Commercial Real Estate Finance

In honor of TNT’s reboot of Dallas, I thought I’d take a look at the great state of Texas. For those involved in commercial real estate at a city or regional level, it’s easy to miss the goings-on of other parts of the country. I can tell you plenty about CRE in Philadelphia or New York City or Washington, D.C., but very little about the West Coast or Midwest. And what I know about the Texas CRE market would make for a very short post.

Fortunately, there’s Google, and plenty of Texas-based CRE blogs like our friends REDNews and The Tenant Adviser. By exploring such markets, looking at their particular challenges and dynamics, those of on the coasts might see our own markets a bit differently.

Texas benefits from a number of major drivers. Its great agricultural output makes it very different, economically, from more urbanized states. Of course, its strong trade position (adjacent to both Mexico and the Gulf) and its dominance in the energy industry have kept much of the state buoyant through the financial crisis.

It’s important to note the state’s opportunities aren’t merely a consequence of its oil industry–though, obviously, Texas has benefited tremendously from such giants as Conoco-Philips (NYSE: COP), ExxonMobil (NYSE: XOM), and that poster child of heartless capitalism, Halliburton (NYSE: HAL). In fact, its real estate benefits from a wide variety of industries and populations. Especially in recent years, Texas has come to embody the investor’s axiom of diversification.

Obviously, its population density is far below those of states like New Jersey, but its 26 million residents present numerous opportunities for the residential and multifamily sectors.  Additionally, its state education system (with endowments bolstered by oil rights from university land) enrolls hundreds of thousands of students annually.

Have a look at a few of the opportunities in Texas CRE, for both mainstream and niche assets:

•  The recent resurgence in industrial real estate seems especially strong in Texas, as exemplified by this recent deal in Dallas.
• Higher education is driving demand for student housing, and major firms like American Campus Communities (NYSE: ACC) aren’t the only ones to benefit. In Austin,Land Development and Construction, LLC, a local partnership, is financing the construction of a 136-unit facility for the University of Texas.
• In fact, Eds & Meds have become an enormous driver in Texas, positioning the state’s economy to stay afloat regardless of future volatility in the energy sector. This week, Texas A&M was awarded a multimillion-dollar federal contract for a biosecurity research center.
• Mainstream assets like office buildings are also performing well in some markets. The Lionstone Group, a Houston-based intermediary for institutional investors, recently purchased two buildings for the second time, reacquiring them because of their enormous value growth (from $42 million in 2004 to an estimated $83 million in the most recent deal).

#CRE #finance 

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