LAKE JACKSON, TX - The Villages at Lake Jackson, a Class A 174-unit garden apartment community, has been acquired by Drever Capital Management in a region short of rental housing where rapid growth is being fueled by Dow Chemical’s largest petrochemical plant in the Western Hemisphere.
The 96% occupied multifamily property at 504 South Texas 288, was bought by the Drever Capital Management (DCM) value-add PF Lightning Club Fund from Spyglass Capital Partners of Demarest, N.J. The price was not disclosed.
“This acquisition is a classic supply-demand investment,” says Noah Drever, managing partner of Tiburon, CA based DCM. “Houston, overbuilt with multifamily assets, is grappling with a weak oil industry. But an hour away, where Lake Jackson is booming with petrochemical manufacturing and a liquefied natural gas shipping hub, attractive rental housing is undersupplied.”
Drever said timing was fortunate. “One month after we went under contract, Dow Chemical and DuPont announced a $121 billion merger, generating a $4 billion development throughout the Gulf Coast. Dow Chemical is completing a 900,000 square foot office north of its plant and will be relocating 3500 new jobs to Lake Jackson where it already has 4300 employees. Freeport LNG is building a $14 billion facility that will add 3500 construction jobs and 160 management and operations positions. Plus, there’s a $2 million downtown revitalization project in the works. At the moment, the Villages is the only upmarket rental community in Lake Jackson.”
Adds Drever: “Being an apartment owner/investor in the epicenter of all this explosive growth is music to our ears.”
The new owner is launching an extensive property improvement program. The bulk of the renovation budget will be used to modernize the apartment interiors. The dated kitchen bar tops will be lowered to counter height with granite added throughout the kitchen and bathrooms. A stainless steel appliances, modern cabinets, plank flooring and two-inch wood blinds will be added.
Additionally, the exterior of the property will be freshened up with new landscaping, full exterior painting, improved lighted monument sign and by enlarging the pool area with two GE gas grills and resort-style pool furniture.
“Spyglass Capital did a great job during its ownership in maintaining the Villages to institutional standards and tastefully upgrading the clubhouse and common areas,” points out Drever. “We’re focusing on dramatically improving the interiors of the residences to compete with the newer apartment product coming on line as well as upgrading the landscaping and our visibility South Texas 288. We believe we’ll be the most affordable, desirable alternative to new construction in the marketplace,” he contends.
Tom Cabibi, who rejoined Drever Capital to head up acquisitions, worked with Ryan Epstein, senior managing director for Berkadia’s Houston office, brokered the transaction and represented the seller. Acquisition financing through Freddie Mac was arranged by Brant Smith, senior vice president of Berkadia Commercial Mortgage in Austin.
Epstein agrees Lake Jackson’s “recent transformation from small company town to high-growth petrochemical and LNG manufacturing and distribution center created a massive demand for upmarket rental communities and other forms of housing.
“There was also a tremendous demand from institutional investors nationwide when we marketed this property because the petrochemical R&D and manufacturing plants are bringing in thousands of construction and high-paying permanent engineering and management jobs,” says Epstein.
He says Drever Capital was selected because the firm’s founder-chairman “Maxwell Drever has a great reputation for getting an acquisition across the finish line and, on this deal, closed on time at the contract price.”
The seller says the timing of the sale was also perfect for him. Adam Cohen, president of Spyglass Capital Partners, says “we loved the supply-demand imbalance for the three-years we owned the Villages at Lake Jackson but it’s time to redeploy our capital.”
Cohen says 20 potential buyers made offers for the apartment community “but we liked Drever Capital’s the best. We also liked that their chairman, Maxwell Drever, personally flew down to visit the property. His track record as an apartment investor in Houston speaks for itself and his firm had sufficient equity capital to close per all the terms of the contract. As a buyer, they were flawless.”