The NRP Group is one of Texas’ most prolific multifamily developers: In the last 12 months it has opened 12 affordable and market-rate properties, totaling 3,680 units across the state.
As many developers take their feet off the gas this late into the cycle and focus on leasing up a wave of new product, NRP may up the ante in the next 18 to 36 months, especially in Houston and Austin, Executive Vice President of Development Dan Markson said.
“When you say cycle, I react like ‘I don’t care if it ends’ because the cycle is not who I’m aiming at.”
The NRP Group Executive Vice President of Development Dan Markson at Bisnow San Antonio’s multifamily event March 2016
NRP broadly aims for an even split between true affordable housing, moderate or mixed-income housing, and luxury, Markson said. That can skew about 10% market by market, year by year, often away from top-end product; for example, in the Dallas-Fort Worth area, NRP recently delivered two market-rate developments and is about to sign contracts on some affordable projects. Next down the pipeline in the Metroplex are some mixed-income projects, Markson said.
“Although we build for all income levels, from low to the highest-end luxury, our passion is housing those who are not housed by current product.”
Workforce and low-income housing is the most recession-resilient product line because jobs in that segment — cashiers, firefighters, teachers, etc. — don’t usually go away regardless of the economy, Markson said.
NRP’s most recent delivery, The Mercantile Square Apartment Homes in North Fort Worth, is indicative of the strategy behind the projects Markson gets most excited about, and in which he sees nearly insatiable demand as Texas’ population grows.
The 324-unit workforce housing property serves employees in the 24,000-job Mercantile business park, an area that only had one residential property. It is right in NRP’s sweet spot for size.
“We try to do 300-unit developments because they finance well, they market well, they buy out well,” Markson said.
Mercantile was built in partnership with the Fort Worth Housing Finance Corp., and NRP chose the site after balancing municipal planning, workforce demand, community support and financial pro forma, with an eye to locations with transit and high-opportunity schooling nearby, Markson said. It is renting about 60 units a month. The goal was to provide something sleek and cool, but cool for families, he said.
“We’re building high-style for the workforce.”
NRP’s next slew of projects includes a return to Houston. The company has a portfolio in the city but had paused all building a few years ago because it was having trouble understanding what was going on, Markson said. Houston was generating a ton of jobs, but were all the jobs in the volatile energy sector?
“Was there going to be a bubble? We weren’t sure.”
Then oil bottomed out, Houston lost jobs and the multifamily spigot was mostly turned off. That can be a bittersweet blessing for an affordable housing developer, Markson said, so NRP started carefully selecting some sites. Then Hurricane Harvey hit, destroying thousands of lower-end homes.
“The low-income demand in Houston is enormous. … We felt it was a very good time for us to get back in [to Houston] with some of our complicated financing platforms to achieve moderate income and mixed-income housing,” Markson said. “On the affordable side, recession is a friend. In a heated luxury market, no one wants to do affordable.”
NRP is underway on a senior housing project in Fort Bend County and it anticipates a big couple of years in the Bayou City. It has some developments under contract with a target groundbreaking in 2019 — Markson said he hopes to break ground on three Houston-area projects in the next 18 months. Through the next three years, he anticipates launching a luxury project or two, a couple of moderate-income communities (60% to 80% of area median income) and as many low-income properties as can get financing. (Federal dollars are involved, which makes this segment more uncertain.)
“On the low-income side there is zero vacancy, so if we end up being successful with five low-income developments we’ll probably do five,” Markson said.
Austin will also be a focus.
“I think we’ll see significantly larger-than-normal production for NRP in Austin in the next two years,” Markson said.
That is largely because Austin has a long lead time for development, and a few projects are finally making their way toward groundbreaking. NRP recently completed two luxury developments in the Capital City. It is starting to lease up its first new tax credit development there, and has one under construction and one about to launch. A mixed-income development is coming down the line, and a couple of luxury developments are also imminent.
San Antonio is NRP’s bread and butter — its office can deliver 12 projects a year, whether for itself or in fee management for others. It doesn’t hit that every year, but Markson estimates NRP has about 12,000 units in San Antonio, with about half of it delivered in the last five years. (“I never count, I think it’s bad luck,” he said.) He anticipates the scale to tip toward more affordable/mixed-income deliveries in the next few years, especially as San Antonio grapples with how to remain affordable as it grows, but he also said there could be a year coming up that NRP does more luxury product in the Alamo City than other property types.
“We can be responsive to seeing how the demographics are going to change and match our production,” Markson said.
NRP’s pipeline may look aggressive, especially when considering the plethora of units delivered in the last seven or eight years. But Markson isn’t deterred by the prospect of oversupply.
“Granted, there’s been a lot of production, but thus far, we’ve had matching job and population growth that has filled up pretty much everything we’ve built.”
CORRECTION, MAY 11, 2:11 P.M. CT: An earlier version of this story had the incorrect time frame for NRP’s last wave of development. It has delivered 12 properties in the last 12 months, not 18 months.