The Future of Wildhorn Capital: Embracing Growth in Central Texas

Navigating Uncertainty with Conviction and State Legislative Support

Whenever we get asked about our plans for Wildhorn’s future, we always sort of shrug our shoulders. 

Truthfully we don’t really know what the future holds, and we don’t have set targets related to the number of acquisitions, a dollar figure for Assets Under Management, or an ideal “number of doors”.  When asked about our goals, we respond by saying that we want to have the ability to execute on interesting business plans and assets that we have conviction around.  

Building on Conviction: Wildhorn’s Approach and Focus

That means we need to have:

• the internal infrastructure and expertise to underwrite and execute a business plan
• the team (and the bandwidth) to support it
• the interest from investors to capitalize on it 

But as you see if you review our portfolio, it isn’t a single business plan.  We have 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 apartments with 3-5 year business plans, newly built Class A apartments with 10+ year business plans, and have started executing on development projects with a strategy of build to core.  

Central Texas: A Safe Bet for Wildhorn Capital

What we are consistent on, and aligned with, is our geographical focus of Central Texas,  and our belief in residential housing–where our current focus is multifamily and Build To Rent.  Being in housing feels safe to us; it’s devoid of the uncertainty so many other asset classes currently face.  “People gotta live somewhere” is a common refrain, and is a simple statement so full of truth. 

The Link Between Job Growth and Wildhorn’s Forecast

Given our focus, naturally we pay a lot of attention to “the people”– and spend considerable time volunteering and staying involved with Economic Development efforts.  In some ways, our business is tied to the continued growth of Central Texas–growth in raw population and in the number of jobs created.  More jobs lead to more people. 

Over the last decade plus Austin, Central Texas, and Texas at large have experienced tremendous growth.  The population has exploded–driven by an abundance of jobs and corporate relocations.  For the better part of the last decade there have been near daily headlines celebrating a new corporate announcement, or an article highlighting how business friendly Texas is (and why companies are fleeing other parts of the country). 

Recently, there was an article that came out predicting Austin would become the third-largest metropolitan area in the United States by the year 2100 (behind only Dallas and Houston) with a projected population of 22.3 million people. The region’s 10-year growth rate of 33%, combined with its thriving job market, has made it an attractive destination and experts predict this will only continue.  

Public Policy Impact: House Bill 5 and Business Incentives

On the flip side, we’ve started to see some articles casting doubt about the future of our growth–and the sustainability of the growth.  And questioning how the growth has impacted overall quality of life, dropping Austin off the top of the “Best Places to Live” perch. 

While we can’t predict the future (as much as we’d like to), the best way to be able to forecast it is to continue to track job growth.  As long as the economic engine of the State, and our Central Texas region continue to hum, the future will look bright.  

Opportunity Austin: Fostering Growth in Central Texas

Few things can impact that future trajectory more than public policy–which is why we paid so much attention to the State Legislature while it was in session.  Heck, with Cooper’s role at the Real Estate Council of Austin, he was at the Capital no fewer than 6 times this session.  

One of the biggest bills that was passed this session was House Bill 5, which will have significant implications for businesses and investors. The bill allows school districts to grant full property tax breaks to certain companies relocating to Texas, with the state covering the resulting gap in funding with state tax dollars. The passage of HB 5 marks a significant departure from the traditional role of school districts in tax incentive programs, shifting the application process to the Comptroller’s office.

Moreover, there are a few things we take from this bill and the support it received from The Governor. Of the 300+ companies that have moved to Austin in the last 15 years, incentives have been used less than 20 times. It’s very clear companies first and foremost target Austin for our highly educated workforce and state tax environment. Having The Governor publicly endorse an incentive program of this sort is a clear flashing “welcome” sign to companies in tax-plagued states or companies struggling to hire. 

Under the new program, qualified projects will be eligible for a 50% tax incentive, while those located in opportunity zones will receive an even higher incentive of 75%. Eligibility for an agreement to reduce taxable value would be contingent on achieving minimum job and investment amounts and the required investment minimums would be based on county populations as follows:

1. at least $200 million in investment and 150 jobs created in counties with a population of 750,000 or more;
2. at least $100 million in investment and 100 jobs created in counties with a population of at least 250,000 but less than 750,000;
3. at least $50 million in investment and 70 jobs created in counties with a population of at least 100,000 but less than 250,000;
4. at least $20 million in investment and 20 jobs created in districts a population of less than 100,000.

As we have written about before, everything changed for Central Texas when Texas started to understand we need incentive programs to recruit companies and when we raised our first Economic Development Fund (Opportunity Austin 1.0) to be in the business of recruiting companies all year round. Opportunity Austin is currently raising our 5th fund. Over the previous 4 funds, we have seen the greatest in-migration of companies and people in seasons where the national economy has struggled. For all of these reasons, we are confident that Central Texas is poised for continued growth over the coming four years.