Mark Allen, Multifamily and SFR Portfolio Broker

06/15/2023

Texas Property Tax Update

I recently shared an article that I contributed to D Magazine about the challenges multifamily owners face with slowing rent growth, higher cap rates, and double digit increases in our biggest expense category… property taxes (link in comments).

Although a bill hasn’t been passed, they’re getting close. Here are highlights from the recent legislative meetings:

- House and Senate introduced bills to lower property tax rates
- House wanted to include an appraisal cap, while Senate insisted on no appraisal cap but an increase in the homestead exemption
- Attempts at compromise during the session failed, leading to a stalemate
- $5 billion appropriation for tax rate compression was passed, and another $12 billion for property tax relief is awaiting guidance
- Governor proposed putting the $12 billion into tax rate compression, which the House accepted, but the Senate promptly adjourned without passing it
- A bill needs to be passed and put on the November ballot as a constitutional amendment to avoid violating spending limits
- Compromise is likely to include rate compression, homestead exemption, and potentially an appraisal cap
- Talks about compromise are ongoing, but there is disagreement between the lieutenant governor and Governor

05/24/2023

ON MARKET: Legacy at Crowley | 96 units + Phase 2 Land with Approvals | Crowley, TX

05/23/2023

Just brokered the sale of 2 Dallas-Ft Worth Multifamily properties.

Both workforce housing, one in Dallas, the other in Ft. Worth. Both stabilized, value-add deals with hard contracts; contract-to-close ~75 days

Seller
1. Japanese Seller on 5-year depreciation schedule. Purchased in 2017 so they fully depreciated asset.
2. Local ownership; Purchased in 2018 and executed business plan.

Buyer
1. Local Buyer executed agency debt in the low 60% LTV range
2. Out-of-state Buyer, bridge debt ex*****on

IMO, I don’t feel that multifamily sales velocity has slowed or picked up pace in the last month - It’s remained stable since beginning of year. I do feel like the general stability in UST yields over the last two months has helped align price expectations and make deals.

The better the property and location quality the more the Buyer demand. In my opinion, the toughest deals to sell right now are 60s/70s vintage over $20M as the syndicator pool raising “retail” equity has diminished. Institutional equity is very conservative, so private capital is taking advantage of Class A assets, many below replacement cost.

Looking at our pipeline, I’m expecting velocity to pick up pace in the 2nd half of the year as all those deals that traded in 2020/2021 have executed on plan or are forced to sell due to maturities.

Despite rent growth normalizing, and property tax and insurance increases, multifamily is still one of the most in-demand asset classes.

Let’s keep making win-win deals!

05/23/2023

Property Taxes are killer in Texas! Check out my latest article.

“Multifamily owners, the TAA, and local and state leaders must work together to find creative solutions. Through a cohesive effort, they can help ensure that all stakeholders can benefit from a fair and equitable tax system that supports schools and infrastructure while promoting long-term economic growth and stability.”

GREA's Mark Allen discusses the effect of rising property taxes on a sector already dealing with higher costs of capital and softening rent growth.

12/01/2022

Just Closed!

Previously listed by another firm, we procured multiple offers in a 10-day period. Ink’d a hard contract a week later with $500k nonrefundable. A bit of choppiness with the 10T yield jumping ~100bps within the first 45 days, but the transaction held and closed on time.

Congratulations to all parties involved helping to make this a smooth transaction!

12/01/2022

After over 40 years of ownership, our long time client engaged us to sell his last two market rate assets.

Congrats to TriWest Development / TriWest Multifamily on the successful purchase of two great value-add assets. Very efficient and sharp team that navigated the choppiness well, ultimately closing in 75 days.

12/01/2022

Dallas Rent Growth is Slowing, but Still Strong Historically

Looking at the trailing four months of year-over-year rent growth in Dallas-Ft. Worth, we can generally see a slowing across all years of construction. It’s also important to note that this four-month trend is coming out of peak leasing season and into the slow velocity season. I’ll be interested to recheck the trend in March and June of 2023 to see if it’s still on a downward trajectory. I’ve found that usually, 1960s/70s vintage lags 1980s and newer vintage; as 1980s and newer vintage starts to slow, 1960s/70s vintage outpaces and then begins to follow and slow. For example, at the end of 2021, we noticed 1980s – 00s construction had the highest rent growth as a percentage, and now it’s the 60s and 70s vintage.

As the media is hyping up negative rent growth across the country, we’re not seeing that in Dallas-Ft. Worth. Slowing down from 18% annualized rent growth to 10% growth is likely healthy; and remember, historical rent growth averages are around 2-3%, so even if we’re growing at 4-6% that’s well above the historical averages. Although the data isn’t shown in the report, ironically, the top submarkets for rent growth are in workforce housing locations with household median incomes below $50,00, such as: Bachman Lake, East White Rock/Buckner, North Irving, Lake Highlands, etc. The high rent growth in these submarkets is due to high sales velocity – As properties trade hands, new ownership is renovating properties and increasing effective and market rents.

*Full Report in Link Below*

https://grea.com/dfw-state-of-the-market-q4-2022/

11/03/2022

Some notes from Powell’s press conference:

- The FOMC hinted at more increases, higher than the current projections, but maybe at a slower pace. September Fed Funds rate terminal at high end of range at 4.9%. This will increase to 5%+

- Powell has stated multiple times he wants positive real rates across the entire yield spectrum. Assuming he’s speaking of Core PCE at 5.1% growth, that would be rates north of 5.1%.

- The Fed would prefer to over tighten to beat inflation, but he is willing to pick up asset purchases based if economic conditions deteriorate. They will be very transparent about it.

10/26/2022

SALE
IMAGE: Mark Allen
DATE: 10/25/2022
ADDRESS: 3706 W 8th St
MARKET: Dallas
ASSET TYPE: Multifamily ~ UNITS: 161

BROKER: Mark Allen - GREA


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10/19/2022

Lineup for the Owner Panel at our Annual Multifamily Forum.

Looking forward to seeing everyone this Friday!

10/19/2022

288-Unit Multifamily Development land site in arguably the best opportunity zone in Texas.

- Entitled multifamily site within an Opportunity Zone, allowing for tax incentives
- Ability to change the site plan, density, and layout
- Directly south of Heritage Ranch (a +440-acre mixed-use development)
- Massive employment and company expansion with Texas Instruments opening a new plant adding approximately 3,000 local jobs and shadow employers moving to the area
- Located next to major north-south and east-west corridors with easy access to retail, restaurants, schools and every day essentials

*Property Website Link in Comments*