Market by Market Expertise
Making superior value-based investments requires broad macro research (“top-down”) and detailed product and submarket knowledge (“bottom-up”). Sold all office assets in Dallas, Houston and San Antonio Texas, then took the proceeds to become the largest office owner in Austin, Texas.
Transaction Summary
Acquired seven assets from November 2004 through September 2006, while exiting Dallas, San Antonio, and Houston in 2005
Assets totaled 1,429,237 square feet in suburban Austin and 530,533 square feet in the CBD becoming the largest office owner in Austin
Purchase price of $494 million ($252psf) at a cap rate of 8.3%
Continued acquiring office assets in Austin until 2016 when supply dynamics became less attractive
Investment Rational
While the supply and demand fundamentals for Dallas and Houston were poor, Austin indicators were positive
Demand was fueled by growing high-tech and business sectors, low taxes, and a highly educated workforce
Supply in Austin was constrained by anti-growth sentiments, by height limitations and view corridor restrictions for the state capital
Capital markets viewed Austin as a secondary market at that time
Results
NOI at acquisition was $21.3 million, 2007 NOI at sale was $26.6 million (a 25% increase)
Allocated value at sale to Blackstone was $640.7 million ($327psf), a 30% increase over the acquisition price
From 2004 to 2016, Austin was one of the top cities in the country for job growth and class “A” office value appreciation