A Chicago-based real estate funds manager has bought a 300-unit apartment complex in suburban Dallas as the first deal in its new program offering tax-advantaged investments, with 65% of the equity already lined up from individual investors paying as little as $250,000 each.
Origin Investments said in a statement it has completed the purchase of The Starling apartments in Princeton, Texas, in the northeast suburbs of Dallas.
The sale’s completion comes about three months after Origin said it was working on a Dallas-area acquisition to launch its Origin Exchange investment program. The specific property was not identified at the time.
By securing commitments for nearly two-thirds of the equity ahead of the deal’s closing from more than 20 investors, Origin said it has demonstrated that its deal structure will work.
“We are excited to kick off our Origin Exchange program with an acquisition of this caliber,” Michael O’Shea, a vice president at Origin Exchange, said in the statement. “This institutional-quality property meets the demands of 1031 exchange investors seeking to transition out of active management and into a professionally managed asset that maximizes long-term investment returns.”
A sale price for the property at 149 Princeton Crossroad was not disclosed.
Texas is a nondisclosure state. The property’s price tag was not immediately disclosed; however, it was last appraised for $66.7 million for the tax rolls by county appraisers.
Tax benefits
Origin is joining an increasing move toward using Delaware Statutory Trusts, or DSTs, as a way for investors to reinvest capital gains from previous investments into new properties. The minimum is a $250,000 investment.
Programs such as the one launched by Origin allow investors to own small or large stakes in a property or broader portfolio, reaping the benefits of a 1031 exchange investment — named for a section of the U.S. tax code, and involving quickly reinvesting profits into new acquisitions — without having to actively manage properties.
DSTs are another way to line up equity for acquisitions at a time of high interest rates and other challenges that have slowed deal volume throughout the country.
Chicago-based Origin said its offering provides passive investments without high fees seen in many DST offerings.
“The 1031 exchange market is riddled with sponsors who charge outrageous fee structures, and our goal is to give investors a better option,” co-CEO David Scherer said in the statement. “Our mission is to enhance the lives of everyone in the Origin community, and that starts by creating products that protect and grow wealth for our investment partners. This is why entering the 1031 exchange space is an easy decision.”
Target markets
Origin said it plans to continue buying residential properties in high-growth markets such as Dallas, Atlanta, Denver, Houston and Las Vegas as part of its DST offering.
The Starling was completed in 2022 by Cleveland-based NRP Group. That firm did not respond to a request for comment from CoStar News.
The Texas property includes 11 three-story, garden-style buildings on 12 acres, with amenities including a resort-style pool, grilling areas, clubhouse, kitchen and dining areas. It was 92% leased at the time of the purchase, with an average in-place rent of $1,542 per unit and strong rent growth projected, Origin said.
It was the first acquisition of an existing apartment property since early 2020 by Origin, whose funds in recent years have focused on investments in ground-up developments.
“This was a great opportunity for Origin, in keeping with the caliber of assets we’ve been developing for the last four years,” Phil Schuholz, vice president of acquisitions at Origin Investments, said in the statement. “The acquisition was made below current replacement costs, and an even greater discount to replacement from two years ago.”
CoStar News reporter Candace Carlisle contributed.