Wayfinder Real Estate Completes Sale of Troubadour in Austin

Austin-based Wayfinder Real Estate has completed the sale of Troubadour, a 321-unit apartment community in Central Austin, to an affiliate of Austin-based Christopher Investment Co.

The sales price was not disclosed.

Located one mile north of downtown Austin at 3403 Harmon Ave., Troubadour has experienced unusually strong demand since pre-leasing started in January. When first move-ins began in April, 80 apartments — 25% of the units — were pre-leased. Since then, an average of 14 new residents have signed leases per week.

The community is expected to reach 93% occupancy and fully stabilize by the end of August.

The six-story project is the first community that Wayfinder has completed and sold since industry veterans Mac McElwrath and Chris Sipes founded the company in 2019.

Wayfinder will soon complete the 295-unit Waterview community in Richmond, Texas just west of Houston and has a 362-unit project named Veranda underway in East Austin that will offer a mix of apartments and townhomes. The company also has five multifamily communities in the design and development phase in the Austin metro area and one in the Houston area.

The transaction between Wayfinder and Christopher Investment Co. was conducted off-market.

Christopher owns several other multifamily communities in the Austin metro including The Catherine just south of downtown Austin and The Pearl in north central Austin.

Troubadour offers one-, two- and three-bedroom apartments with 16 units reserved for residents making no more than 80 percent of Austin’s median family income.

Community amenities include an outdoor movie theater, a rooftop terrace overlooking the downtown Austin skyline and the University of Texas at Austin, a resort-style pool, and multiple courtyards. Locally renowned artist Chris Rogers produced custom murals located throughout the property.

Troubadour is the final multifamily community to be completed in University Park, the master planned redevelopment of the former 22-acre Concordia University campus between Interstate 35 and the Hancock neighborhood in Central Austin.

Gladstone Commercial Announces Five-Year Lease at Austin, TX Office Building

MCLEAN, VA / ACCESSWIRE / July 28, 2022 / Gladstone Commercial Corporation (Nasdaq:GOOD) (“Gladstone Commercial”) announced it has entered into a 5.7 year lease with Cognizant Technology Solutions U.S. Corporation (“Cognizant”) for 41,225 square feet of its 320,000 square foot, four story office building, located at 717 East Parmer Lane in Austin, Texas, bringing occupancy to approximately 70%.

“We are delighted to have Cognizant in our portfolio and express thanks to their real estate department for their assistance on the deal. We could not have asked for better partners. This transaction shows the strength of the Austin market and the resiliency of the office sector. I would also like to thank Bethany Perez and Colton McCasland of JLL for their untiring work,” said Perry Finney, Senior Vice President of Gladstone Commercial.

Buzz Cooper, Gladstone Commercial’s President, added, “Cognizant is a great tenant to have and adds to the strength of our already impressive roster of tenants. We appreciate the speed and efficiency in which they acted to execute the deal.” Click to read more at www.gladstonecommercial.com.

New Mixed-use Project Coming to Corner of Hwy. 79 and Kenney Fort Boulevard Following Council Approval

A new mixed-use project could bring up to 530 housing units and commercial space to the northwest corner of Kenney Fort Boulevard and Hwy. 79 following Round Rock City Council’s approval of annexation and rezoning requests as well as a utilities service agreement.

The trio of action items went before council July 28, requesting an 8.955-acre plot of land be rezoned to a planned unit development to allow for mixed residential and commercial use, to be serviced by city water and wastewater utilities and annex 7.287 acres of the property that are not already within the city’s limits. The city previously annexed the property’s frontage along Hwy. 79 in 1979, according to city documents. All were approved unanimously.

The PUD zoning allows for a maximum build height of eight stories, although Brad Wiseman, Round Rock Planning and Development Department director, said the developer, Gulf RC Ventures LLC, is planning a multifamily project with a height of six stories. According to documents detailing the zoning request, 90% of necessary parking for the development will be contained in an attached parking garage, and 25% of units will have balconies. Click to read more at www.communityimpact.com.

Stratus Properties Inc. Announces Construction Financing for The Saint George, a Multi-Family Project in North-Central Austin

Construction Set to Commence Later this Month

AUSTIN, Texas, July 21, 2022–(BUSINESS WIRE)–Stratus Properties Inc. (NASDAQ: STRS) (“Stratus” or the “Company”) today announced that it has completed construction financing for the development of The Saint George, a 316-unit luxury wrap-style multi-family project to be constructed in north-central Austin on Burnet Road. The Saint George project is located within minutes of the University of Texas, downtown employers, Apple Inc.’s new North Austin campus, the Q2 Stadium-home to Austin’s major league soccer team Austin FC-and The Domain, an upscale retail, office and residential center with more than 100 stores and restaurants. Construction is expected to commence later this month.

William H. Armstrong III, Chairman of the Board and Chief Executive Officer of Stratus, stated, “We are pleased to announce that we have obtained construction financing for The Saint George, another Stratus multi-family project, located in the rapidly growing Burnet corridor in north-central Austin. The Saint George will be a high-quality addition to our portfolio, ultimately adding value to our leasing operations. After project stabilization, we look forward to considering monetization opportunities for this property.”

The project is owned by The Saint George Apartments, L.P., a Texas limited partnership and a Stratus subsidiary. The construction financing consists of a four-year construction loan from Comerica Bank to the limited partnership in the amount of $56.8 million, which is secured by the project. Stratus provided a completion guaranty and twenty-five percent repayment guaranty, which will be eliminated once the project meets specified conditions. Click to read more at www.finance.yahoo.com.

United Alloy Inc. Breaks Ground on Expansion of Manufacturing Facility in Seguin, Texas

SEGUIN, TEXAS – United Alloy, Inc announced today that they are breaking ground on a nearly 110,000 square foot expansion of their existing manufacturing facility in Seguin, Texas. Headquartered in Janesville, Wisconsin, United Alloy, Inc. is a contract metal fabrication and powder coating company. United Alloy produces the highest quality leak-proof metal fuel tanks, hydraulic reservoirs, skids, frames, chassis, trailers, and complex weldments for an extensive list of long-term Fortune 500 OEM customers. United Alloy is ISO 9001 Certified and is also a recognized Woman/Minority Owned Business.

This expansion will include the latest automation for light sheet metal fabrication, powder coating, and assembly. The extra space will allow United Alloy to continue to grow its capacity fabricating and assembling sheet metal enclosures for large OEM customers. United Alloy also plans to dedicate space to launch an apprenticeship program that will allow it to train entry level welders, fabricators, painters, and assemblers. To learn more about United Alloy employment and apprenticeship opportunities please visit their website – www.unitedalloy.com or contact them at 830-549-5550.

In December of 2019, the City of Seguin and the Seguin Economic Development Corporation announced that United Alloy would be expanding to Seguin, Texas, with plans to construct a new stateof-the-art manufacturing facility in two phases on a 27-acre tract of land within the Rio Nogales Industrial Park. Phase 1 of United Alloy’s expansion to Seguin was completed in December of 2020, representing an investment of more than $17 million. Today, United Alloy has more than 100 employees at their
Seguin facility. Upon completion of Phase 2, United Alloy’s total building footprint will be approximately 230,000 square feet and will represent a capital investment of more than $35 Million.

“We are thrilled that United Alloy is expanding their operations in Seguin, Texas. Even though they have only been a member of our business community for a short period of time, United Alloy has developed a tremendous reputation as a quality employer and are a top-notch corporate citizen. We are excited to watch United Alloy grow and look forward to working with them for years to come.” said Josh Schneuker, Executive Director of the Seguin Economic Development Corporation.

Colliers Q2 2022 Houston Industrial

“Capital flows are still robust for industrial assets despite some near-term headwinds as the sector continues to show strength on the user (leasing) demand side and reasonable new construction pipelines. We believe that the central part of the country, including SE Texas, are well positioned for robust future industrial growth as the Gulf of Mexico Ports and North/South rail options push more distribution from the backlogged West Coast to this region.” Patrick Duffy | President of Colliers in Houston

Key Takeaways

  • Robust leasing activity
  • Positive net absorption
  • Vacancy drops 
  • Rental rates increase
  • Construction starts up

Houston Highlights

Houston’s industrial market continued to gain momentum as leasing velocity reached over 10 million square feet in the second quarter. The increase in demand for space continued to spur new development with over 21 million square feet under construction and an additional 65 million square feet proposed or in the final planning stage. Houston’s industrial market recorded 6.6 million square feet of positive net absorption in the second quarter. The vacancy rate decreased 280 basis points annually from 8.5% in Q2 2021 to 5.7% in Q2 2022.

Executive Summary

Commentary by Jim Pratt 
The headlines for the 2nd Quarter of 2022 might mimic a political campaign of yesteryear, “It’s the economy, stupid!” While that may be somewhat harsh, we are certainly in a period of dramatic change and uncertainty in the Houston industrial market. With inflation at 40-year highs, currently exceeding 9%, and YTD increases of 1.5% in the interest rates by the Fed, developers and investors alike are revising their investment parameters to reflect these significant shifts. While the appetite for investment doesn’t seem to be affected, there is a wider gap in Seller expectations and Buyer pricing that will likely grow through the end of the year. Further, additional increases in interest rates are expected to total 1.5% to 1.75% and should have a significant impact on valuations. As we are easing into a recession that could be exacerbated by the additional interest rate increases anticipated from the Fed, the impact of a national recession on the Houston economy, and more specifically the Houston industrial market, is unknown. We continue to have strong tailwinds that could likely carry us through without a huge impact.
International investment dollars are still pouring in as these investors are willing to accept lower returns in exchange for the safety of their investments. U.S. real estate is an excellent hedge against inflation and offers security. These investors may be muting the overall impact of rising interest rates on cap rates. While not rising point for point with interest rates, there is certainly movement in cap rates on most industrial real estate. Long-term debt has increased as much as 150 basis points, creating negative leverage where cap rates are lower than the interest rates on debt. To maintain the required debt coverage ratios, investors have to provide more equity with lower percentages of leverage to satisfy the lenders. All of these factors are affecting the pricing and will continue to have a more significant impact through the end of the year.
Nationally, according to the Wall Street Journal, property sales dropped 16% compared to April 2021. Prior to April of this year, sales had increased for thirteen consecutive months. The decline has been more pronounced in the Houston Industrial market. According to statistics from Real Capital Analytics, industrial sales dropped from 114 properties and $1,904,940,472 in the 4th quarter of 2021 to 57 properties and $1,549,963,942 in the 1st quarter of this year, and only 43 properties totaling $777,668,957 this quarter.  
Aside from the drop-off in industrial sales, we have a very healthy industrial market. The vacancy rate dropped from 6.11% in the 1st quarter to 5.6% this quarter. Year-to-date absorption through the end of the 2nd quarter was 13,078,101 square feet, in line with the record setting absorption in 2021. More importantly, the average rental rate increased from $7.88 to $8.60 over the past quarter. Where annual increases in rental rates had recorded 2% for many years, they increased substantially and are now typically ranging within 3.5% to 4%. Owners are bolstering their returns as they try to offset the impact of inflation with larger increases in the rental rates.
Another trend continuing to take root in the market is the preference for shorter-term leases by landlords. Houston has historically seen 5-6% annual increases in rental rates, but the weighted rental rate change over the 1st quarter was 5.52%. Landlords are reluctant to commit to long-term leases that lock in fixed rental rate increases, preferring shorter-term leases that allow for more significant rental rate increases at the end of the lease term. While lenders still want longer-term commitments for a stabilized cash flow on new acquisition loans and ground-up development, current owners typically renew for shorter terms.
So, despite all of the changes in the economy, we believe the Houston industrial market is strong and adapting to the changing parameters. We will continue to watch the economy closely, and adjust to changes in the market, but with a solid foundation, the outlook for the balance of 2022 continues to be good.