(By Dale King) HOUSTON – A South Florida real estate company formed a month ago has taken a major step into the Houston rental market, acquiring nearly 1,000 workforce dwelling units for renovation into improved, but still affordable, housing, said a company executive.
The firm, Elandis, based in Coral Gables near Miami, spent $50 million to secure 984 units in four separate multifamily communities in Houston, said Chief Operating Officer Ted Lawson. It expands the company’s portfolio of owned and managed residential units to 2,500. The apartments in Houston represent the company’s first acquisition since it was formed as a stand-alone entity in May.
Elandis, a subsidiary of the global conglomerate Libra Group, came about by combining three former Libra subgroups, FCA Group, FSA Group and US Hotels. “Elandis handles real estate and hospitality throughout the Americas,” Lawson said. “In the US, it acquires and improves multifamily properties.”
He said the three subsidiaries all worked together, so it was natural to consolidate.
The communities Elandis purchased in Houston include Kirkwood Landing on South Kirkwood Road, a 264-unit complex; the Forest in Imperial Valley Drive, with 192 rentals; Pine Creek on Maxey Road, with 300 units, and Valencia at Spring Branch on Long Point Road, a community of 227 rentals. “They are almost at the four corners of Houston, but in different submarkets,” said the COO.
He said occupancy rates are all around 95%, except for Valencia, which is about 87%.
The company’s “general mandate,” he said, is to locate and acquire properties in the Sunbelt, specifically in the states of Florida, Georgia, South Carolina, Texas, Arizona and Nevada. “We are very excited about Texas in general,” he added. “Texas has a lot of great drivers for what we are looking for.”
The four Texas properties now in the Elandis portfolio are considered Class C rentals, the lower end of the multifamily spectrum. Lawson said they will be upgraded to Class B or B-plus, but will not be turned into Class A units, which are considered luxury apartments. Also, no current residents will be evicted when the work is done.
Going head-to-head with Class A rental firms “is really not our business,” he said. “We have a big corporate responsibility component in our company. We want to make money, but we also very much like the idea of repositioning these properties that have been neglected. We like being the entity that comes in and improves them, which is good for the people who live there and in the communities around them.”
“Let the other guys build the Class A luxury stuff for now,” he quipped. “We love workforce housing, we love to make it better, to create value and improve communities.
General plans for the four developments are:
Valencia at Spring Branch, with a mix of one-, two- and three-bedroom apartments: “This is such a great neighborhood and the school system is amazing. It is a very international community, and in the international demographic, everyone loves football – meaning soccer. There is a great piece of land where a building burned down that will be turned into a football field, with barbecues and picnic tables nearby.”
The Forest in Imperial Valley Drive, with one-, two and three-bedroom units: “There is not as much land here, so the emphasis will be on interiors. We plan to add a fitness center, an office center, pool upgrades and landscaping.”
Pine Creek, with one- and two-bedroom units: “This is an exciting place that is located near major roadways. It serves a large Latino population. A lot of people have barbecue grills on their balconies. In a wood-frame structure, this is not safe. We are going to add outdoor grilling areas, landscaping and pool improvements. We are taking a former tennis court and changing it to a hard-court soccer field covered with Astroturf.”
Valencia, which offers apartments with as many as four and five bedrooms: “With large units and great schools, you know there will be kids. We plan to build a playground. This complex is in a great neighborhood, but it is run down. It needs some love.”
Lawson said all four developments are gated. That aspect will remain, and some gates that are not working will be repaired. He said security at all locations “will be increased. We want to make sure people feel safe.”
By staying with workforce housing, Lawson said, Elandis remains “in a niche where there is much less competition.”
“The financials work out very well for workforce housing,” he noted. “It is too expensive to buy land and build infill projects in urban areas unless you build Class A, luxury, super-high rent properties. The number of people who need workforce housing is growing, and no one is building workforce housing to meet that demand.”
He noted that the four Texas complexes are located near retail stories, groceries, entertainment venues and jobs.
Elandis has set an 18-month timetable for completion of the renovation work.
June 9, 2016