CapitaLand Launches $300M Multifamily Joint Venture in Austin, TX

Singapore’s CapitaLand is taking its commitment to the tech economy overseas as Southeast Asia’s largest developer today announced a joint venture to develop apartments in Austin, Texas.

The Temasek Holdings-backed builder says that it has formed a JV with a developer based in Austin to build $300 million in multifamily residential assets in the Texas tech hub, as well as other markets in the southeastern and southwestern United States.

“CapitaLand’s acquisition of this prime site to develop our first multifamily property in Austin and having a potential pipeline of projects in the Southeast and Southwest markets of the USA will accelerate CapitaLand’s growth in the resilient multifamily sector,” Jason Leow, president for Singapore and international at CapitaLand Group said in a statement.

The deal, which is CapitaLand’s second investment in the US multifamily sector after its acquisition of a 16 property portfolio in 2018, would provide it with an initial 341 home pipeline in a city that hosts offices for Adobe, Apple, Cisco, Oracle and other tech titans.

Building in Austin’s Burbs

Together with its partner, CapitaLand has already acquired a 4.71 acre (19,060 square metre) plot in suburban Austin for the joint venture’s first project, with the goal of developing 341 homes in mid-rise buildings to be completed in 2023.

The Singaporean firm holds an 80 percent slice of the JV, while its partner holds the remaining equity. More projects are likely to follow this initial development, with CapitaLand’s Leow saying that, “We will continue to seek attractive investment opportunities to build upon our diversified and well-balanced portfolio to deliver long-term value for our stakeholders.”

CapitaLand said that its partner has already developed more than 25,000 multifamily units in the US over its more than 25 year history.

The upcoming project is located adjacent to the McKalla Place Major League Soccer Stadium, a 20,000 seat facility due to open next year near the Domain commercial hub in the North Burnet section of North Austin. The property will include around 1.4 acres of outdoor recreation space, and is designed to offer a mix of studios, one- and two-bedroom apartments with separate work and living areas to enable residents to work from home.

Capella Capital Partners, an Austin-based property investment firm, had in May 2018 announced plans for a mixed-use project, including a multifamily element, adjacent to the McKalla Place site, before the stadium scheme had been finalised. Since that time, the developer has revised that proposal, now called Arena Tower, to include only commercial space.

“Despite COVID-19, Austin continues to be an attractive technology, business, government and investment hub with a steady outlook, an ideal base for CapitaLand to scale our multifamily portfolio in the USA,” said Dang Phan, CapitaLand’s managing director for the US.

He added that, “The city’s focus on technology has also fuelled its population and job growth, consistently outpacing the national average. The demand for quality housing has risen correspondingly, with rents increasing 50 percent over the past decade.”

More American Apartments

Austin, which is home to the main campus of the University of Texas ranked ninth among US cities for cross-border investments into multifamily assets over the past half decade, according to a report by CBRE. Investors from outside the US put $2.1 billion into Austin apartments from 2015 through 30 June of this year, according to the property agency, including over $160 million during the first six months of 2020.

CapitaLand’s latest investment in US multifamily comes more than two years after the developer paid $835 million to purchase a portfolio of apartments across the cities of Seattle, Portland, Greater Los Angeles and Denver from Starwood Capital.

“Since the acquisition of our suburban multifamily portfolio in 2018, we have value-added to the assets through progressive refurbishment to enhance returns,” Phan said. “Our multifamily properties have remained resilient and achieved a current committed occupancy rate of about 95 percent.”

Phan noted that multifamily assets have provided more resilient returns than many other asset classes during the pandemic, with the crisis amplifying investor interest in apartment opportunities.

Chasing Tech Sector Growth

The investment in one of the major tech hubs in the US was announced just weeks after CapitaLand announced a new corporate strategy aimed at profiting from the growth of the online economy.

In addition to incorporating digital technology into its business, the group has also shown an appetite for assets positioned to benefit from growth in the tech sector.

Just last month, Capitaland Retail China Trust, a REIT managed by a unit of CapitaLand, expanded its portfolio into industrial and business park assets by purchasing 852,727 square metres (9.2 million square feet) of suburban offices in China.