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Austin, Texas, November 16, 2015
Austin Capital Advisors added 294 units to the company’s multifamily portfolio with the acquisition of Villas Del Sol Apartments in the north Austin. Villas del Sol is the largest multifamily asset in ACA’s portfolio, and according to ACA Managing Director Jim Gatlin, fit the acquisition strategy ACA has employed in accumulating nearly 1,000 apartment units in Austin. “Villas Del Sol represented the profile in-line with our investment thesis to acquire assets with fragmented ownership and operational inefficiencies whereby we can enhance both the operations, and the physical asset itself which allows us to elevate rents more reflective of the market” said Gatlin. He added, ” VDS also gives us scale in a sub-market where we already owned and operate nearly 300 units, and possess intimate knowledge and real time data in that market.”
Austin Capital Advisors is a Private Equity Real Estate Investment Company, specializing in the acquisition and asset management of multifamily communities in Austin Texas. ACA and its affiliate, Austin Capital Property Managment manage nearly 1,00o units in Austin.
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Trifecta Square is a 52-unit garden-style community with approximately 37,188 square feet of rentable space located on 1.533 acres of land in north central Austin. The property consists of four, two-story buildings with pitched composition shingle roofing. Buildings are wood frame construction with brick and HardiPlank siding. Floor plans consist of 40 one-bedroom units and 12 two-bedroom units with an average of 715 square feet.
Many of the unit interiors have recently been renovated and the spacious floor plans feature 100% ceramic tile flooring throughout, upgraded countertops in kitchens and bathrooms, large walk-in closets, fireplaces, built-in wet bars, and balconies or patios. Common area amenities include a swimming pool with new pump and filter, large courtyard with playground, clothes-care center, barbeque grills, and the recent addition of a leasing office with onsite management.
*Class C properties offered the least amount of concessions yet achieved the highest occupancy rate (96.3%) amongst all multifamily classes in 2014, according to Austin Investor Interests research.
*According to Berkadia Research, effective rents in Austin will rise 4.5% percent in 2015, to $1,185 per month. Rents advanced 3.9% in the prior four quarters to $1,085 per month as of December 2014.
*North Austin is one of the most rapidly improving submarkets in the top growth city in the nation, with the Mueller redevelopment (4.2 million square feet of office, retail, medical mixed use space) transforming the area with excellent job opportunities for residents.
*ACC Highland – Austin Community College’s newest, largest, and most innovative learning facility, housed in what was previously Austin’s Highland Mall, is less than two miles from Trifecta. The 200,000 SF first phase opened in 2014 and has the capacity to serve 6,000 students. Phase II planning is underway and could potentially serve 25,000 students.
*Outsized employment and population growth will continue to drive new housing demand in the metro. In 2014, approximately 47,500 more people have made Austin their home, including 13,000 individuals in their prime renting years.
*Hiring will accelerate in 2015 with 39,400 positions created for a 4.3% increase in Austin total employment, driving robust apartment absorption.
TRIFECTA SQUARE APARTMENTS
Property: Trifecta Square Apartments
Date Acquired: April 15 2015
Acquisition Price1: $3,415,000
Location: Austin, Texas
Cap Rate: 6.43% (purchase
Loan Amount2: $2,600,000
Investor Equity: $1,330,000
ACA Equity: $175,000
Projected Hold Period: 5 years
Pro Forma Yr. 1 CoC: 7.8%
Pro Forma 5-Yr. Avg CoC: 8.5%
Pro Forma IRR: 16.1%
Equity Multiple: 1.96x
Type: Class C+ Multifamily
Current Occupancy: 98.0%
When young college graduates decide where to move, they are not just looking at the usual suspects, like New York, Washington and San Francisco. Other cities are increasing their share of these valuable residents at an even higher rate and have reached a high overall percentage, led by Denver, San Diego, Nashville, Salt Lake City and Portland, Ore., according to a report published Monday by City Observatory, a new think tank.
And as young people continue to spurn the suburbs for urban living, more of them are moving to the very heart of cities — even in economically troubled places like Buffalo and Cleveland. The number of college-educated people age 25 to 34 living within three miles of city centers has surged, up 37 percent since 2000, even as the total population of these neighborhoods has slightly shrunk.
Some cities are attracting young talent while their overall population falls, like Pittsburgh and New Orleans. And in a reversal, others that used to be magnets, like Atlanta and Charlotte, are struggling to attract them at the same rate.
Even as Americans over all have become less likely to move, young, college-educated people continue to move at a high clip — about a million cross state lines each year, and these so-called young and the restless don’t tend to settle down until their mid-30s. Where they end up provides a map of the cities that have a chance to be the economic powerhouses of the future.
Where the Population of College Graduates Is Growing
As metropolitan areas vie for these residents, some are attracting them at a higher rate than the national average. The rate over the last dozen years does not necessarily reflect the current percentage. For example, Denver’s percentage in this age group is 7.5, higher than Houston’s and more than the national average of 5.2 percent, but lower than that of Washington, the Bay Area and Boston.
“There is a very strong track record of places that attract talent becoming places of long-term success,” said Edward Glaeser, an economist at Harvard and author of “Triumph of the City.” “The most successful economic development policy is to attract and retain smart people and then get out of their way.”
The economic effects reach beyond the work the young people do, according to Enrico Moretti, an economist at the University of California, Berkeley, and author of “The New Geography of Jobs.” For every college graduate who takes a job in an innovation industry, he found, five additional jobs are eventually created in that city, such as for waiters, carpenters, doctors, architects and teachers.
“It’s a type of growth that feeds on itself — the more young workers you have, the more companies are interested in locating their operations in that area and the more young people are going to move there,” he said.
About 25 percent more young college graduates live in major metropolitan areas today than in 2000, which is double the percentage increase in cities’ total population. All the 51 biggest metros except Detroit have gained young talent, either from net migration to the cities or from residents graduating from college, according to the report. It is based on data from the federal American Community Survey and written by Joe Cortright, an economist who runs City Observatory and Impresa, a consulting firm on regional economies.
Denver has become one of the most powerful magnets. Its population of the young and educated is up 47 percent since 2000, nearly double the percentage increase in the New York metro area. And 7.5 percent of Denver’s population is in this group, more than the national average of 5.2 percent and more than anywhere but Washington, the Bay Area and Boston.
Denver has many of the tangible things young people want, economists say, including mountains, sunshine and jobs in booming industries like tech. Perhaps more important, it also has the ones that give cities the perception of cultural cool, like microbreweries and bike-sharing and an acceptance of marijuana and same-sex marriage.
“With lots of cultural things to do and getting away to the mountains, you can have the work-play balance more than any place I’ve ever lived,” said Colleen Douglass, 27, a video producer at Craftsy, a start-up with online classes for crafts. “There’s this really thriving start-up scene here, and the sense we can be in a place we love and work at a cool new company but not live in Silicon Valley.”
Other cities that have had significant increases in a young and educated population and that now have more than their share include San Diego, Baltimore, Pittsburgh, Indianapolis, Nashville, Salt Lake City and Portland, Ore.
At the other end of the spectrum are the cities where less than 4 percent of the population are young college graduates. Among those, Detroit lost about 10 percent of this group, while Providence gained just 6 percent and Memphis 10 percent.
Atlanta, one of the biggest net gainers of young graduates in the 1990s, has taken a sharp turn. Its young, educated population has increased just 2.8 percent since 2000, significantly less than its overall population. It is suffering the consequences of overenthusiasm for new houses and new jobs before the crash, economists say.
The population of young, educated people in Dallas, Charlotte and Raleigh is also growing more slowly than their populations as a whole.
The effects of the migration of the young and the restless are most vividly seen in urban cores. In 1980, young adults were 10 percent more likely than other people to live in these areas, according to the report from City Observatory, which is sponsored by the Knight Foundation. In 2010, they were 51 percent more likely, and those with college degrees were 126 percent more likely. The trend extends to all the largest metropolitan areas except Detroit and Birmingham, Ala.
Of the metropolitan areas with the most populous city centers, Washington and Philadelphia showed the largest increases of young adults living there, at 75 and 78 percent. Other cities that have made big gains in that category are Baltimore, Los Angeles, San Diego, Dallas, Miami and St. Louis. Washington also had the largest share of young college graduates over all, at 8.1 percent.
“They want something exciting, culturally fun, involving a lot of diversity — and their fathers’ suburban lifestyle doesn’t seem to be all that thrilling to many of them,” Mr. Glaeser said.
How many eventually desert the city centers as they age remains to be seen, but demographers predict that many will stay. They say that could not only bolster city economies, but also lead to decreases in crime and improvements in public schools. If the trends continue, places like Pittsburgh and Buffalo could develop a new reputation — as role models for resurgence.
Real estate investors should look to cities with an upsurge in millennials for new investing opportunities.
By Joel Cone Dec. 1, 2014 | 9:35 a.m. EST + More
As with any type of investment vehicle, anyone who wants to succeed in the realm of real estate investing needs to be a studious observer of market trends. Tracking everything from unemployment, job creation, population migration and economic stability, to housing inventory, home prices and rental yields in any particular region is essential.
Just like anyone else with goods and services to sell, the most successful investors are ones who own the supply when the demand comes calling. However, after the Great Recession hit, the next great wave of first-time homebuyers, the millennials, did not come calling. Instead, they were either attending college, or trying to start their careers fresh out of college.
In a report released October 2014, entitled, “15 Economic Facts About Millennials,” released by the White House, the President’s Council of Economic Advisers or CEA, noted that the millennial generation, which accounted for one-third of the U.S. population in 2013, will shape the nation’s economy “for decades to come.”
It should come as no surprise then, that with the baby boomer generation heading toward retirement years, and possibly downsizing or moving into retirement or assisted living communities, it would behoove real estate investors to follow where the next generation of homebuyers and renters is migrating to live, work and play.
A realtor study highlighted millennial migration patterns. This July, the National Association of Realtors, or NAR, released a report entitled, “Best Purchase Markets for Millennial Homebuyers,” which took into account a lot of variables that can affect real estate investors when making a decision on where to buy investment property.
“The premise of the study is that we have had this very low homebuying participation among young people. Many factors held back the millennial generation from home buying,” says NAR’s chief economist, Lawrence Yun.
According to the NAR report, homebuying among young adults under age 35 peaked in 2005, at 43 percent, before declining to 36 percent in the first quarter of 2014.
“Limited job prospects, student debt and flat wage growth have combined with tight credit conditions, and low inventory to price millennials out of some of the top cities, such as New York and San Francisco,” Yun said. “However, NAR research finds that there are other metro areas Millennials are moving to where job growth is strong, and homeownership is more attainable. These markets are well-positioned to soon experience a rise in first-time buyers as the economy improves.”
In conducting the study, NAR looked at a number of factors, such as the local employment situation, the inventory of homes, the migration patterns of millennials (where they are moving to) and the affordability of homes in those areas.
Out of the top 100 metropolitan areas analyzed by NAR, 10 markets stood out as projected to gain or to witness an increase in millennial homebuying in the upcoming year. Those metropolitan areas are:
Des Moines, Iowa
Grand Rapids, Michigan
Salt Lake City, Utah
Other metropolitan areas, which show strong potential for attracting Millennials include:
Raleigh, North Carolina
Looking at recent trends, Yun anticipates 2014 will be the low point in homebuying activity, with a pickup expected in 2015, although not back to normal levels.
“One underlying assumption going into 2015 is that the underwriting standards will be less strict, due to policy changes. The director of Fannie and Freddie is saying that 3 percent down is sufficient for people who are staying well within their budget, not stretching to buy a home,” Yun explains.
The investor’s perspective. Similar to the realtors, the most important metric for real estate investors when it comes to determining where to own property – is where the millennials are moving to, says Daren Blomquist, vice president of RealtyTrac.
“If they are moving to that market, then you can make money off millennials by renting to them initially, and then flipping to them as they decide to become homebuyers,” says Blomquist.
However, in conducting its “Q2 Residential Property Rental Report,” RealtyTrac examined down to the county level, rather than the metropolitan areas, like the NAR report. Still, when considering the factors that go into determining the best places for investors to buy rental property, many of the same factors were considered, such as migration patterns and employment rates, although the RealtyTrac report factored in the level of rental yield available in a particular market as well.
In all, 370 counties were examined nationwide, accounting for 60 percent of the U.S. population. To make the top 50, the county had to have at least 24 percent of total population in the millennial age range, and at least a 10 percent increase in the number of millennials between 2007 and 2013.
Employment rates were added into the mix, along with median home prices, and had to have an annual average gross rent of 9 percent or higher. The survey found investors buying residential property in the second quarter of 2014 were garnering an average annual return of 9.97 percent, down from a 10.60 percent return a year earlier.
As a result, the report named the following counties as the best markets to buy rental property, as of the second quarter of the year:
Anderson County, South Carolina
Woodbury County, Iowa
Pickens County, South Carolina
Alachua County, Florida
Allegheny County, Pennsylvania
Spotsylvania County, Virginia
Lexington County, South Carolina
Franklin County, Ohio
Dorchester County, South Carolina
Douglas County, Nebraska
Frederick County, Maryland
Rutherford County, Tennessee
Anoka County, Minnesota
Benton County, Arkansas
Polk County, Iowa
Based on gross rental yields, the RealtyTrac report also named the top five markets for renting to Millennials including:
Baltimore County, Maryland
Philadelphia County, Pennsylvania
Duval County, Florida
Cumberland County, North Carolina
Newport News City, Virginia
“We’re definitely in a recovery, but not a recovery that looks like previous recoveries. Not built much on the back of first-time homebuyers and move-up buyers. Still on the backs of investors, although the percentage of cash buyers is going down,” Blomquist says.
The case for an investor-driven recovery is based on a new metric RealtyTrac has been studying, which calculates the percentage of non-owner occupants. Based on data collected by RealtyTrac, the percentage of non-owner occupants is 30 percent of sales so far in 2014, the highest it’s been since the firm began tracking the data in 2001.
“That tells me that the recovery is still investor-driven, although investors are starting to slow down,” he says.
If there is a downside, it is that next year interest rates are expected to rise by 1 percent to 5 percent, Yun says. Although higher interest rates are always a deterrent to buying, he does not feel even a one percent rise will cause potential homebuyers to panic.
Joel Cone is a southern California-based freelance business writer who specializes in the fields of real estate, economics and law. His articles have appeared both in print and online for many publications including California Real Estate, OC Metro, GlobeSt.com and The Los Angeles Daily Journal. He is also a contributor to Auction.com.
Corrected on Dec. 2, 2014: A previous version of this story misstated two county names and locations.
July 31, 2014 Austin, Texas.
We are pleased to announce another acquisition in Austin, a 70 unit multifamily building near the Mueller re-development of the former Austin airport. The investment strategy is to reposition the asset and attract rents more in-line with the surrounding sub-market.