Texas Real Estate Vets See Gold In Distressed Commercial Property

Mar 30 2011 | 1:11pm ET

Two Texas real estate vets see an opportunity in Lone Star state commercial property and are launching the $150 million State of Texas Real Estate Fund to take advantage of it.

STXRE managing directors Mark Jordan and Kevin White say their fund will primarily target high quality distressed office, industrial and raw land in Austin, Dallas, Houston and San Antonio.
Jordan, owner of JP Realty Partners and Sooner National Property Management, has completed over $700 million in real estate transactions during his 20 years in the business. White has 14 years’ experience in Texas real estate, including six years running KGW Real estate, a commercial real estate firm providing services to commercial tenants and investors.

The new fund intends to benefit from the relatively rapid recovery of the Texas economy, which is growing at a rate of 4% annually—four times as fast as the rest of the country. Asked to explain the Texas recovery, White told FINalternatives "It’s all about jobs.” The state took the top five spots in a recent Forbes ranking of Best Cities for New Jobs. Houston alone added 260,000 new jobs in 2010.

STXRE will acquire properties that are in distress typically due to low occupancy. The buildings will be leased up and sold within two-to-three years.  Its managers characterize STXRE as a “pure capital gain play” with a projected IRR of 20%-22%.

According to the fund web site, STXRE expects to utilize 50% to 70% debt in addition to equity raised, to invest $10 to $12 million per transaction, and to have a fund life of five years.

White says the fund is fielding serious inquiries from foreign investors, “We are talking to investor groups throughout the U.S, Asia and Europe.  The weakening dollar has given foreign investors leverage in purchasing U.S. real estate.  Last year alone, the Chinese yuan strengthened 3.3% against the U.S. dollar.”

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