We’re excited to reveal the details on our latest acquisition, a multifamily ground-up development project in Austin, Texas. In the 14-minute video at the bottom of this page, Co-Founder Dave Van Horn and Real Estate Portfolio Manager Chris Cordes share the story of the project, including its unique inclusion of affordable housing units and how that positively impacts both the community and our bottom line.
We’ve also included an interview with Chris Cordes that further discusses Chris’ role at PPR and the five things he most likes about the Austin project. Enjoy!
Introduction
PPR has invested in the commercial real estate vertical for the past several years. In that relatively brief time, we’ve already evolved our approach to that sector in response to shifts in the overall economy and specifically with the interest rate environment as it impacts commercial lending.
With the recent closing on an affordable housing development project in Austin, Texas (as discussed in the video above), we realized it would be helpful to further explain what makes this deal so interesting in the current environment.
To that end, we recently sat down with Real Estate Portfolio Manager, Chris Cordes, and asked him to explain his role at the company and what he likes about the Austin project.
Interview with Chris Cordes
Chris, can you tell us a little bit about yourself? What’s your current role and background in the industry?
Sure, I’m the Real Estate Portfolio Manager at PPR, so my role is to manage the sponsorship screening and deal structuring for the company’s multifamily investment vertical. I also monitor the ongoing performance of the assets that we own.
[Note: see Chris’s most recent report on the Commercial Real Estate portfolio in quarterly update.]
Prior to PPR, I was a Senior Analyst with Philadelphia-based Korman Residential Properties, where I was responsible for financial modeling for acquisitions, as well as provided asset management support and led the due diligence process for both acquisitions and dispositions
Thanks, Chris. What sorts of commercial projects has the firm been involved with since launching this vertical?
Good question. Before I joined the team there was an initial R&D phase where we co-invested in a variety of small deals to get our feet wet. Then not long before I started about a year ago, we entered joint venture deals to acquire “value-add” Multifamily, Class B or C+ properties with opportunity for strategic capital improvements that are strategically located in markets that had key indicators for both growth and stability.
Thanks, Chris. As you mentioned in the video (below), the project in Austin has taken months longer to finalize than we expected, and we certainly had our share of challenges with it along the way. What is it about this deal that made you want to stick with it? In other words, what does PPR like about this deal?
Great question. I’d say that there are five unique benefits of this project that made it well worth the delay and extra work we had to put in to get it closed. Here they are:
- It’s tax advantageous. We receive a by-right 50% tax exemption by partnering with a local non-profit as long as the property maintains 50% affordable units within 60% AMI (adjusted median income).
- It addresses the local affordability demand. With rising housing costs, affordable living demands have exponentially increased in the Austin market. The affordable element at the property will appeal to a wide demographic and be essential during lease-up and speed up overall stabilization.
- We’re working with a proven project sponsor. The sponsor has experience, vision and fresh perspectives on the multifamily process. Furthermore, the sponsor is well connected in all project facets, including legal, lender, construction management and property management selection.
- It’s a great location. The property accessibility to Downtown Austin and Austin-Bergstrom International Airport is second to none. Additionally, the property has great proximity to current (and future) employers, including Tesla, Apple, Amazon and Google.
- The shorter hold period reduces our risk. The expected sub-2-year duration of the hold period of the investment is strategic in that it allows a potential buyer to avoid any development risk and step into a stabilized asset with an established NOI, thus establishing a premium on sales price and maximizing return of equity.
Thanks, Chris. Being involved in a ground-up development like this that provides the social good of affordable housing while also being a sound investment is truly a win-win. Keep us posted on the construction progress in Austin and with future projects!
