9850 South Kirkwood, Houston, TX
Completion Date: 2013
Net Rentable Area: 209,456 S.F.
Number of Buildings: 22
Asset Type: Multifamily
Kirkwood Landing Apartments is a 264-unit, garden-style apartment complex located in Houston, Texas. The property consists of 22 two-story buildings, featuring two swimming pools and three laundry rooms.
The property is located within the Alief submarket near the intersection of South Kirkwood Road and Bissonnet Street, approximately 21 miles southwest of downtown Houston along U.S. Highway 59. The Sam Houston Tollway is approximately one mile east of the property.
In 2012, Ytech conducted an in-depth analysis of the submarket’s fundamentals and economy, paying special attention to private consumption, which had remained strong throughout recent years. The research also indicated that households had successfully deleveraged and improved their balance sheets. Metro-wide, the vacancy rate was expected to remain near its lowest level in decades, providing sufficient leverage for local apartment owners to capitalize strong rent growth.
Ytech concluded that the combination of reasonably restrained supply growth and expanding payrolls would support a stronger apartment market in the upcoming years in the area. Despite any volatility in oil prices, Houston’s economy was poised for modest growth with support from healthcare, downstream energy and business/consumer services to support a growing population.
Due to the aforementioned, Ytech International secured a commercial mortgage-backed securities (CMBS) loan and acquired this asset in 2013.
Ytech completely redeveloped the property through capex infusion of almost $3 million and leased the units until stabilized occupancy was achieved. Its redevelopment plan involved major exterior rehabilitation, roof and HVAC replacement and interior renovations, all of which were completed in January 2014. In addition, the company rebuilt several buildings that had been destroyed by an accidental fire prior to the acquisition. Currently, the property is at 96 percent occupancy.
Previously, the property rental rates were below market average resulting in a considerable loss to lease at the time of acquisition. Ytech realized that there was significant intrinsic value and upside potential in this property as it is located within a submarket that is heavily governed by the healthcare industry. Due to the site’s condition, the former management team had to offer lower rental rates. After completing the redevelopment process, Ytech was able to increase the property’s rental revenue with above-market rents, a completely re-built rent roll and a 28 percent net operating income (NOI) increase.