“Dallas is a Powerhouse”: Multifamily Experts on Texas’ Hottest Markets

The thing about Texas is people want to live here. Proof is in the numbers. For the past several years, the state has been at or near the top of U-Haul’s annual migration report, a breakdown of the states on the receiving end of the most one-way moves. When they get here, those folks have to find a place to call home, a certainty that has helped the multifamily industry flourish. “Texas is a right-to-work state. It has a lower cost of living compared to states such as California or New York. There’s no state income tax. Someone can have a very high quality of life here at a bargain compared to some other markets,” said Jon Krebbs, managing partner of The Multifamily Group, a commercial real estate brokerage firm based in Dallas. “As long as there are jobs being created, you’re going to see a lot of activity from apartment developers and a lot of demand from apartment buyers.” That demand pushed sales volume for The Multifamily Group to record levels in 2019, the firm’s highest-grossing year ever. Things were looking up in early 2020 as well.

“The uncertainty that hit in March killed several of our deals that were either under contract or under letters of intent,” Krebbs said. “Everybody hit the brakes for a couple months.” Mark Allen, executive managing director, Greystone Investment Sales Group, attributes that pause to investor concern about rent collection. “After rent collections were proven stable, the challenge shifted to buyers finding deals as the demand far outpaced the supply on the market,” Allen said. While sales slowed, they never stopped completely. The new environment created a number of obstacles, but firms like Greystone, The Multifamily Group and Avid Realty Partners pressed forward. “On the operational side, we’ve seen fewer tenants leaving, fewer tenants moving in and less turnover,” said Craig Berger, Avid Realty Partners’ founder and CEO. “We also observed that, due to financial hardships, folks moved back in with family or brought roommates, so the number of people renting consolidated a bit.” The response by many properties, he said, was to offer concessions—such as reduced rent or a rent-free month—to drive occupancy and stay full. Meantime, multifamily pricing went up due to lower interest rates ramping up purchase power. “You’re discounting cash flows at a lower interest rate, so that makes asset prices go up,” Berger said. “We were doing virtual tours while trying to educate our owners about prospects. Buyers still had to go in every unit, and we had to make sure everyone was outfitted with personal protective equipment when they did. It was a logistical challenge to get the due diligence done,” said Krebbs, who added that his firm would consider 2020 a successful year based on its completed transactions in Texas, Oklahoma and Arkansas. “Like all multifamily brokerages, we had to get as creative as possible to help buyers and sellers close out transactions during the stay-in-place orders,” Allen said. “Multifamily owners had to adapt from an operational perspective. Whether they were communicating with residents differently, altering their marketing strategy to fill vacancies or shifting their maintenance work order operating procedures, 2020 wasn’t without its challenges.” Challenges or not, Greystone made the best of the situation. Allen said his team’s sales volume and number of transactions increased from 2019. “I’d likely attribute that to continuing to work hard through stay-in-place orders and continued maturity of our team,” he said. The lessons learned in 2021 are now being carried into 2021 as the market gets closer to normal. “Folks are sort of getting off the sidelines and buying and selling again, which is great,” said Berger. Though Texas as a whole is a promising market for multifamily investors, two cities stand out as offering exceptional opportunities. “In Dallas, we had an influx of new and existing residents from states with much more government control and restrictions, and less affordability,” Allen said. “Texas is a very business-friendly state relative to many others across the country; you can get twice the size of house in Texas for a fraction of the cost, and pay no state income taxes. Also, we have a very diverse economy and very low unemployment metrics relative to other Texas and U.S. cities.” “Dallas is a Fortune 500 and Fortune 5,000 powerhouse,” said Berger. “Because so many companies and people are moving to cities like Dallas or Austin, those are the places where I want to invest my money. I know there will be future growth.” Prices certainly reflect the increased interest in those in-demand markets, but Krebbs and the Multifamily Group have their eye on the San Antonio area. “In Houston, Austin or DFW, you’re looking at $90,000 to $100,000 a unit for a Class-C property,” he said. “But in San Antonio, the rents just aren’t as high, so you can still get a property for about $65,000 a unit.” Krebbs notes that, like other Texas cities, San Antonio is a steadily growing market, drafting off the winds of Austin and its location in the middle of the state. “At The Multifamily Group, we don’t see any headwinds to multifamily investing in Texas,” he said. “There’s just too much job growth.” That’s just one of the fundamentals that remains strong, setting up 2021 as an incredible time to buy multifamily in DFW. Allen also points to the spread between treasuries and cap rates being the widest since the “Great Recession.” “Investors sitting on the sidelines the last three to four years because prices are too high have missed out on an incredible opportunity of growth,” he said. “There was $4 trillion on the sidelines last year, so there’s plenty of pent-up demand still. With the discussions on further fiscal and monetary stimulus, a declining U.S. dollar, and inflation in the short term, I only see the market going one way in 2021 … up!” The issue of inflation is an important one that helps distinguish multifamily from other CRE investments. “In multifamily, you can keep pace with inflation. If the market is hot, it’s a free market. Your leases are typically a year, so you can go out and rent apartments at market rates that could be well in excess of 1.5 percent to 2 percent growth that you’re seeing in net lease properties,” Berger said. “So as inflation heats up, multifamily apartments tend to be a tremendous hedge against that inflation.” Everything is bigger in Texas, including the opportunity for multifamily investment as more and more people make the move to call the Lone Star State home.

These Are Excellent Times For DFW Industrial

Well, 2020 was certainly a year for the ages. Before getting into what D CEO asked me to write about, the current state of the Industrial real estate market in DFW, I think it would be unmindful only to discuss business in a vacuum. The Industrial market is as strong as it has ever been, but I can’t just jump right into that. Last year was grueling for all of us, whether it was learning how to work from home, personal tribulations, Covid-19, political unrest, we have experienced a lot this year. Through the pain, heartache, and turmoil of 2020, my mind goes to a song I was listening to this weekend: There will be Better Days—2021 will have those better days. For me, 2020 started with devastating medical news I received about a loved one. A tough cancer battle would occur for months with extensive surgery and challenging odds—David vs. Goliath. Last week I found out David was cancer-free. There will be Better Days. I hope everyone who reads this blog experiences a better 2021 than 2020. Now let’s discuss the DFW Industrial market, which had a heck of a year in 2020. Click to read more at www.dmagazine.com.

M2G Ventures, Pennybacker Acquire 1.2 MSF Industrial Portfolio in DFW

M2G Ventures, a North Texas-based real estate investment and development company, and Pennybacker Capital LLC, a data-driven real estate private equity firm, have purchased the 1.19-million-square-foot industrial distribution facility and corporate store formerly owned by Tuesday Morning, located at 14303, 14621, 14601, 14639 Inwood Road and 4404 S. Beltwood Pkwy in Farmers Branch, Texas. The agreement also includes Tuesday Morning’s 105,000-square-foot headquarters, located at 6250 Lyndon B Johnson Freeway in Dallas. Stephen Williamson and Adam Graham of Lee & Associates represented the partnership on this transaction. “We are pleased to partner with Pennybacker to unlock value for Tuesday Morning, while significantly growing our urban industrial portfolio,” said Jessica Miller Essl, co-founder of M2G Ventures. “This transaction is an important milestone in M2G’s history, for Tuesday Morning, and the industrial market, collectively.” The 46.7-acre assemblage is located along Inwood Road within the 95 percent occupied Metropolitan Addison submarket. The site is located less than 20 minutes from both downtown Dallas and DFW International Airport, providing access to over 3.5 million people within a 30-minute drive-time. The buildings have clear heights in excess of 26 feet across the portfolio and are in immediate proximity to affluent growing areas including Addison, Richardson, Northwood Hills, Farmers Branch and Carrolton along with the Galleria shopping district. The size of this portfolio offers optionality and serves as one of the largest single-market urban industrial plays in recent news. “There is more to come in 2021, but this is certainly a historic moment for all and the market as a whole,” said Miller Essl.

Allen, Texas’ 135-Acre ‘Farm’ Project Attracts Major Entertainment Venue to Join Site Along 121 Corridor

The Allen Economic Development Corporation announced that JaRyCo’s 135-acre development, The Farm, which is set to break ground in early 2021, will include a 2.6-acre food and beverage-focused entertainment venue, The Hub. This comes as the city’s 121 Corridor, a five-mile stretch along State Highway 121, now includes 900 acres of planned development, with 2.5 million square feet soon underway or recently completed. The Farm site is designed to be a premier place to live, work and play with over 1.6 million square feet of office, 142,000 square feet of retail, a 150-key hotel, 60,000 square feet of restaurants, townhomes and 2,400 urban residential units. The Farm’s entertainment component, The Hub, is set to complete construction in 2022. It will feature 0.75 acres of open space, a 2,000-square-foot stage, a 5,700-square-foot outdoor, covered lawn, nine restaurants, 15,000 square feet of shared dining space and nearly 13,000 square feet of additional outdoor space. “The Farm will be a wonderful addition to the Dallas–Fort Worth metro, with the help of The Hub’s active dining and entertainment space, providing an experience that’s simply unrivaled in North Texas,” said Daniel Bowman, executive director of the Allen Economic Development Corporation. “Its dynamic location also borders other new mixed-use developments. These are projects that will appeal to office workers, residents, students and visitors across the region.” “The Hub, located at the entrance to our Central District and adjacent to West Lake Park, perfectly aligns with our mission to create a master-planned, walkable community oriented around families,” said Bruce Heller, president of JaRyCo. “As developers and operators, The Hub ensures its event spaces are activated daily. Plus, the open-air setup is perfect for today’s circumstances, allowing The Farm in Allen’s tenants and patrons to safely unwind in their own backyard.” The Farm site also embraces the property’s natural beauty with a 2.5-acre lake, boardwalk restaurants, over 2.5 miles of hike and bike trails, a 16-acre greenbelt along Watters Creek and four additional park areas. The development will tie into Allen’s extensive hike and bike trail system and will also include several energy-efficient and sustainable design features. JaRyCo engaged Omniplan Architects, civil engineer Dynamic Engineering, landscape architect TBG and RSM Designs for graphics on The Farm project. Also along the 121 Corridor, Collin College has opened a $177 million, 340,000-square-foot, four-building Technical Campus, serving 7,100 students once fully occupied. It offers courses in advanced manufacturing, health sciences, architecture and construction, science, technology, engineering and math (STEM), as well as logistics and transportation. Other planned developments along 121 include The Avenue, an 80-acre mixed-use development from Thakkar Developers, Allen Gateway, featuring a hotel and office condominiums, and Monarch City, a 238-acre mixed-use development perfect for corporate campuses. “Without question, the 121 Corridor is the future of Allen,” Bowman added. “With its shovel-ready sites along the Tollway and The Farm’s undeniable presence—offering a work-live-play fee—we expect ‘121’ to be a center of culture, innovation and employment, recognized as one of North Texas’ most prominent destinations.” Much of the five-mile corridor where Allen borders McKinney, Texas, is former privately owned farmland that is now being redeveloped to house modern amenities for the city’s growing workforce.

Cawley Partners and Staubach Capital Announce Acquisition of Sabre Corporate Offices In Southlake

DALLAS, TX – Cawley Partners and Staubach Capital have purchased the Sabre Global corporate offices located at 3120 and 3150 Sabre Drive in Southlake, Texas. The two-building campus totals 475,000 square feet of Class A office. Sabre Global, a leading software and technology company for the travel industry, has signed a 12-year lease for the entire 265,000-square-foot Building A, and entered into a short-term lease for the 210,000-square-foot Building B. The Work From Anywhere movement has proven not only possible, but preferable for many employees at Sabre Global. In light of Sabre’s shifting workforce, their need for nearly half a million square feet of office space has lessened. Cawley Partners and Staubach Capital jumped at the opportunity to purchase their campus in the ever-growing Southlake submarket. With Sabre retaining over 265,000 SF long term, there will be roughly 210,000 RSF (one entire building) available for lease in 2022. Beginning in Q1 2022, Cawley Partners plans to fully renovate Building B and add a full suite of upscale amenities, including: meeting rooms, fitness center, locker rooms, food service, and outdoor gathering spaces. “We are really excited about being in Southlake. With Charles Schwab, Microsoft and Robinhood growing in the area, we anticipate additional growth and demand for Class A space in the submarket,” commented Kristi Waddell, VP Leasing at Cawley Partners. 3150 Sabre Drive will be managed and leased by Cawley Partners. For leasing inquiries, contact Kristi Waddell at kwaddell@cawleypartners.com.

Deal Ticker: Another California-Based Real Estate Firm Relocates to Dallas

Lion Real Estate Group, an investment firm focused on multifamily and creative office properties, has relocated its Los Angeles-based headquarters to Dallas. The firm has taken space at 3811 Turtle Creek Blvd. “The decision to relocate our corporate headquarters to Dallas aligns with our strategy of acquiring desirable multifamily assets outside of the urban core, both here in Texas and in other high-growth cities across the Sunbelt and Southeast,” said Jeff Weller, co-founder and managing principal of LREG. Texas is already a key location for LREG, which has a national portfolio of 27 properties exceeding $900 million in estimated value as of Dec. 29, 2020. The firm owns five residential properties in the Lone Star State, including Embry Apartments (2210 Marsh Lane), a 151-unit multifamily property in Carrollton, 13 miles northwest of downtown Dallas. As of August 2020, Dallas-Fort Worth-Arlington is one of the nation’s 12 largest metropolitan statistical areas (U.S. Bureau of Labor Statistics). Late last year, CBRE also announced it was relocating from California to its new home base at 2100 McKinney Ave. in Dallas. Click to read more at www.dmagazine.com.