An estimated $2.77 billion in multifamily and commercial real estate involving 2,139 properties was sold in the San Antonio metro area from Jan. 1, 2017, to Aug. 6, 2018, according to data from CoStar Group.
The makeup of buyers and sellers is as diverse as the types of properties changing hands, and their reasons say much about where the local market is and where it’s heading. On the buying side, there are investors such as brothers Jeff and Rami Kotel, co-founders of Woodland Hills, California-based Kotel Investments. Since 2017, the Kotels have bought 14 retail, office and industrial properties across San Antonio, worth roughly 11.5 million, according to the Bexar County Appraisal District. Other buyers such as Chicago-based Sherman Residential spent an estimated $100 million to buy the 308-unit Axis at the Rim and the 399-unit Pecos Flats.
Not only has San Antonio attracted buyers from more than half the states in the country and every major market in Texas, but also international investors. Since 2017, Vancouver, Canada-based Western Wealth Capital bought three apartment complexes for nearly $64 million, and even local companies are making some big investments, like newly formed Kairoi Residential, which bought a 1,210-unit apartment portfolio that was appraised at $48.1 million.
Real estate’s predicable life cycle also means that most buyers will eventually become sellers, as will builders. San Antonio has seen many developers sell newly built properties recently, including local developer Embrey Partners, which sold three apartments that were last appraised for $134.8 million or Atlanta-based Robinson Weeks Partners and Albuquerque, New Mexico-based Titan Development, which sold two properties at the Enterprise Industrial Park for $52.1 million. And buyers who came to San Antonio seeking value-add properties have invested in improvements, stabilized occupancy and moved onto new opportunities, like local investment firm Redrock, which sold the Highpoint Towers for an estimated $31.5 million or Santa Ana, California-based NNN Apartment REIT Inc., which sold two apartments that were apprised for $58.6 million.
The numbers
As San Antonio’s image has grown on the national stage, so too has the volume of its real estate transactions.
The number of commercial and multifamily transactions in San Antonio has more than doubled in 10 years. From Jan. 1, 2007, to Aug. 1, 2008, before the recession, there were 1,044 commercial real estate transactions in San Antonio, according to CoStar Group, representing a sales volume of roughly $1.08 billion. Current numbers show that retail transactions alone outpaced all sales a decade ago, with 1,093 properties sold in the last year and a half. These retail transactions accounted for roughly $453.6 million and 9.4 million square feet of property. While multifamily accounted for the least-sold property type from 2017 to 2018, only 227 transactions, it accounted for a vast majority of the sales volume during that period and alone outpaced the total sales volume from 2007 to 2008 of roughly $1.6 billion.
Why value-add investors are buying in San Antonio
Commercial real estate buyers, regardless of the types of property they’re seeking, generally fall into two categories: the value-add investor and the core investor. Value-add investors are generally looking for more affordable, perhaps older product that can be improved to maximize their investment.
“There’s no question that the largest buyer pool today in San Antonio is chasing value-add properties,” said Matt Michelson, managing director for ARA, A Newmark Company.
Several notable buyers, such as Kotel Investments, have chosen San Antonio because of the value-add opportunities the city presents.
“San Antonio has always been good for us,” Jeff Kotel said in May. “Everything we hear [about San Antonio] is always positive news, and while it’s not as fast of a market as you’d see on the West or the East, you also don’t really have to worry about downturns.”
Other buyers, like Western Wealth Capital in Canada, have begun investing in the San Antonio market because of its low risk and potential for growth. Since November, the company has bought three apartment complexes: the 204-unit Sereno Park, the 276-unit Brynwood Apartments and the 296-unit Sedona Canyon.
“We believe San Antonio is at a perfect intersection, providing the lowest investment risk and the longest runway for opportunity,” Western Wealth Capital co-founder and CEO Janet LePage said last year. “In terms of timing and potential, San Antonio is at an excellent entry point to create scalable growth.”
Why core investors are buying in San Antonio
As many value-add investors as San Antonio attracts, the city has also seen its share of core investors recently. These buyers seek the best and flashiest properties, often those that have been recently built and are stabilized. These sales typically make headlines due to their prices. In mid-2017, Suffern, New York-based Castle Lanterra Properties bought the 349-unit Agave Apartments in Southtown, which was appraised at $72.5 million. Castle Lanterra Properties founder and CEO Elie Rieder said San Antonio’s growing reputation and economic strength helped make her decision to invest here.
“San Antonio has emerged as one of the strongest multifamily markets in the country due to its exceptional economic and population growth,” Rieder said last year. “In Agave, we identified a best-in-class property that fits perfectly with our strategy of complementing our existing value-add portfolio with stable core urban assets in irreplaceable locations. We will continue to pursue opportunities in both asset classes.”
And San Antonio doesn’t just provide opportunities for core multifamily buyers. Last year, USAA Real Estate Co. bought the $88 million Bank of America Plaza downtown from a pair of investors from the Northeast, and the Business Journal recently reported that New York City-based private equity firm Blackstone Group LP is under contract to buy San Antonio’s most expensive property, the 644-acre JW Marriott San Antonio Hill Country Resort & Spa, for a nearly $650 million.
“Overall, our investment strategy has been to target high-quality, well-located assets, and we do know that this is one of the premier buildings in San Antonio,” said Samira Bitar, senior director of marketing at USAA Real Estate Co., about the Bank of America Plaza in August 2017.
