East Riverside Value-Add Multifamily Benefits from Oracle Proximity

AUSTIN, TX—Hawthorne at the District is a 284-unit 80s-vintage multifamily community that recently sold to Wildhorn Capital, an Austin-based multifamily investment firm focused on value-add assets in Texas markets. The price was undisclosed.

The property was 97.5% occupied at the time of sale. It is located near the East Riverside corridor, a district that is rapidly transforming into a true live-work-play destination, anchored by the expanding Oracle Cloud campus.

Newmark Knight Frank vice chairman Patton Jones represented the sellers, Hawthorne Residential Partners, a North Carolina-based multifamily investment management group, and Midway, a New York-based multifamily investment firm active in the Southeast and Texas value-add markets. Additionally, Patrick Short, managing director for NKF’s debt and structured finance group, facilitated the financing of the transaction for Wildhorn Capital.

“NKF cleared the market for debt options that would complement their plan, ultimately selecting Mesa West Capital. Lenders remain focused and eager to deploy capital in the Austin market,” said Short.

This is Wildhorn Capital’s seventh transaction and financing with NKF, and its third acquisition in the Austin market, bringing its total Texas multifamily portfolio to 1,854 units.

“The East Riverside corridor has been experiencing major investment and redevelopment,” Jones tells GlobeSt.com. “Due to its proximity to Austin’s CBD, the area is home to many young professionals that work downtown but opt for the lower rents offered in East Riverside, which is now bustling with new retail, entertainment and employment opportunities. New investors from East and West Coasts markets entering the Austin market see an urban revival happening in East Austin and are jumping at the opportunity to own in this rapidly improving submarket.”

The Wildhorn Capital principals, Andrew Campbell and Reed Goossens, plan to continue their value-add model with the acquisition of Hawthorne at the District. Wildhorn Capital’s process includes implementing all value-creating strategies within the first 12 months of ownership and completing all rehabilitation work within the first 18 months, aiming to garner the highest returns for investors.

“The buyer plans to upgrade the asset to capture some of the rent delta between Hawthorne at the District and nearby newly constructed luxury communities,” Jones tells GlobeSt.com. “The property interiors were previously renovated with different finish levels, and the new owner has the opportunity to upgrade roughly 50% of the units and create a uniform finish out. This could include upgrading kitchen cabinets and backsplashes, framed bathroom mirrors, and hard surface floors.”

Completed in 1987, Hawthorne at the District will be across the street from the planned 4700 East Riverside project, a 97-acre mixed-use development with plans to include 4 million square feet of office space, as well as parkland, hospitality and medical space.

Oracle’s 560,000-square-foot campus is less than one mile from Hawthorne at the District. The company has already started construction on its 420,000-square-foot phase II expansion, creating space for up to 10,000 employees at full build out.

“Hawthorne at the District represents a growing trend of value-add trades in the East Riverside corridor as this area rapidly develops, spurred by the presence of Oracle’s expanding campus,” according to Jones. “Investors are looking to capitalize on residents seeking affordable, quality living options just outside of downtown Austin. The proximity to Oracle, downtown Austin and east Austin positions Hawthorne at the District to attract a talented, high-earning resident base for years to come.”

Fourth-quarter 2019 US multifamily volume totaled $50.5 billion, up 4.3% quarter-over-quarter, according to a NKF report. Non-major markets accounted for 72.1% of investment in 2019, as investors gravitated toward markets with a strong combination of yield and growth prospects.

High levels of new supply were met with robust demand in 2019, as absorption outpaced units delivered. Although Dallas added the largest number of units last year, Charlotte had the largest inventory increase on a percentage basis at 3.3%, compared with 1.1% nationally.