Lionstone shows faith in Houston multifamily with River Oaks buy

High interest rates didn’t stop Lionstone Investments from snatching a luxury apartment building in Houston’s River Oaks district.

Local firm Lionstone Investments has acquired the James, an eight-story, 344-unit complex at 2303 Mid Lane, from a venture of Dallas-based StreetLights Residential and Stonelake Capital Partners, the Houston Chronicle reported. 

While a sale price was not disclosed, Lionstone believes the price it paid is less than what it would cost to develop a similar apartment building due to factors such as high construction and land costs.

“This investment gave us the opportunity to purchase a newer Class A apartment building at a substantial discount to replacement cost, at a time when there will be a historically low supply delivered into this prime inner-loop location,” Lionstone’s Bailey Jones told the outlet.

The James is 94 percent leased, with monthly rents ranging from $1,325 to $3,890. Amenities include a private full-service bar, a pool, clubhouse and fitness center.

StreetLights and Stonelake developed the James for an estimated $100 million. The complex, which opened in 2016, is part of a mixed-use development that includes an adjacent 17-story apartment building, called the Ivy. The developers, along with lender Texas Capital Bank, still own the Ivy.

The sale comes at a time when many multifamily investors are steering clear of acquisitions amid high interest rates. Apartment sales in Houston totaled $210 million in the first quarter, a significant drop from $320 million a year prior, the outlet reported, citing Transwestern. 

Yet, Lionstone is optimistic about the future of Houston’s rental market. With the current pace of demand, the firm estimates that the under-construction apartment units in River Oaks could be fully leased within two years.

Separately, Lionstone turned heads last month when it sold the two-building Jones on Main office complex, which includes the 34-story JPMorgan Chase Building, in downtown Houston.

—Quinn Donoghue 

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