Episode 80 -Out of State, Out of Mind: Commercial Real Estate via Remote Locations

Out of State, Out of Mind: Commercial Real Estate via Remote Locations              


Investing in commercial real estate can be challenging within itself. However, oftentimes it is the regulations within a particular state that make commercial real estate unappealing.  Here at Goodlife HP we’ve taken a liking to the Lone Star state of Texas as it is very “ commercial investor” friendly and the restrictions are not as limited as well. 


So Why Texas? 


One of the most common questions that the Goodlife team has encountered is why we have chosen to focus our investment strategy on properties mainly located in Texas, despite our headquarters being  in Los Angeles. As mentioned previously, this is due to the lower amount of regulations on commercial real estate within Texas. Also to boot; there is no rent control.  There is tremendous upside and opportunity in the big state of Texas and to date Goodlife HP has done a fantastic job on capitalizing on those opportunities. 


COVID-19 and Eviction Moratoriums


We only need to look at California as an example of where strict regulations impacted owners and impeded their ability to collect rent.  Owning a commercial property in California during covid was very costly and with limited help from the government the financial burden took its toll. While Texas did not impose an eviction moratorium during COVID-19 (instead providing financial assistance to both tenants and landlords)  the California state legislature took another path and continued to extend eviction moratoriums protecting the tenants while offering no aid to property owners to date.  The owners continued to face financial hardships and their obligations did not cease as it related to their property. 


In contrast to this, at our properties in Texas, Goodlife HP has been able to manage operating expenses effectively and operate with limited impact. 


Texas and Rent Control/Stabilization


Additionally, one regulation that Texas lacks that is present in states such as California is rent control. In Los Angeles (where the Goodlife HP team is located), yearly rent increases on most apartments built pre 1978, which can only be made once per year, are limited to 8%. For buildings in Los Angeles built from 1978 to 2005 in Los Angeles, the statewide rent stabilization law applies, which caps rental increases on tenants at 5-10%.


Given the historic levels of rent growth that are currently being experienced in Texas (with rental growth rates hitting 12-15% in the Irving submarket in Texas, where we own 416 units at the Ayva), these rent control restrictions limit the ability of commercial real estate owners to maximize income. 


Additional Benefits of Texas


Moreover, the population of Texas continues to expand rapidly, growing by over 300,000 people from 2020 to 2021, making it the second fastest growing state in the United States, and increasing the potential renter base. This contrasts sharply with California, which had a net loss of approximately 260,000 people from 2020 to 2021. Lastly, Texas’ large levels of job growth (especially in comparison to California) and increasing levels of higher education suggest that this increasing potential renter base is also more likely to be employed and have a higher level of education, both of which correspond to a higher ability to complete their rental payments. 


Institutional Property Advisors Brokers the Sale of Two Multifamily Assets in North Tempe

TEMPE, Ariz., June 15, 2021 – Institutional Property Advisors (IPA), a division of Marcus & Millichap (NYSE: MMI), announced today the sale of 134-unit Sakara Tempe and 36-unit Sakara Villas at Tempe in Tempe, Arizona. Together, the properties sold for $30.5 million, which represents $178,363 per unit.

“Located at the doorstep of Arizona State University, these garden-style apartment communities offer two of the remaining cost-effective price points near campus,” said Cliff David, IPA executive managing director. “Residents enjoy more favorable rent economics in comparison with the towering purpose-built student housing alternatives and traditional Class A market-rate communities that surround the properties and permeate North Tempe. Sakara’s rent affordability measured against North Tempe’s best-in-class housing stock and the nearly 70,000 employees and 2,000 total business in the surrounding area make it ideal for the implementation of a comprehensive renovation strategy.” David and IPA executive managing director Steve Gebing represented the seller, GoodLife Housing Partners, a student housing and apartment investment firm based in Los Angeles, California founded by principals, Rohan Gupta and David N. Fong. Cliff David and Steve Gebing also procured the buyer, Capital Allocation Partners, Nathan Reid, principal.

“We are truly excited about the sale of the Sakara portfolio as it represents a successful exit and execution of our value-added renovation business plan for the property after acquiring it three years ago for approximately $20.8 million,” stated Fong.

Built in 1968, the properties are within walking distance of Arizona State University and the University Drive/Rural Road Transit Center. There is over 4 million square feet of retail and dining within a three-mile radius of the communities, including Downtown Tempe, Tempe Marketplace, and Mesa Riverview/Sloan Park. Loop 202, Loop 101, and U.S. Route 60 are also within three miles of the two properties.

Sakara Tempe and Sakara Villas at Tempe feature one-, two- and three-bedroom apartment homes. Select apartments have new laminate kitchen countertops, wood-style vinyl flooring, and two-tone paint with accent walls. Some of the units are furnished for the convenience of students. Common area amenities at Sakara Tempe include a resort-inspired swimming pool with cascading water features and poolside cabanas, a fitness facility, bocce ball court, and an outdoor television lounge

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Newmark Announces Sale and Financing of 416-Unit Multifamily Asset in DFW Market

Newmark announces the sale and financing of Marbletree Apartments, a 416-unit, garden-style multifamily asset at 4057 North Belt Line Road in Irving, Texas. The property is currently 98% occupied.

Read the article on Newmark

Newmark Senior Managing Director Jakob Andersen and Executive Managing Director Brian O’Boyle, Jr. represented the seller, LumaCorp, Inc., in the transaction to buyer, privately held real estate investment company GoodLife Housing Partners (GoodLife HP). Financing for the purchase was provided by Ready Capital and placed by Newmark Vice Chairman Deverick Jordan, MAI, FRICS and Associate William Hairston.

“This was a cooperative effort, with value added for all parties. The transaction was executed in a timely manner and facilitated a 1031 exchange for the seller; the buyer is able to expand their footprint in the Dallas-Fort Worth market,” said Brian. “Additionally, the transaction demonstrated the health of the debt capital markets,” added Deverick.

“Our objective as the lender was to provide the sponsor with an optimal loan structure to match their business plan. We were able to meet their timeline with certainty of execution through our upfront process,” said David Cohen, Managing Director of Ready Capital.

Built in 1982 and having never undergone renovations, the property is well-positioned for capital improvements, including updated unit interiors and improved property amenities, which is in-line with the Buyer’s value-add investment strategy.

The property is located less than two miles from Dallas-Fort Worth International Airport and has direct access to Interstates 161 and 183, providing residents a convenient 20‐minute drive to Dallas Love Field Airport, Downtown Dallas and Downtown Arlington, and a 30‐minute drive to Downtown Fort Worth. There are 185,227 jobs within a five‐mile radius of Marbletree Apartments and several new major employment hubs are under development nearby, including Las Colinas Urban Center (26,000+ employees), American Airlines headquarters (11,000+ employees) and Cypress Waters (17000+ employees).

According to Newmark Research, despite the impact of COVID‐19, annual rent growth for 1980s vintage multifamily assets in the Irving submarket remained positive at 2.4%. In the past five years, the average annual rent growth has been 4.2% and the average occupancy rate has been 95.2%, reflecting the strength of the submarket.

About Ready Capital
Ready Capital (NYSE: RC) is a multi-strategy real estate finance company that originates, acquires, finances and services small- to medium-sized balance commercial loans. Our National Bridge Originations Team offers nonrecourse financing on transitional, value-add and event-driven commercial and multifamily real estate opportunities. Ready Capital is a direct lender that provides comprehensive financing solutions to real estate owners, investors and small business owners, which generally range in original principal amounts between $2 – $45 million and larger for select assets and portfolios. For more information, contact David A. Cohen, National Bridge Originations Managing Director for Ready Capital at david.cohen@readycapital.com.

About Newmark
Newmark Group, Inc. (Nasdaq: NMRK), together with its subsidiaries (“Newmark”), is a world leader in commercial real estate services, with a comprehensive suite of investor/owner and occupier services and products. Our integrated platform seamlessly powers every phase of owning or occupying a property. Our services are tailored to every type of client, from owners to occupiers, investors to founders, growing startups to leading companies. Harnessing the power of data, technology, and industry expertise, we bring ingenuity to every exchange, and imagination to every space. Together with London-based partner Knight Frank and independently owned offices, our 18,800 professionals operate from approximately 500 offices around the world, delivering a global perspective and a nimble approach. In 2020, Newmark generated revenues in excess of $1.9 billion. To learn more, visit nmrk.com or follow @newmark.

Discussion of Forward-Looking Statements about Newmark
Statements in this document regarding Newmark that are not historical facts are “forward-looking statements” that involve risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements. These include statements about the effects of the COVID-19 pandemic on the Company’s business, results, financial position, liquidity and outlook, which may constitute forward-looking statements and are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected. Except as required by law, Newmark undertakes no obligation to update any forward-looking statements. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see Newmark’s Securities and Exchange Commission filings, including, but not limited to, the risk factors and Special Note on Forward-Looking Information set forth in these filings and any updates to such risk factors and Special Note on Forward-Looking Information contained in subsequent reports on Form 10-K, Form 10-Q or Form 8-K.