Multi-Family Advice

Responding to the Headlines

By August 23, 2020 No Comments

A big part of our job at Wildhorn is to be an expert in our home market.  It’s our competitive advantage, and it’s a big reason we believe our partners choose to work with us. We’re born and raised in Austin, Texas.  We’re plugged into the local scene and make a major effort to keep our ear to the ground about what’s going on–and what’s coming down the pipe. This obviously includes the multifamily scene and what that development pipeline looks like.  But it also includes the larger economic scene and engine that is Austin.  We want to keep abreast of what’s happening, where, and then understand the implications of those movements. 

It’s part of the reason we volunteer our time with the Chamber of Commerce and invest in Opportunity Austin. We want to be able to “skate to where the puck is going” and be thinking ahead on our investment decisions.  Those efforts invariably drive some of our investment decisions, as we look at which submarkets to focus on, where job growth is headed and how we can best capitalize on this information. 

A big item we follow is job announcements. People follow jobs, and the more jobs we have, the better our prospects for keeping our assets full and growing the rents. Job announcements are headlines. 

We’re not sure if you’ve noticed, but over the last several months there have been a ton of scary, negative headlines.  COVID-19 has sent the country into a recession and the headlines have not been great.  Here in Austin, mixed in with the COVID headlines, the news hasn’t been all bad.  We’ve continued to see some major announcements come through, obviously headlined by Tesla’s decision to open their Gigafactory in South East Austin. This factory represents a $1.1 Billion investment for a facility that will employ 5,000 people, build all the Cybertucks and Semi’s and supply the Eastern US with Model Y and Model 3’s.  All of this coming out of a 2,100 acre land purchase along Toll Road 130. 

Not to be overshadowed, Amazon continues their expansion in Austin, announcing a new 800,000 ft facility in Northeast Austin that will employ 1,000 jobs. This is in addition to the facilities they already have in town–and their corporate presence in the Domain and Downtown via Whole Foods.  

Finally, as we’re putting the finishing touches on this article comes yet another big announcement from a large Defense contractor, who will be doubling their presence in Austin to take advantage of the Army Futures Command presence in Austin, along with the Army Research Laboratory and the Defense Innovation Unit.  

It is certainly a good time to be in Austin, and these headlines continue to support our investment thesis about buying quality assets in good locations in our market.  But how do they affect our underwriting, or the submarkets we focus on? All three of these headlines are focused on job creators happening on the east side of Austin, and all are taking advantage of the new road infrastructure that has been put in place over the last decade.  Does that mean we exclusively start to look for deals on the East side of town? No.  In reality, we pay close attention to these announcements but don’t make investment decisions based solely on these headlines.  

In the aftermath of the Tesla announcement, we fielded dozens of phone calls from investors asking us if we were working on anything near the facility.  (In fact, we own one deal considered close and the Opportunity Zone deal we have under contract is an 11 minute drive away).  We also had quite a few calls from brokers and out of state groups asking if we had anything we wanted to sell–particularly anything on the East Side of town. The Euphoria of the announcement was real.  

But that doesn’t mean we’re making investment decisions based on excitement and headlines. 

We continue to be big believers in Austin and Central Texas.  These headlines add fuel to our fire.  But, they haven’t sparked a new thought for us.  We’ve been in Austin and our fire has been lit for a while.  We will continue to be in Austin; the East Side of town will continue to be exciting and be a focus for us.  But we’ll continue to look for unique investment opportunities all across the city. 

What these announcements do signal, though, is continued growth for our city.  At a time when the economy is on pause and everyone across the world is reevaluating their priorities, their values and their futures, Austin is getting good news.  Good news that leads to more jobs in the future. 

As we have talked about in previous articles, Austin and Central Texas has been the most prolific creator of jobs over the past 15 years. In the “Great Recession” Austin was the last  large city in the country to go to negative job growth, the first to return to positive job growth, and the first city to reach its pre-recession job numbers. It appears Austin will be poised to repeat that trend coming out of this recession. Prior to COVID-19, according to the State of Texas 151 people were moving to Austin per day.  The majority of job and population growth migrated from California, New York, Illinois and Internationally. Trends of migration to the Sunbelt have been occurring for the last decade. Coming out of a Post COVID world, we believe that those same trends will only increase.  On the residential side, Austin has seen our inventory go lower during COVID, signaling more people wanting to move into town than are wanting to move out. As families realize they can work from anywhere, and aren’t going to be tied to dense metropolitan areas, a larger and larger percentage are choosing to finally make the move–and Austin keeps getting our fair share. 

We’re clearly excited about the recent headlines, as we think that speaks to the long-term trajectory of our city.  We also want to make sure we’re not caught staring at the news and only canvassing the East Side for deals.  

The latest headlines are exciting.  We hope (and may have a tip or two that) they will continue in the near future.  And we’re going to continue to track them as they come in.  Just don’t expect us to follow the latest headlines–we’re already planning how to respond to the future headlines.

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