Pivotal Group Sells 3,000-Plus Apartments in West Texas

By Scott Baltic, Contributing Editor

An affiliate of the Pivotal Group, of Phoenix, has sold a 21-community, 3,128-unit portfolio of Class B apartments in West Texas to the Related Cos.’ Related Real Estate Recovery Fund, the parties announced separately on Wednesday. The purchase price for the private transaction was not disclosed.

Fourteen of the assets, totaling 1,751 units, are in Midland, Texas, and six, totaling 1,225 units, are in nearby Odessa. The remaining community, with 152 units, is in Longview, in eastern Texas, not far from Shreveport, La.

The properties were completed between 1974 and 1983, but reportedly had been extensively renovated after being acquired by Pivotal about two years ago, to the tune of about $13 million.

“Our strategy of investing in markets with strong economic fundamentals and adding value through thoughtful renovation worked well for us here,” Pivotal CEO Francis Najafi said in a release.

CBRE represented Pivotal Group in the sale.

A CBRE brochure for the portfolio touted the Midland/Odessa area’s 3.2 percent unemployment, driven by strong activity in the oil and gas sector; average household income of $157,000; 97 percent occupancy of multi-family housing; and the potential to substantially raise rents.

In a release, Related stated that it “expects to improve the portfolio by implementing institutional-quality management practices and investing significant capital to upgrade the properties.”

“With the exception of the past five years, the Midland/Odessa region experienced an extremely limited amount of new construction and capital upgrade investment since mid-1980s, creating a gap in the marketplace.” Justin Metz, managing principal of Related Fund Management, said in the release. “We seek to be a premier provider of institutional-quality rental housing in the area to meet the growing demand.”

Pivotal had acquired the portfolio in February 2012 on behalf of a joint venture between itself and an institutional investor, in the process assuming the then-existing Fannie Mae debt.