Apartment investors bet on Houston as rents rise

Multifamily investors are expanding their portfolios in Houston as rents rise.

Rents for apartments in the Houston area rose 9.8% year on year in June to an average of $1.40 per square foot, according to Houston-based ApartmentData.com. Strong increases are stabilizing after climbing 10.5% in May and nearly 14% for all of 2021.

Fogelman Properties, a Memphis-based investment and apartment management company, has acquired The Moorings, a 201-unit waterfront apartment community at 601 Enterprise Ave. at League City. The purchase is part of a plan to acquire $300 million in multi-family assets in 2022.

Across the country, investment in apartments rose 22% in May compared to May 2021, according to a Capital Trends report from New York-based investment information firm MSCI Real Assets. Commercial real estate investment for all property types, meanwhile, was up just 3% on the year in May as inflationary pressures and rising interest rates slowed deal volume.

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The Moorings, where newly renovated units range from $897 to $1,565, is 95% leased. The property features waterfront views, a 24-hour fitness center, and a resort-style pool.

“With access to top employers and school systems, as well as restaurants and entertainment, the community is well-suited to access boating and recreation literally at your doorstep,” said Mike Aiken, Vice President senior investment manager at Fogelman. “As active investors and seasoned property managers, we look forward to expanding our footprint in the Greater Houston area.”

Founded in 1963, Fogelman operates 96 communities in the Southeast and Sun Belt regions, including The Retreat at Steeplechase and Artesian on Westheimer in Houston.

In the Katy area, Sentinel Real Estate Corp., a New York-based company that made its first Houston apartment acquisition in 1971, acquired The Retreat at Cinco Ranch, a 268-unit complex at 3306 S. Fry Road . The property was sold by a partnership of BRT Apartments Corp.

The acquisition follows Sentinel’s purchase of 3000 Sage Apartments in November.

“This property offers the opportunity to acquire a multi-family asset in a high-growth market with strong long-term growth prospects and significant barriers to entry,” said George Tietjen, Sentinel’s chief executive.

Built in 2008, The Retreat at Cinco Ranch contains 12 three-story apartment buildings with units ranging from one to three bedrooms averaging 943 square feet. The resort’s first floor underwent a substantial renovation in 2019, and upgrades are planned for the remaining 172 units.

“As a planned community that opened in 1991, Cinco Ranch is fully built and well insulated from new supply additions,” Tietjen said. “Rental rates in the submarket have grown an average of 4.6% per year over the past five years.”

Over the past 50 years, Sentinel has owned and managed 35 properties, including 27 apartment communities, valued at over $1 billion in the Houston market. Its current Houston apartment portfolio has 1,290 units across four properties, including The Lodge at Cypresswood Apartments and Everlee Apartments.