Identifying & Evaluating Investment Opportunities
As you likely know at this point, at Wildhorn Capital we call ourselves a Boutique Real Estate Investment Firm. We are a multifamily operator, and we focus in our backyard of Central Texas. If you are new here, first off welcome—and you can find many articles in our archives speaking to our thoughts on all of the above. Over the past year, we jumped into the development space as well, breaking ground on two new-construction assets that we are building with development partners.
Over the last couple of months I have had multiple conversations with investors, partners and potential employees where we’ve been asked “what are your growth goals” or “what does your 5-year plan look like”? (I think when the economy and real estate market are depressed, everyone is thinking about big picture, long-term topics—partly because the short-term isn’t really fun to live in). I always answer that question the same way. “We don’t set growth goals”, and “I’m not sure what our 5-year plan looks like.” These are not flippant answers, and reflecting on my time in Business School they are certainly questions we think about. A lot.
But we have never set any sort of growth metric or target to the business. I find it a little silly to write down a goal that says “Buy 2,000 units this year”, or “Have $1 Billion in Assets Under Management”. Once you have a goal like that by which you are measuring yourself and your team, the focus of the company shifts. Everyone is pushing towards the goals that we’ve laid out, and in doing so you start to change the culture of the company. Stretch to buy deals and make an underwriting make sense because we’re behind on our growth target. Looking at the numbers on the wall and not thinking about each asset individually.
Boutique Real Estate Investment Firm Focus
Rather, I always answer that question like this: “our goal is to be able to execute and capitalize on any real estate opportunity we have conviction about.” That keeps the focus on the deals. That is our North Star. Whether that means we are a company of 5 people or 20 people, or that we have an AUM of $500mm or $5B—none of that is how we are keeping score or measuring ourselves. We continue to focus on being a Boutique Real Estate Investment Firm. Focusing on Texas, and living within (at least for today) the residential side of the business. We believe in housing, and that people need a roof over their head, and that they’ll prioritize everything to keep said roof over said head.
In our short 8-years as a firm, we’ve never wavered from that thesis. Whether we have been focusing on buying a 106-unit value-addValue-add is a strategy where an investor or property owner seeks to increase the value of a property by making significant improvements or changes to it. The goal is to enhance the property's appeal, functionality, and income-generating potential, which can lead to higher rental income, increased property valuation, and improved overall performance. View Definition apartment, a brand new 300-unit mid-rise or a new construction Build-To-Rent community, the deals are underpinned by a true belief they provide very strong risk-adjusted returns to investors.
Expanding Horizons: Venturing into Build-To-Rent
As we’ve forayed into the Build-To-Rent space with a specific investment thesis about developing communities to own long-term, we’re seeing new investment opportunities emerge related to land development. We’ve started having a weekly acquisition meeting with our building partner, to review all the potential sites that we’re aware of. Which ones make sense for a BTRBuild-to-Rent: a real estate development model where a property developer constructs a residential building, community, or group of single family homes with the specific intention of renting out the units rather than selling them as individual properties. View Definition community? What is the current status of the land—are we buying raw land? Entitled land? Paper lots? Finished lots? That all impacts how we think about the site and what is required to get it shovel ready for our BTR product.
But it has also created a lot of conversation about how to capitalize these sites, and what sort of investment opportunity exists within the land development component of each BTR site. Again, that points back to our goal of executing on deals we have conviction about. I have a ton of personal conviction about the BTR space and how that product meets the market’s needs and wants. We plan on building a portfolio of BTR communities across Central Texas under our “Wonderyard” brand. We have a unique partnership structure with a builder we trust, so we can build the homes cheaper than other developers. We have inherent advantages up and down the value creation stack.
Looking at creative ways to capitalize the land development is the next investment opportunity we see. It is something that is frankly required to realize the BTR opportunities we have so much conviction about. And it will be a new investment bucket that Wildhorn Capital can offer.
In this exploration of the BTR and single-family space, we’ve also come across another investment opportunity we are exploring. This one is related to property tax lien lending, working with homeowners who need some assistance in paying their delinquent property taxes. As you likely know, Texas does not have a State Income Tax but the State revenues are driven in large part by elevated property tax rates. While we are still early in exploring this as a potential investment fit, it certainly fits within our overall thesis of housing based investment opportunities in Texas.
Continuing the Legacy: Multifamily Investments
On top of these opportunities, we continue to look at and review multifamily opportunities. That won’t change and is always going to be a major food group for us. In fact, we’re starting to see some interesting deals that are distressed and could offer some very compelling investment returns.
We are committed to our vision, and staying focused on finding investment opportunities we are convicted about. And as we keep traveling down this path we’re on, we’re always going have our head up and open to the possibilities we may stumble across. It’s a fun part of our job and of the real estate business. And it will be fun to share those with you as we find them.
Stay tuned.
Andrew Campbell is a native Austinite and Managing Partner at Wildhorn. He is a real estate entrepreneur who first broke into the business in 2008 as a passive investor. In 2010 he transitioned into active investing and management of a personal portfolio that grew to 76 units across Austin and San Antonio. He earned his stripes building and managing his personal portfolio before founding Wildhorn Capital and focusing on larger multifamily buildings. At Wildhorn, he is focused on Acquisitions and maintaining Investor Relations, utilizing his marketing and communications background to build long-term relationships.
