The Eagle Ford shale, located about halfway between San Antonio and Brownsville Texas, is more than 400 miles long. Three years ago, energy companies were shuttling drillers about two hours each way to small-town sites along the line. That’s when San Diego-based DWOLV started seeking opportunities outside of its home town and zeroed-in on the area, buying Class C, value-add properties to rehab.
“Around that time, the first of the shale plays in Texas really began to blossom,” says Gary Bethel, principal with the San Antonio, Tx.-based Beach Project Management. “Now you’ve got drilling, you’ve got pipelines, you’ve got big tanks that are showing up all over the place. You’ve got people doing all manner of things to establish an infrastructure and a network permanently for this 425-mile stretch of oil field.”
Most energy companies were renting out entire hotels for its staff. So DWOLV teamed up with Logistics International, a remote locations hospitality company, to match workers with apartments leased by their employers, the energy companies. This was a huge step-up from the ever present “man camp,” where workers housed themselves in makeshift tents.
DWOLV was able to increase rents for their units, and lease beds out individually to residents. A two-bedroom apartment which normally went for $700, quickly increased to at least $2,100 monthly, as the furnished bedrooms were leased on a weekly basis.
The best part, Bethel adds, is in many cases, the leases are purchased by the energy company itself. That means you don’t have to collect checks from each tenant, nor pull extensive background and credit reports. Instead, the lessee is a corporate entity, liable for the lease even after the employee changes, providing one check for multiple beds.
“It’s an entirely different dynamic, not only on your revenue stream, but how we go about prepping and maintaining property and doing property management,” Bethel says.
The model of employer-leased apartments is especially effective in these boomtowns, he adds, where you’re catering to a demographic that doesn’t need all of the bells and whistles of a full apartment.
Over in the Western part of Texas, the oil-rich Midland-Odessa region is also attracting a lot of attention from multifamily players. Kirkland, Wash.-based Weidner Apartment Homes long ago staked its claim there, paying around $10,000 to $15,000 per unit in the mid-1990s. The company also owns property in energy hotbeds like Alaska (44 properties, 4,758 units) and Canada (44 properties, 6,472 units).
Weidner now has 26 properties in its Texas portfolio, 20 of which are in Midland-Odessa. It’s moving to develop new product with higher quality to answer the booming demand, with three new communites built there in the last five years, and one more under way.
And a well-heeled competitor recently moved into the market. New York-based Related Cos. recently purchased a 3,000-unit portfolio in the Midland-Odessa region, worth about $300 million, according to New York-based research firm Real Capital Analytics. The company is reportedly in talks to develop in the Bakkan-shale region as well.
-Linsey Isaacs is an assistant editor with Multifamily Executive magazine. Follow her on twitter @LinseyI to continue this conversation.