With 338 units, the Encore SoFlo is one of the largest apartment buildings downtown. Along with Heritage Plaza across the street, it has breathed life into the area north of the H-E-B SoFlo Market where parking lots and black-windowed office buildings had once proliferated, offering little to residents or tourists.
About two years after it was finished, Encore SoFlo, 326 S. Flores St., now has a new owner. Strategic Property Investment, a firm with offices in Dallas and Austin that invests in multifamily properties, purchased it on Dec. 17 from its developer, Encore Multifamily of Dallas.
The firm’s co-founders and principals, Michael Becker and Sean Mabarak, declined to share the sales price, but the entity they formed to purchase the complex took out a loan of $51.9 million as part of the transaction, county property records show.
If it seems like San Antonio’s multifamily market is heating up, with investors buying large numbers of apartment complexes in downtown and beyond, the experience of Strategic Property Investment helps explain why.
Six months ago, the firm did not own anything in San Antonio, focusing mostly on the Austin and Dallas-Fort Worth markets. Then, in August, it bought the Southtown Flats complex near the Blue Star Arts Complex and the Birwood Heights Apartments on the North Side. Last month, along with Encore SoFlo, it purchased the La Mirage complex in the Medical Center area.
The firm hopes to at least double the number of properties it owns in the city this year, Becker said.
Last year was a good time to enter the market because a glut of multifamily units that had been built in the latter half of the 2010s had been largely absorbed, creating a healthy balance between supply and demand, the partners said.
The firm had been hesitant about buying Southtown Flats, but decided that the public works and infrastructure upgrades that are underway downtown, such as Hemisfair and the San Pedro Creek Culture Park, make the area desirable, they said.
For Encore SoFlo, they also cited the ongoing expansion of H-E-B’s Arsenal campus and the construction of the University of Texas at San Antonio’s downtown campus.
“We are just kind of bullish on San Antonio in general,” Becker said.
San Antonio’s practice of offering a 75 percent rebate on city property taxes is another draw, he said. It is “certainly a competitive advantage to attract investment dollars downtown. You certainly don’t see that in most markets,” he said.
In these types of incentive deals, the city in recent years has begun to allocate the other 25 percent of a developer’s city property tax bill toward its affordable housing fund. The deals also require City Council approval.
In the previous incarnation of this practice, a policy known as the Center City Housing Incentive Program, Encore SoFlo received an estimated $6 million package from the city in 2016—the seventh-largest package the city has ever awarded for an urban development project. That includes an estimated $4.5 million in a 100 percent city property tax rebate over 15 years that will now be transferred to Strategic Property Investment. This was before the city divided the city property tax rebate 75 percent back to the developer, and 25 percent toward the affordable housing fund.
There were several other bidders for Encore SoFlo; and Strategic Property Investment ended up competing with another firm from the Northeast, Becker and Mabarak said. One of the things that helped them prevail was that they already had experience in going through the process of transferring CCHIP incentives through their purchase of Southtown Flats, promising to make the transaction easier for the seller, they said.
Richard Webner is a freelance journalist covering Austin and San Antonio, and a former San Antonio Express-News business reporter. Follow him at @RWebner on Twitter