firm with institutional equity from Chicago. It's on East Basse Road near The Quarry, a core submarket with high barriers to entry due to the scarcity of raw land. (Will knows all about the area—his dad was the mayor of Alamo Heights for 20 years.) It also has a solid value-add opportunity since existing finishes are from 1996.

Before the end of the year, Northwest San Antonio's newest spec office project will be in the ground. Stream Realty VPs Carolyn Hinchey Shaw and Ryan Harrison tell us the firm bought 17 acres on Loop 1604 near I-10, where it will build a 127k SF Class-A mid-rise building known as Lockhill Crossing. Carolyn says it will be the first spec development of its size built in the Northwest submarket since 2008, even though it's San Antone's strongest growth area. (There's lots of development around here, including two new hospitals and lots of executive housing.)

The team eyed 50 sites around the metro (mostly near 1604/I-10 and 183/Wurzbach) before choosing this one. They liked the access options; tenants can even bypass highways entirely by entering from Lockhill Selma. (But who would deny themselves that joy?) Stream is building Lockhill Crossing on six acres, leaving three acres for future development (Ryan says it could be a second phase—a great option for a tenant who wants room for expansion--or Stream could sell to an office or hotel developer) and eight acres of permanent greenbelt with walking trails.

The building will be pushed back from 1604 but will be visible from it and have a monument at the entry, which Carolyn says is a rare visibility/signage opportunity for 1604. (It's a great place to wish someone a happy birthday or, in a pinch, ask someone to marry you.) The duo tells us the project is already 20% pre-leased (including LOIs) and has a couple of other prospects in hand. It benefits from a dearth of availabilities—there are only three other Class-A office options in the area. Lockhill Crossing will deliver in Q4 '14. Chesney Morales & Associates is the architect and Pape Dawson is the civil engineer.