Case Study: The 2008 Acquisition of the “Austin 9”
Northland’s Long Term Value Creation in Austin
Background
Northland has a 25-year history in Austin entering in the early ‘90s recession and exiting in 2001 prior to the “tech wreck.” Northland re-entered in 2005, when our research indicated that a diverse mix of job drivers, the city’s growing appeal to young professionals, and the state’s business friendly climate would ensure long-term stability and strong growth. Northland specifically concentrated on the Arboretum and southwest submarkets, in-fill, high barrier to entry locations in a traffic burdened city. While Austin was not spared the significant job losses and rent declines of the Great Recession, Northland believed that its diverse mix of job drivers, the city’s growing appeal to young professionals, and the state’s business-friendly climate would ensure Austin’s long-term stability and high growth trajectory.
Opportunity
When a large national REIT decided to exit its entire Austin position in 2008, the portfolio offered a tremendous opportunity for Northland: three direct adjacencies to our existing four property position in the Arboretum, four additional properties in the surrounding submarket, and two properties in the desirable southwest submarket.
Execution
Northland acquired the nine community portfolio and became Austin’s largest multifamily owner. The distressed investment climate at the time – with difficult access to new financing, limited competition, and high levels of uncertainty – allowed Northland to step in and acquire the portfolio at a significant discount to true value.
Results
Northland’s analysis of Austin’s growth potential proved prescient, as the last five years has seen Austin solidify its identity as a top five city in the United States, as a hub of technology and innovation, and as a key job center to some of the U.S.’s most successful corporations. Over the past six years, Northland’s 18 properties in Austin have experienced annual rent growth outperforming the national average.