Strategy

 
Heiser Development offers the service of a major Fortune 500 Firm with the personal attention that only a boutique shop can offer.  Due to the company’s vertical integration from architecture through management, Heiser Development creates synergy through the consolidation of multiple firms under one roof. This further ensures that interests are aligned throughout the process resulting in cost savings to the investor.

We believe the current environment will lead to arbitrage opportunities and generate long-term sustainable growth and sound fundamentals of back to basics real estate. Our concentration will be focused in the Texas Markets, mainly the four major MSA’s: Austin, Dallas, Houston, & San Antonio. 

Texas, due to its strong market fundamentals, boasts a well diversified economy which will help weather the current economic situation relative to the other areas of the nation. We did not see the run up in prices that the two coasts recognized over the past five years, setting the region in a great position to weather the economic condition and be among the first areas to bounce back when fundamentals return. 

Heiser Development will concentrate to areas around large employment hubs and medical centers. The long term plan is to be diversified across the state and obtain a critical mass of properties in growth corridors.

Deal size will be focused in the $15 MM and under arena; this will keep the company under the institutional level where there is less competition and higher returns.  The average equity commitment is estimated around $3,000,000 per deal.  Heiser Development will co-invest 5% or more of its own equity in each deal.

Hold periods will be based upon long term fundamentals with roughly 7 year horizons; if opportunities exist to sell properties at a premium then hold periods will be shortened. Investment criteria will target stabilized cash on cash returns of 9% and leveraged returns in excess of 15%.

The focus will be a two pronged approach:

• DISTRESSED ASSETS
• CASH FLOWING ASSETS

 

DISTRESSED ASSETS
Due to the illiquidity of the capital markets today, there are a multitude of factors that make this arena attractive. 
First, the cap rate compression which was prevalent over the last five years has caused many stabilized properties to miss debt service, causing a loan covenant trigger placing the property into special servicing or foreclosure.
Second, construction loans that are coming due will miss projected rents and need to be rolled to permanent financing.  The tightening of lending standards is mandating higher returns requiring the borrower to trigger a capital call.   
The down fall is there is a substantial amount of equity lining up on the sidelines for this play, and returns will be compressed relative to what the market is projecting. 


CASH FLOWING ASSETS
Cash flowing assets will be focused on assets in class A and B+ infill locations with potential rehabilitation or construction plays to optimize the property’s cash flow. Due to the lack of construction financing in today’s market, existing cash flow is a key factor to financing vehicles. This tactic combines development returns with the stability of a cash flowing asset.

We manage residential and commercial properties in Austin, Texas. Interested in how we can help manage your property? Give us a call or send us an email today!