Austin, Texas Commercial Real Estate Private Equity Fund Management

 

The Focus

The Fund will strive to deploy equity across individual projects/assets within five asset types:

I. Multi-family

These projects provide the most current designs and amenities, such as attractive leasing centers, well-appointed fitness facilities, business centers, high-speed Internet access, and garages. Additionally, these projects include innovations allowing the asset to favorably compete within its sub-market. Selected locations favor in-fill or comparable areas in which the potential for new competition is reduced. Land basis and site selections create a core competitive advantage. Mid-rise (6 stories or less) and garden (2 and 3 stories) projects are the most attractive. Building materials reflect quality and attention to long-term ownership with the desire to minimize major capital outlays in the future.

II. Anchored Retail

Grocery anchored projects range from 80,000 to 150,000 square feet with the larger centers having at least one additional junior anchor in addition to the grocer. Grocers have a dominant (top three) market share with a senior debt rating that is investment grade or better (S&P BBB- or better). In fill as well as suburban locations in major metropolitan areas are acceptable, as well as re-development of in fill existing centers. The goal of re-development is to remove age and functional obsolescence, the replacement or extension of the grocery anchor lease and the stability of a fully developed location. Institutional quality design and construction materials such as brick and stucco are required.

Lifestyle centers will range from 100,000 to 275,000 square feet. Seasoned, well-known national tenants dominate each project (Pottery Barn, Barns and Noble, J.Crew, Victoria's Secret are examples). Only strategic tenant driven locations are chosen.

III. Bulk Industrial

Typical building size range from 150,000 to 400,000 square feet, with 26 to 30 foot clear height and site coverage of 35% or less. ESFR fire sprinkler systems are standard with concrete tilt walls or brick over block with steel building frames. Floor loads vary with market needs. Office finish for standard tenants do not exceed 20%. Developments, which anticipate multiple buildings over a four-year period, are viewed as attractive. Developments with longer horizons are only viewed on a case-by-case basis. Build to suits (BTS) with proper tenant credit is attractive as well. BTS tenants need not be investment grade but must demonstrate strong credit characteristics. Properties may be special use if tenant is investment grade rated and the lease term amortizes the cost of the building.

IV. Single Tenant Net Leased

The single-tenant properties are 100% occupied under long-term leases that are guaranteed by the corporate tenant. The terms of a typical net lease allow for regular rent increases that produce attractive annual cash yields and transfer the responsibility for most or all operating expenses to the tenant. Our net lease investments are generally long-term leases, often 12 to 15 years, with contractual rent increases, creating the foundation for stable, growing cash flow in the form of rent escalations. With rent and most property operating expenses paid by the tenant, the real estate is primarily a passive investment designed to generate stable, long-term cash flows with the primary risk to the owner/lessor being the creditworthiness of the tenant. The cornerstone of InvestCAP's investment strategy is a commitment to investment grade quality tenants. High credit quality minimizes cash flow risk and provides maximum liquidity at exit. Performance of the long term rental obligations is guaranteed by the corporate tenant, significantly reducing the risk of a tenant vacancy and or any associated re-tenanting costs.

V. Urban Land Plays

Typically these assets are in the urban core of major metropolitan areas or within the immediate path of growth. The target projects have an income producing component. The true upside in these parcels is in the enhancement of the land value increasing either by pure demand or by changing the entitlement of the land to allow for more generous use. These assets generally have very little downside because they are located in the most desirable areas, however the limited cashflow makes them less attractive to other investors seeking a high current paid return.


Geographic Focus

Texas

Current population is around 26 million. Estimates show a population increase of 30 million between 2010 and 2050, a 120% increase. Most of this population growth is likely to occur in a triangle of Texas that runs from Dallas to San Antonio to Houston and back to Dallas. Texas needs more homes, apartments, shopping centers and offices. There is also need to create new subdivisions to provide quality neighborhoods, and bank lending and private equity investment to provide capital for these undertakings.

Oklahoma

Oklahoma's economy is forecast to continue to grow rapidly in 2013. In the future, the state Real GDP is expected to grow 3.4% in 2013 and 4.5% in 2014 compared to the U.S. expected 3.2% in 2013 and 4.0% in 2014. The robust energy sector will continue to be an asset for the state. Oklahoma produces a substantial amount of oil, with annual production typically accounting for more than 3 percent of total U.S. production. Two of the 100 largest oil fields in the United States are found in this state. Similarly, it is one of the top natural gas producers in the United States with production typically accounting for almost one tenth of the U.S. total. Oklahoma houses more than a dozen of the 100 largest natural gas fields in the country.