Q3 2011 Feature Article - Introducing HPI Residential

As we all know too well, there has been many less than ideal changes in the real estate market over the past couple of years. Many segments of the market continue to lag far behind levels we grew accustomed to just a few years ago. Single family housing is suffering and will continue to do so for some time before it rebounds. Retail leasing and development are still lacking, with small signs of improvement. Office and industrial leasing is beginning to pick up significantly with many new jobs being created thanks to relocations to the Austin area. Despite the small glimmers of hope, we are still trailing far behind recent historical levels.

The deafening reality realized above, coupled with the lack of any new apartment development over the past 3 years, has created a pent up demand for multi-family rental housing. The Austin market has historically absorbed about 5,000 to 6,000 units per year in a normal healthy market. Remember healthy markets? Over the past 3 years less than 4,000 units total have been delivered and these, along with any surplus units on the market, have been completely absorbed. As a result, occupancies have climbed to well over 96% city-wide and rents have increased over 12% in the past 18 months. Occupancy is expected to push up to between 97% - 98% with rents climbing another 6% - 8% over the next year. Not great news for renters, but excellent news for landlords and developers. Obviously, there is a great demand for new rental housing.

To meet that demand, HPI has partnered with 3 other local developers to form HPI - RESIDENTIAL. This new entity is seeking to develop apartment communities here in Austin, as well as, other markets where opportunities and need exist. Our first two projects are located in Northwest Austin. One is located on Spectrum Drive at Parmer Lane. This site is located across the street from the HPI's flex office project housing Blizzard Entertainment, AT&T and others. This project will contain 334 units. Our second project is located on Lakeline Boulevard, about one block East of Lakecreek Parkway, across from the Lakeline Rail station. This property will contain 325 units. Neither project has been named yet as we are still working through our conceptual marketing plans at this time.

Both projects will be class "A" properties with nine floorplans, ranging from one bedroom units with 657 square feet up to three bedroom units with 1315 square feet. The properties will offer full amenity packages including large pools with outdoor grilling areas, fountains, party rooms, gathering areas, fitness centers, gaming rooms, wi-fi, demonstration kitchens, business center, and hiking trails. The units will feature 9 and 10 foot ceilings, vinyl "wood" plank flooring, patios and balconies, crown molding, granite countertops, cultured marble vanity tops, carpet, and ceramic tile entries and baths. The properties will offer services and amenities that will place them at the top of their submarket.

We currently anticipate breaking ground in December or January. Our goal is to start preleasing by mid-summer 2012 with construction completed in early 2013 on both projects. While we work through the permits, construction, and lease up of these first two properties, we will continue to indentify additional sites for potential development here in Austin and in other markets, as well.