“We think the New Braunfels market, in the next six to 12 months, is going to see undersupply."
steve may - Bridgeview president
Article Sourced from: SAN ANTONIO BUSINESS JOURNAL
November 14, 2023 – A Dallas developer is plotting a new apartment complex in New Braunfels and is raising capital by preempting potential turns in the economy.
During an online presentation, BridgeView executives told potential investors that economic indicators forecasted a drive in housing demand that would likely be met with a scarcity in supply because of current headwinds impeding new housing starts.
Because of declining occupancy, and rental rates, BridgeView founder and President Steve May said that multifamily starts are down across all Texas markets. But with the high rates of inmigration to the state, May said there is still an appetite for housing that is unlikely to be satisfied at the single-family level because of high interest rates, as well as low supply. That segment of the market, he said, will turn to multifamily product as a viable housing solution.
BridgeView Real Estate, a vertically integrated firm that includes its own acquisition, construction and equity arms, is in the predevelopment phase of Landhaus at Gruene, a 356-unit apartment complex in the heart of New Braunfels.
Renderings of Landhaus at Gruene Project - New Braunfels, TX
"We think the New Braunfels market, in the next six to 12 months, is going to see undersupply as these new units are absorbed and nothing else new comes on the market," May said.
In that case, projects like Landhaus that managed to get off the ground now would likely be there to meet that demand — and could even benefit from a rise in rental rates.
The firm also identified other barriers to entry for new product in New Braunfels.
Dru Guillot, BridgeView's managing director of development and construction pointed out that many cities are having trouble managing dramatic growth in new residents. In New Braunfels, impact fees, which are levied on new developments by cities to offset the cost of running new infrastructure to those developments, have risen commensurately to help the city manage that growth.
The problem is those impact fees can also dramatically ramp up development costs. He noted that per-unit land basis costs in New Braunfels went up from about $20,000-$25,000 to about $40,000 due to new impact fees.
356
17.068 Acres
Q4 2023
Rendering of BV's future development, Landhaus at Gruene
Rendering of BV's future development, Landhaus at Gruene
"Their impact fees were already exorbitant. Now, they've gone up 2.5 to 3 times the amount for all new developments," he said, noting the changes took effect for final plats recorded after January of this year. "Luckily, our deal was grandfathered in because we had our plat recorded."
With high borrowing rates, low occupancy rates and rental rate decline complicating matters, it's a challenge to get new apartment developments off the ground, said Guillot.
But that doesn't seem to bother the Dallas company, which has an apartment project currently under construction in its home city and, in addition to Landhaus, has another four projects in predevelopment set to begin construction between now and spring 2024.
The company also said it is managing costs by performing construction in house, which allows it to absorb unforeseen costs that have waylaid developers in other cities along Interstate 35.