Investors from Austin have recently snatched up two major apartment complexes in San Antonio, even as the local multifamily sector struggles with sagging rents and occupancy rates and as sales transactions are hampered by a limited supply of financing.
The Austin firm WayMaker Ventures bought the landmark Jones & Rio apartment complex on the River Walk across from the San Antonio Museum of Art at 111 Jones Ave. on April 19, Bexar County property records show.
On April 25, shell companies linked with Palladius Capital Management of Austin purchased Luxx, a 260-unit complex at 6023 UTSA Blvd. along the Leon Creek Greenway that caters to UTSA students nearby.
The purchase prices were undisclosed. The Palladius Capital shell companies borrowed $32.5 million from Metlife Real Estate Lending to buy Luxx, which the Bexar Appraisal District valued at $43.4 million this year, the county records show. WayMaker borrowed $13 million from Horizon Bank for the 191-unit Jones & Rio, which the district valued at $44.4 million.
Built in 2013, Luxx had been owned since 2019 by Preiss Company, a student housing investment firm from Raleigh, North Carolina. The prior owner of Jones & Rio, constructed in 2019, was a partnership between New York City-based Benefit Street Partners and New Jersey-based Strategic Properties of North America.
Struggling San Antonio apartments
After hitting record highs in 2021 and 2022, sales of local apartment complexes “plummeted” last year due to “financial constraints” — a factor also holding back the construction of new complexes, according to Austin Investor Interests, an analytics firm that studies the local market.
In the first quarter of this year, nine complexes with a total of 2,482 units changed hands, the firm reported, including the 424-unit Avasa at 1604, along Loop 1604 on the Northeast Side and the 352-unit Summit at Salado Creek, off Wurzbach Parkway on the North Side.
“This year may see an uptick in trades, as some investors look to sell in lieu of higher loan rates,” Austin Investor Interests said in its most recent market report, which does not get released publicly in full.
The occupancy rate for local apartment complexes dropped to 89.2% in the first quarter of this year — the lowest since the 2009 recession — from 89.5% the prior quarter and 91.3% in first quarter 2023, according to the report. The average rent per square foot was $1.41, down slightly from $1.42 the prior quarter and $1.49 in the first quarter of 2023.
Yet the report noted that the declines were smaller than those experienced in prior quarters.
“Could this signal a turning point for this Central Texas market? Let’s hope so,” the report said.
Landmark in north downtown
Jones & Rio is part of a cluster of class A apartment complexes that sprung up in north downtown San Antonio in the mid- to late-2010s, as developers flocked to take advantage of demand for housing along the newly-built Museum Reach stretch of the River Walk and near the Pearl, which was booming about a half-mile to the north.
Other complexes built nearby during that era include 1221 Broadway Lofts, Flats at River North and Augusta Flats.
Financial incentives offered through the city of San Antonio’s Center City Housing Incentive Program, or CCHIP — part of the “Decade of Downtown” inaugurated by Mayor Julián Castro in 2010 — also helped.
The city awarded Alamo Manhattan, the Dallas developer that built Jones & Rio, a $4.4 million package through CCHIP in 2015.
In the five years since Jones & Rio was built, north downtown has filled up further, even as the Covid-19 pandemic shook the downtown economy, setting back redevelopment efforts.
The area southeast of the San Antonio River has grown into a bar district while the six-story, 140,000 square-foot Soto office building opened on Broadway in 2020.
The stretch of Broadway in north downtown is now being reconstructed, with sidewalk, lighting, drainage, landscaping and other improvements, as part of a $43 million project that was part of the 2017-2022 municipal bond.
A partnership between local developer Hixon Properties and the Cavender auto family is working on plans to develop the area further.
They recently opened the Make Ready Market behind the Soto.
Meanwhile, the McCombs family is preparing to build a mixed-use neighborhood on a 5.9-acre parcel next to the SAMA, just down the street from Jones & Rio and across Interstate 35 from Pearl, which it bought from CPS Energy in 2023.
