Trammell Crow Residential’s development team in Houston may be young, but they’re hungry. The team is looking to dominate the hyperactive Houston market, and they have a plan to do it, starting as early as this year.
Brian Austin’s goal for his youthful team is to lead development on 20 percent of all apartment starts in Houston every year. That’s likely to translate into 4,600 units by June, quite a number for a team of six developers under the age of 35.
“It is pretty unusual to have a young group like this in our business,” said Austin, senior managing director. “Still, we have quite a bit of experience. We were lucky to have started early in real estate.”
They got game
Austin, the head of the development team, is the oldest member of the group at age 34. He joined the firm in 2000 as a development associate and was promoted to the helm of the Gulf Coast division team last year.
The team is not built on youth alone. Its members bring plenty of wide-ranging experiences to the table. Managing Director Jeb Cox previously was director of multifamily acquisitions for Creekstone Partners, where he closed approximately $150 million in multifamily and retail transactions. Cox also traveled to Botswana, Africa, on a policy assignment for the U.S. Senate.
Team member Scot Davis joined the firm in 2006 as a development associate and was promoted to managing director just this year. Davis was a senior accountant for Arthur Andersen and also worked in the affordable housing business for Dwayne Henson Investments, Inc.
The development analysts’ backgrounds are just as varied. Sean Rae has experience in the insurance industry and in building design. Derick Craig was a financial analyst. And Connor Winn, the newest member of the team, worked for an energy company and has experience in media buying.
Setting themselves apart
Austin said it’s important for the firm to establish a strong brand as part of its effort to become Houston’s premier developer. Alexan is the brand of its luxury properties, while Windhaven is the brand of its Class B developments. Recently, Trammell Crow completed three Alexan developments: Alexan Cityside, Alexan Landing, and Alexan Stafford. It has built four other Alexan properties in Houston. The former property currently is in lease-up, while Alexan Landing recently has been sold.
The Alexan properties include a variety of amenities such as massage rooms, Internet lounges, video gaming stations, and wine tasting rooms.
“Wine bars are getting more and more popular in the Inner Loop in Houston,” said Austin. “So we wanted to bring that into our properties. We’ll hire a third party to come in and put on wine tasting classes.” The Alexan properties also provide a dizzying array of floor plans, with Alexan Piney Creek and Alexan Stafford offering 15 choices.
“We are really pushing the finishes to set ourselves apart,” said Austin. “Solid wood floors, granite countertops. I think our level of finishes puts us at a competitive advantage over other new apartments.” The floor plan choices, luxury finishes, and the wine bar concept are all part of Trammell Crow’s strategy for beating the competition.
This year, about 5,300 units will be built in Houston, according to research by Marcus & Millichap. Other reports suggest apartment completions will reach 7,000, up from 6,300 in 2006. The last report Austin saw claims that 17,000 units currently are under construction in the city. Even with new apartments under construction and the continued departure of hurricane evacuees, vacancy rates are expected to improve modestly in 2007 .
The city’s population and job growth are expected to be twice the national rate this year. Houston is expected to add 54,000 new jobs in 2007. Those factors are driving demand for rental housing in Houston.
Currently, Trammell Crow Residential has 12 developments under construction in Houston, said Austin. The firm will begin construction on another two apartment communities in the city, bringing the total number of units under construction this year to 4,600 units. The Houston team is well positioned to take advantage of a market in which more than 40 percent of residents are renters. The situation is unique in Houston because the city has no zoning laws.
The top challenges for the Houston team are keeping up with the pace of construction and coping with construction costs.
“Since Houston doesn’t have zoning and has a fairly short permitting process, we have to move quickly on projects. I don’t think a lot of development teams have that issue,” said Austin.
Additionally, the team has to forecast what the market may look like a year after the development is built, even as they are under the gun to get deals closed.
The heat is on
“Construction costs have gone up 20 to 25 percent,” said Ken Valach, who heads up operations for the firm in Texas, as well as Phoenix and Las Vegas. “The increases are just unprecedented. You have to be so careful when you commit to a number. But this is Houston, so you can’t be slow.”
Trammell Crow Residential is also looking to expand its presence in Texas with more developments in San Antonio. Valach said that market currently is experiencing some oversupply. If the firm puts together a solid team in San Antonio like it’s done in Houston, there’s no telling how fierce the competition will get.