Central Texas Boutique Real Estate Investment Firm: Multifamily Operators
The term “Central Texas Boutique Real Estate Investment Firm” is the quick-hand version of how we describe our business, but it represents a philosophy deeply ingrained in our approach. If you throw that term in a search engine, you’re going to see a big variety of things come back at you that represent all the various components involved in any sort of Real Estate deal. You’ll probably see developers pop up. Money managers and equity groups. Maybe a REIT. Perhaps a property manager or two. And you’ll see firms representing all the different asset classes, from Office to Retail to Industrial to Multifamily.
Within the term Central Texas Boutique Real Estate Investment Firm, Wildhorn has certainly crafted our own distinct identity. We don’t just raise money, or manage investor relations, or asset manage. We do all of those things, but within the small slice of the space focused on residential housing units. In two words, we would say we are multifamily operators.
We love the art and science of crafting a new deal, in understanding the local landscape (political and figurative) supporting a business plan and in creating alpha for our investors. But we think all of that is only a start to having a good investment and project. What really makes or breaks a deal is the hands on operations. Getting into the weeds of the day-in and day-out nuance of leasing and turning units.
If you have followed us this year, you’ll notice the two deals we’ve put together are new construction development deals–a 313-unit garden-style apartment in San Marcos, and a 156-unit Build-To-Rent community in Lockhart. Those are decidedly not what we just spent the first three paragraphs above talking about.
The Natural Evolution as Multifamily Operators
I think the big question on everyone’s mind is: Does this mean we’re shifting away from our core identity as operators and pivoting into becoming a developer? To set the record straight – that is absolutely not the case.
These development projects are not a departure; they are a natural evolution of our identity as operators. In both cases, we’ve partnered with developers to create new assets from the ground up. While our partners handle the building and construction (ensuring our lessons learned from operating newly built assets are accounted for), we are responsible for the success of the asset. We manage the lease-up process and the day-to-day asset management over the lifetime of the investment.
Build-To-Core Strategy Defined
In the institutional world, this is known as the “build-to-core” strategy. It’s about constructing a project from scratch (“build”) and holding onto the stabilized property for the long term where you can generate stable and consistent cash flows–”core” type returns. Both of these new construction projects are meant to be longer-term investments. As you may know, we are long-term thinkers–and longer-term believers in Central Texas.
Where most development groups are looking to build an asset, get it leased up and sold, that is not the business plan for either of these deals. We are involved because that is NOT the plan. And we can add value in both the upfront design and operational phases of the business plan.
The Synergy of Build-to-Core Investments
Wildhorn remains a Central Texas Boutique Real Estate Investment firm. That is our backyard, and our core focus. Within that geographical sandbox, we want to have the ability to execute on assets and business plans that we have conviction about. These build-to-core investments align with that vision. For various reasons we have strong conviction about both deals and the associated business plan.
One common element is for both projects, our respective partner already owned the land and had completed entitlements, allowing for construction to start much quicker. They both represent exactly what we have been preaching–when we see a great opportunity present itself in Austin, San Antonio or the I-35 corridor in between, we want the ability to execute on that opportunity–whether that’s a value-add opportunity or an incredible site for future development.
Why Build-to-Core Investments Make Sense for Us
When it comes to these Build-To-Core type investments, we’re excited to add this business plan to our portfolio. As we’ve gone through the process of evaluating and putting two of these together now, here are the things that standout to us as being very attractive:
- Controlling Build Quality: When you build a property from the ground up, you can tailor the design, quality, and features right from the beginning. We are thinking about these as longer-term investments, so we weigh the upfront construction cost as much as the total cost of ownership and the impact to our future repair and maintenance costs as we operate the asset. Does it make sense to install a flooring product that will last 5+ years vs one that likely needs replacing in 2-3 years?
- Alignment with Construction: In both cases so far, we have a true partner for a developer. I can’t imagine us ever doing a deal like this where that isn’t the case. There is a shared vision for the business plan and time horizon for the asset. A shared and transparent budget. And alignment on how we all get compensated in the deal. That has helped strip out a lot of unnecessary costs, and allow us to have transparent conversations about budgets, material selections and other items that pop up. Big picture, we think that helps create some built-in equity into the asset. And really is the only way we’d want to enter into a new construction type deal.
As we look to bring on more of these types of projects into our portfolio in the future, we’ll continue to build on the list above. What we know today is that the way we are approaching the build-to-core strategy resonates with our ethos, and aligns to our vision for what a Central Texas Real Estate Investment Firm looks like.
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If you are interested in learning more about our build-to-core approach and Central Texas market outlook, please feel free to schedule a call with us here. We would be happy to connect.
A lifelong Austinite and UT graduate, Cooper has worked in a variety of roles in the commercial real estate space throughout his career in Central Texas. Most recently, Cooper served in a business development role for Heritage Title for over 9 years. His diverse background serving clients in a variety of roles is an ideal fit for his position at Wildhorn Capital, where he manages the company’s capital relationships and focuses on deal sourcing in Austin.
