Steadfast Income REIT Buys 6 Apartment Communities in Houston

 By Gail Kalinoski, Contributing Editor

Villas at Kingwood, Houston

Steadfast Income REIT, Inc., has acquired 1,692 apartments in Houston as part of a six-property portfolio deal that closed in two phases. It is the second investment in Houston in two months and one of many the REIT has made in Texas.

The Irvine, Calif.,-based multi-family REIT has now acquired 57 apartment communities with nearly 14,000 units in 11 Midwestern and Southern states for over $1.3 billion. Other states the REIT is active in are: Alabama, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Oklahoma, Ohio and Tennessee.

“Houston has always been on our radar screen. It was the perfect time to go in and scoop up those assets,” Ella Shaw Neyland, president of Steadfast Income REIT, told Commercial Property Executive.

“As the fourth largest city in the nation, Houston has not only sustained the effects of the recession but has continued to lead the nation into the recovery and growth period,” she said.

Citing the growth of the energy and healthcare sectors in Houston, Neyland said Houston had all the factors for their target markets – above average job growth, limited new construction, good quality of life, strong local and diversified economy.

She told CPE Steadfast carved out the central corridor of the country rather than go after assets in higher-priced coastal communities or urban infill locations.

“People overlook the flyover states,” Neyland added. “These really aren’t the flyover states now, they are the go-to states and Texas has been of the major beneficiaries of that.”

Neyland said Steadfast’s target markets include Houston, Dallas/Fort Worth and Austin, which are three of the five fastest-growing markets in the United States because they are cities where jobs are being created.

All of the properties in the Houston portfolio acquired Oct. 10 and Nov. 7 were developed by the manager and seller, Atlanta-based Davis Development, between 2004 and 2008. Five of the properties are in the Cypress and Champion submarkets in northwest Houston, and one is in the prestigious master-planned community of Kingwood in northeast Houston.

The price paid for the six Houston properties was not disclosed. Earlier in October, Steadfast said it paid $97 million for three apartment communities in Houston, Dallas and Nashville, its first in that city.

Steadfast represented itself in the latest transaction and ARA’s David Oelfke represented Davis Development.

Neyland described the apartment communities Steadfast acquires as aimed at moderate-income residents with an average monthly rent of $924. Some of the Houston properties acquired have average rents a bit higher, such as Carrington at Champion Forest, a 284-unit community in the Champions submarket with an average rent of $1,016.Villas of Kingwood, a 330-unit garden-style property in Kingwood has average rent of $1,140.

The other Houston properties acquired were all garden-style communities in the Cypress submarket: Villas at Huffmeister, Waterford Place at Riata Ranch, Carrington Place and Carrington Park.

Neyland told CPE that she believes multi-family investments, particularly in their target markets, will be strong into the future.

“For the next two to seven years the demand and the demographics will continue to drive the value creation of our apartments,” she concluded. “We feel really good about it.”