Gaia Bails on Texas multifamily, Invests in New York

New York’s Gaia Real Estate has exited Texas and dusted its hands, selling five Houston multifamily properties.

Gaia didn’t disclose the sale prices or buyer, though company co-founder Danny Fishman said it made three times its investment. It acquired the portfolio, which has a total of 1,376 multifamily units, in 2015. Capital improvements included renovation of amenities and “select units,” according to a press release.

The portfolio properties are for the most part in the Copperfield Place master-planned community in the Cy Fair area of Northwest Houston. “The Texas market is overpriced,” FIshman told The Real Deal in a Thursday phone interview. “There’s lots of demand and not much supply.” Gaia and Miami-based Starwood Capital jettisoned 32 multifamily properties in March — more than half of them in Texas.

The sale is part of Gaia’s exit from multifamily investments in the Sun Belt. In a LinkedIn post celebrating the Texas deal, Fishman posted that it “marked the sale of ~15,000 apartments in Sun Belt areas for ~ $1.5 Billion at what Gaia believes are overpriced markets.”

Gaia plans to “redeploy capital into New York City metro properties and elsewhere where we can realize higher returns,” Fishman said in the press statement. The strategy of “selling class B apartments at cap rates of 3%” has paid off, he added.

“Texas is doing well with migration and population growth and New York is not,” Fishman said of the shift. “We decided we’d make a huge profit [in the Sun Belt], and we’re investing in New York. We’re always working against the market”

The company is in contract to buy six multifamily buildings in “good locations” in New York, Fishman told The Real Deal. The completed deal would add to Gaia’s holdings in the city, where it recently bought three more properties. With the acquisition of nine buildings in six months, he texted, “it will be a nice comeback.”