S2 Capital, a Dallas-based multifamily investment manager, has acquired Timber Creek, a 352-unit apartment community in Charlotte, N.C., from NexPoint Residential Trust Inc. for $49 million. The purchase is the firm’s fifth purchase in the city and eighth property in the state.
S2 is rebranding the property at 1100 Falls Creek Lane as The Marley. The company plans to make exterior renovations to the buildings and outdoor amenities, as well as upgrade unit interiors.
As of Dec. 13, the property was 95.17 percent leased with a weighted average effective monthly rent of approximately $1,202, according to NexPoint. When the REIT released its third quarter results in late October, it announced that Timber Creek was under contract for $49 million and expected to close by the end of this year. At that time, it didn’t identify the buyer.
Completed in 1984, the property is located in the Collingwood neighborhood, 6 miles southwest of downtown Charlotte. Timber Creek has studio, one- and two-bedroom floorplans ranging in size from 407 to 847 square feet. Unit features include stainless steel appliances, large closets and smart thermostats. Community amenities include an outdoor swimming pool, grilling station, clubhouse and fitness center, dog park and nature trail.
The property is convenient to several shopping centers, including the SouthPark Mall, and there are other nearby options for shopping, dining and entertainment. Timber Creek is also close to the Lynx Blue Line light rail system that runs throughout Charlotte. Charlotte Douglas International Airport is less than 8 miles away and the property is also near I-77.
Charlotte has seen strong employment growth across industries, with major employers including Amazon, Atrium Health and Bank of America. There are also 12 colleges and universities in the metro region providing jobs and educational opportunities.
These solid underlying fundamentals and Charlotte’s growth trajectory contributed to S2’s acquisition of Timber Creek. Davey Leach, S2 vice president of acquisitions, said in a prepared statement the firm targets high-growth markets across the United States.
In October, S2 acquired two multifamily properties in the Dallas-Fort Worth metro. One of the properties, the 642-unit Silverbrook community in Grand Prairie, Texas, was also acquired from NexPoint. In a separate transaction, S2 purchased Falltree, a 126-unit property in Mesquite, Texas, from an undisclosed seller.
NexPoint Disposition Strategy
The sales of both Timber Creek and Silverbrook for $70 million are part of NexPoint’s ongoing disposition strategy as it attempts to unlock liquidity so it can improve its balance sheet, repurchase shares and/or pay off higher property-level debt to be used for future growth, according to Matt McGraner, chief investment officer of the Dallas-based multifamily REIT.
McGraner said in a prepared statement the sale of Timber Creek was part of the REIT’s strategic objective to exit lower growth legacy assets in Charlotte, Dallas and Houston and to pay off the most expensive debt capital.
Timber Creek was acquired for $22.8 million in September 2014 and the company completed an extensive repositioning and value-add initiative. During its ownership period, NexPoint improved the common area amenities and a significant portion of the unit interiors. The REIT stated net proceeds of the sale were approximately $24.5 million, delivering a trailing nominal tax and insurance adjusted cap rate of 5.01 percent, a 25.80 percent levered internal rate of return and a 4.45x multiple on invested capital, which all exceeded expectations. NexPoint used the net proceeds to make a $17 million paydown on the company’s corporate credit facility. The paydown reduces the drawn balance on the facility to $24 million, a 92.8 percent reduction from September 2022.
At the same time it announced the planned sale of Silverbrook in August, NexPoint also said it had entered into an agreement to sell Old Farm, a 734-unit residential community in Houston, this year. Other properties set for disposition by the end of this year or in early 2024 include Stone Creek at Old Farm Apartments in Houston and Radbourne Lake in Charlotte.
