U.S. Southwest a happy hunting ground for Pure Multi-Family

Pure Multi-Family REITRUF.U – has a pretty simple operating philosophy: invest in quality multi-residential properties in good locations, and if possible, buy stuff that offers upside in rents and valuation with the application of better management, marketing and improvements.
A good example of the Vancouver-based REIT’s strategy can be seen in its recent US$17.5-million purchase of Laguna Luxury Apartments in North Dallas, Texas.
Situated in a gated community, the 156-unit property offers amenities such as “a state-of-the-art fitness centre, a resort-style swimming pool with large deck area, attached,  detached, and direct-access garages, 9' to 14' ceilings, crown molding, ceiling fans in all living and bedrooms, and full-size washer/dryer connections in all units,” the REIT noted.
 
“Laguna we feel actually has some real potential that hasn’t been tapped yet, so we will go about working on repositioning that asset,” said Stephen Evans, the REIT’s Chief Executive Officer.
The Laguna property’s biggest drawing card is its location, it sits astride a golf course, an advantage the property’s former owner did not take proper advantage of, said Evans.
“The management has not really taken full advantage of the fact that the suites overlook the golf course,” he said. “It has also not been terribly well managed in our opinion so we are going to try and rebrand it and bring a new identity to the site.”

Images of the Laguna Luxury Apartments from the Pure Multi-Family REIT website.
Pure Multi-Family affiliated with Sunstone
Pure Multi-Family REIT is currently the only publicly traded vehicle in Canada which offers investors exclusive exposure to U.S. multi-family real estate assets. It’s sweet spot is properties in the $10 million to $60 million range built or refurbished in 1990 or later with low vacancies.
Launched through a July 2012 IPO, Pure Multi-Family is affiliated with U.S. based Sunstone Realty Advisors Inc. and its management led by Darren Latoski and Stephen Evans. Latoski and Evans are principals of Sunstone Realty Advisors as well as being Co-CEO of Canadian listed Pure Industrial REIT.
At the time of the IPO, Sunstone had identified, acquired, managed and divested approximately $1.2 billion in income producing real estate in Canada and the United States over a 10-year span, including over $200 million in nine U.S. multifamily real estate properties acquired since 2008.
Complementary Portfolio
Laguna represents the seventh property holding for Pure Multi-Family. It stands out for its golf-side location but has a lot in common with the other properties beyond its Texas location.
“They all tend to have very nice amenity packages, much than you would see in any of the apartment communities in Canada. That is the beauty of the space within the southwest or the U.S. as a whole,” Evans explained.
“The markets that we are in, there is really no rent control. So it permits developers to provide product that renters want and are willing to pay for and you get clubhouses and large pool areas.”
The REIT looks to boost rents further by adding tenant-friendly touches such as outdoor kitchens (gas grills by the pool).
Yuppies in Texas
The REIT’s target market is comprised of young professionals who tend to rent a little longer in the U.S. than they do in Canada.
Part of that is a result of the availability of more upscale rental product of the type Pure Multi-Family is interested in, as well as the fact that there is a large segment of the renting population who have an itinerant professional life. “There is a more transient population in the larger cities in the U.S.
Somebody might be living in Chicago for a couple years then they get transferred to Dallas and then they transfer to Atlanta. They kind of hold off buying until they reach that upper management level.”
While the REIT is concentrated wholly on the state of Texas currently, the management team headed by Evans and Executive Chairman Darren Latoski also run investment funds that hold multi-residential properties in Phoenix and Houston.
“It is a natural for us to focus on Houston and Phoenix and a couple of the other southwest markets in short order,” said Evans. “That will be the next sort of focus areas for us at Pure Multi.”
To date, Pure Multi-Family has not purchased any assets from within its corporate “family” of funds, but that could soon change, said Evans. “The funds that we have are actually nearing maturity so we will likely look to be selling those assets this year. In that case we’re happy to buy them within Pure-Multi and the beauty is we know them completely.”
Growing through that pipeline acquisition strategy will require a third-party fairness opinion, said the REIT’s CEO. The portfolio includes 694 units in two properties in Houston in two apartment complexes and two similar-sized properties in Phoenix.
As well, the REIT will look to acquire properties one by one in a “robust” U.S. market, said its CEO.
“Our intent will be to continue to grow within Dallas, but focus on Houston, possibly San Antonio and Austin. Those markets are all growing very robustly. A little bit of an overexposure to Texas but I am happy about that at the moment because it is one of the strongest economies in the U.S. Overtime, we will have a much more diversified platform.”>
Plenty of buyers and sellers
One advantage for the REIT in the U.S. southwest is the prevalence of vendors and the absence of a dominant set of big acquirers. REIT ownership in the apartment space is comparatively low, about 20%, according to the REIT’s CEO.
The U.S. is also an acquisition-friendly market, compared with Canada, he noted. That’s due to tax laws that allow for the sale of properties without paying capital gains provided that capital gains from a sale are deferred provided that they are re-invested in a timely manner.
“The asset management groups, the people who are paid to do management on behalf of pension funds and such, they don’t hesitate to shuffle their portfolio around,” he said. “There is a constant supply of opportunities. There are just way more transactions. For us, that is perfect as a growth vehicle.”


Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

Read more

Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

Read more





Industry Events