JV Grabs 2,044-Unit Riata in Off-Market Deal

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AUSTIN-In an off-market deal, Dallas Cowboys’ owner Jerry Jones and his Blue Star Land LP have sold the largest multifamily block in the city to Capmark Investments LP, two of its public pension fund clients and Legacy Partners Inc. Local sources say the 2,044-unit Riata and 17 acres of developable land have brought more than $150 million.

The power quartet of buyers put the Riata under contract in December 2005, but had to work through five HUD 221(d)(4) loan assumptions before the entire package could change hands, Spencer Stuart Jr., senior vice president and Texas partner for the Foster City, CA-based Legacy Partners Residential Development Inc., tells GlobeSt.com. For Capmark, it’s the second high-profile deal in Central Texas to make headlines this week.

Capmark senior vice president Michael Bryant says the deal also required two new Freddie Mac loans, totaling $50 million. He says the new loans are five-year terms at a 5.8% fixed-rate interest while the HUD loans have three to five years left on their terms.

“The borrowing structure was a bit complex,” says Bryant, who single-handedly worked out the debt. “HUD took quite a bit of time understanding the borrowing structure because it was one they had never seen before.” He says the deal was packaged with a holding company and different single-purpose entities for each loan, none of which are cross-collateralized.

The village of eight complexes at 12300 Riata Trace Parkway is located in northwest Austin’s Arboretum, a heavily weighted pocket of upper-end residential and retail product. The just-sold package, developed from 1996 to 2001, was 96% occupied at sale time, according to Stuart. The portfolio’s units average 923 sf; rents go from $740 to $2,250 per month.

With the deal now done, Stuart says the team will begin planning a renovation of at least $4 million and adding a ninth complex, possibly another 306 units, on the extra land. It will be early 2007 before a decision is made. “Our mission No. 1 is to get everything operating smoothly and get our upgrade programs in place,” he says, adding the plan right now is to redo 700 apartments in the first year and stage in the balance. Dallas-based Milestone Management Co. has been hired to oversee the portfolio.

Stuart says a minority partner in the Riata put the deal on his desk. At first, he said “no,” but it didn’t take long to reconsider. “It was a tough deal to finish up,” he says. The upside lies in the rapid elimination of concessions–one month free on a one-year lease at the Riata–the renovation and adding the ninth complex.

Stuart says the anticipated hold is at least five years, with no flips in sight. “We acquired this to own, manage, improve operations and create value,” he stresses.

The village’s amenity base includes nine swimming pools, 11,000-sf staffed athletic club, town center, putting green, sports courts and events center. The complexes are the Enclave, Dominion, RockCreek, GreyMoss, BuenaVista, ArrowWood, WoodTrail and MylesMark.

Bryant, who’s based in Dallas, says the closing “was important to Capmark” because it’s in the process of rebuilding its Austin team. The new office leader is Scott Bryant, no relationship to the Dallas executive and who assisted on the tail end of the deal.