A California-based multifamily investor, Sunstone Two Tree, recently completed a significant real estate transaction by acquiring the 384-unit Villas Del Paseo in the Westchase area of Houston. The acquisition, valued at $29 million, reflects Sunstone Two Tree’s commitment to expanding its presence in Houston’s high-growth markets.

Property Details and Seller Information

The apartment complex, located at 3030 Elmside Drive, was purchased at a rate of $75,500 per unit from the seller, Austin-based Thrive FP. Originally constructed in 1978, the Villas Del Paseo underwent renovations in 2015, as per information from the Harris Central Appraisal District.

Extensive Renovations Planned

Sunstone Two Tree plans to invest an additional $10.5 million, equivalent to around $27,000 per unit, for both interior and exterior renovations. These enhancements include the addition of dog parks, with the entire project slated for completion in the coming year.

Sunstone Two Tree’s Growth Strategy

Sunstone Two Tree, resulting from a merger between Sunstone Properties Trust and Two Tree Capital in the previous year, specializes in investing, developing, and managing rental communities. This acquisition aligns with their strategy to further establish their footprint in the dynamic Bayou City real estate market.

The company already holds 10 other properties across the Houston metro, including multifamily projects in Rosenberg, Conroe, Baytown, Dickinson, and Galveston. Notably, Sunstone Two Tree has an established presence in the Westchase region, having acquired the 282-unit Commons at Westchase in 2016, which experienced a significant increase in valuation after a 2018 remodel.

Westchase’s Unique Multifamily Landscape

While multifamily properties have been flourishing in Houston’s western and northwest markets due to a surge in population, Westchase stands out as an anomaly in the otherwise thriving West Houston market. Despite being one of Houston’s youngest enclaves, the neighborhood’s multifamily pipeline is dry, with no new units in development.

Westchase’s multifamily market maintains an 89 percent occupancy rate, consistent with Greater Houston’s overall rate. Interestingly, the area experienced a 1.1 percent decrease in rent prices year-over-year between the third quarters of 2022 and 2023, according to Transwestern. The neighborhood’s average effective rent hovers around $1,150.

Houston Multifamily Market Outlook

Greater Houston’s multifamily market is anticipated to perform well in the current year, despite signs of a slight increase in vacancy. The market is expected to face challenges with record-setting deliveries that may impact demand. However, Westchase’s unique position and Sunstone Two Tree’s strategic acquisitions position them favorably in the dynamic real estate landscape.

Projections for Houston’s Multifamily Market

In conclusion, the multifamily real estate market in Houston, particularly in Westchase, continues to evolve. Sunstone Two Tree’s recent acquisition and planned renovations signify confidence in the market’s potential. As the Greater Houston multifamily market navigates challenges, strategic moves and renovations may play a pivotal role in maintaining a robust and resilient real estate sector.