Brokers: Trio of record-breaking real estate deals a ‘light at the end of the tunnel’
ARA Newmark Houston had a busy end to 2016.
The Houston land brokerage closed three major apartment deals within a 45-day span. All three land deals, which closed between the middle of November to the end of December — set new records for land prices in their respective submarkets, brokers said.
“During the worst oil slump in a generation, developers are stretching to make premier deals happen on really core A-plus sites,” said Tim Dosch, principal of ARA Newmark Houston. “It’s a sign that folks believe in Houston and see the light at the end of the tunnel.”
Here are the three luxury apartment deals brokered last quarter by ARA Newmark Houston’s land team, led by Tim Dosch, and executive managing directors Tom Dosch and David Marshall:
The Hanover Co. purchased a 1.65-acre site near Kirby Drive and
Steel Street in Upper Kirby. The Houston multifamily developer plans
to build a 40-story apartment tower with more than 300 units on the
site. Hanover closed on the land on Nov. 17, after struggling to find
capital partners amid the oil slump. The developer hopes to start
construction on the $150 million project in 2017.
Caydon Property Group purchased a 1.15-acre site at 2850 Fannin St. in Midtown. The Melbourne, Australia-based developer plans to build The Midtown, a 28-story apartment tower with 380 units on the site. Caydon closed on the land in mid-December. The developer began demolition work on the former Mental Health and Mental Retardation Authority building in early January.
PM Realty Group purchased a 1.15-acre site at 3300 Main St. in Midtown. The Houston developer plans to build a 40-story, 336-unit apartment tower on the site. PMRG closed on the land in late December, after also struggling to find capital partners amid the energy downturn. The developer demolished a former city of Houston code enforcement building on the site last year, and hopes to start construction on the apartment project this year.
Usually, developers try to have both the land and construction costs capitalized before closing on a land deal, Tim Dosch said. However, these three developers were so committed to Houston that they closed on the land before finalizing the construction financing, Dosch said.
“That’s pretty unusual,” Dosch said. “Usually, the developers’ goal is to have everything capitalized so the day after you close, you can start building.”
The three experienced developers were able to find equity partners willing to help them close on the land before lining up a construction loan. Although banks are starting to pull back from financing apartment deals across the country, Dosch said he is confident all three developers will be able to land a construction loan for their projects.
“It doesn’t hurt to close on the land deal, because you can go to a bank and say, ‘This is a done deal, we have the land,’” Dosch said. “Inevitably, at some point, you have to close because sellers don’t want to be strung along for a ride.”
As Houston’s multifamily market recovers from the oil slump, Dosch said he expects more high-rise projects like the ones planned by Hanover, Caydon and PMRG.
Before 2011, only 10 high-rise apartment towers were built in Houston. At one point during the energy boom, as many as 25 apartment towers were proposed, Dosch said.
“Houston has never really been a high-rise market but our city is changing,” Dosch said. “We’ll see more and more of these high-rise developments in the next development cycle.”
Paul Takahashi – Reporter
Houston Business Journal
