Big Opportunity for Small Retailers

Rockspring CEO Jim McAlister tells us the purchase was largely driven by residential activity nearby. The site sits on 71 in the Bee Cave area, just two miles west of the Hill Country Galleria. 6,400 new homes are coming soon to Bee Cave, and residents there will pass by this strip on their way into Austin. (So it wouldn't hurt to add a couple of bathrooms there as well.) Rockspring will invest $1.4M to enhance the property, and then sell to 10 to 14 retail users.

Jim says the area is underserved for retail, and there are almost no alternatives along 71 for smaller users. Clearly there's demand—Rockspring was receiving interest from retailers before the deal even closed, and he's in discussions with four users already. Look for Rockspring's name to pop up a lot this year; Jim says he wants to be an extremely active buyer in Austin and San Antonio, and has 15 sites under negotiation now between the two cities. (The land looks so beautiful from this view, you can really see the giant arrows and area signs that you can't appreciate from the ground.)

Construction started on the 58k SF two-story Class-A Avnet Technology Solutions office building near the intersection of Loop 1604 and Hwy 281 in San Antonio. The company's relocation and expansion is indicative of the solid economy and improved real estate market for office space, Ryan Cos SouthCentral region prez Hunter Barrier (far right at the groundbreaking) tells us. Market rents have increased to the point where a custom build-to-suit makes financial sense for companies. He's expecting the build-to-suit market for both industrial and office buildings to increase in San Antonio during the next several years. Avnet's project, on a five-acre site within the RidgeWood Business Park in northern San Antonio, is targeted for an August completion. (Groundbreaking ceremonies are a dry cleaner's best friend.)

Hunter tells us the declining availability of large blocks of space and market rent increases point to companies looking more seriously at build-to-suit projects. For office and industrial buildings today, there's not a premium for a company to develop and either lease or own a custom building, he says. Ryan Cos is providing the equity capital and Vectra Bank out of Denver is providing the construction loan. Ryan will provide development, architecture and engineering, construction, and capital market services for the project. Ryan is also partnering with three brokerage firms on this corporate build-to-suit project: Colliers International, Phoenix; Pruitt Realty, San Antonio; and Travis Commercial Real Estate Services, San Antonio.

Velocis sold The Jefferson Building, the first acquisition from its Fund I, to Healthcare Realty Trust. Velocis principal/co-founder Jim Yoder (here with his wife Ana) tells us the sale exceeded expectations and netted his investors a 30% IRR and 2x equity multiple. (That's an MVP season right there.) Velocis purchased the 98k SF Austin MOB three years ago, invested $600k into updating it, lifted occupancy from 84% to 90%, and raised rents. Transwestern and Marcus & Millichap (who co-listed the property) received over 10 serious offers, but Velocis was happy to select HRT because it wanted to sell to a REIT (he says they're just great buyers).

Jim tells us Fund I is 65% invested and properties under contract will bring it to 75%. It still owns two shopping centers and two office buildings in Austin, all of which are full or nearly so. Jim says it doesn't have anything specifically on its radar in the Capitol City, but the team sees a deal a week there. All four Velocis principals went to UT and love Austin (although they're based in Dallas), so they'd like it to be one of the Fund's major markets. (Gives them an excuse to visit the alma mater and maybe "happen to be in town" during football games.)