Bank OZK has provided a $42 million debt facility for Anthem Development, a newly formed multifamily development-focused subsidiary of Beck Properties, with an aggressive proposal for a planned apartment project that offered better than expected pricing and proceeds.
The transaction provides a snapshot into the pace and depth of liquidity for multifamily properties in the supply constrained Dallas Fort-Worth metro, where Anthem is set to break ground on Miles One 90, a planned 389-unit apartment complex, said Steve Yazdani, a managing director at Nova Capital, which arranged the financing.
“On the debt side, [competition drove down pricing] by at least 100 basis points and the leverage was increased by at least 5 percent,” Yazdani told Real Estate Capital USA.
The story is bigger than Miles One 90, with Yazdani noting exceptional demand for projects in the Dallas-Fort Worth metro.
“We’re already talking to the [equity partner] about financing two or three other deals in [Anthem’s] pipeline, so it’s really about programmatic relationships – they’re already in preliminary stages of underwriting other similar transactions,” Yazdani said.
In addition to the Bank of OZK, Nova also lined up an institutional partner that provided 90 percent of the equity in the project at 4201 Bunker Hill Road. Anthem, which Yazdani said is looking for a three- to five-year exit, is slated to break ground on the apartment complex fronting Highway 190 at the end of this year and anticipates the project will open in 2023.
According to Yazdani, Nova Capital and Anthem shopped the equity and debt tranches for the project for approximately two months. But the managing director said the deal is merely a reflection of the pace of the multifamily market throughout the Dallas Fort-Worth metro. The undisclosed institutional equity partner has an AUM of more than $6 billion.
“In the last year – depending on which publication you read – rent growth is anywhere from 15 percent to 19 percent year-over-year,” Yazdani said. “The institutional capital, equity and debt, they’re all aware of the significant activity in these growth markets with obviously Dallas being at the top of that list.”
The 11-acre project will include four four-story buildings with resort style pools, two 24-hour fitness centers totaling 3,500 square feet and community amenities such as a coffee bar and outdoor kitchens, to name a few.
The bigger picture
According to the Federal Reserve Bank of Dallas, the pandemic initially destroyed nearly 1.5 million jobs in Texas. However, over 91 percent of those jobs were recovered by October.
The Dallas Fed’s Texas employment forecast predicted a 5.1 percent growth in employment in 2021. And according to the office of state comptroller Glenn Hegar, employment in the Metroplex region rose by more than 25 percent from 2009 and 2019 prior to the coronavirus pandemic.
Apartment occupancy in the Dallas Fort-Worth metro stood at 93.5 percent as of December according to ApartmentData.com.
While the overall metro has seen rent growth approaching 21.2 percent, rent growth statistics differ across the entire metro. As of December, rent growth statistics broke down as follows:
- The North Central Dallas and Upper Greenville submarket saw annualized rent growth increase by 25.6 percent.
- Annualized rent growth at the end of November in the West Lewisville/ Flower Mount and East Plano/Richardson submarkets stood at 27.4 percent and 25.1 percent, respectively.
- The largest increase in annualized rent growth in the metro area occurred in the Far North Dallas/Collin County submarket where rent growth reached 30.8 percent at the end of November.
ApartmentData.com reported 44,944 units were absorbed in the metro area in the past 12 months while a total of 19,600 units across 70 communities are under construction as of December. A total of 70,444 apartments have been proposed in the metro as of December.
Haley Crimmins, a manager for Real Capital Analytics based in New York, wrote in May that the Dallas metro saw construction starts grow by 24 percent from Q2 2020 to the first quarter of 2021 and that the city, at the time, was the top market for office, industrial and hotel starts in the covid era.
The majority of conventional loans originated in Dallas in the first half of 2021 were originated by government agencies (26 percent), regional banks (18 percent) and private investors (18 percent) according to RCA.
The US Census Bureau reported the population of the Dallas-Fort Worth-Arlington metropolitan area experienced an increase exceeding 20 percent from 6.4 million in 2010 to 7.6 million in 2020.