The Domain in Austin, TX, is home to upscale retail, recreation, residences, and some of the world’s most prominent corporations. So what happened when HPI and Stonelake Capital Partners set out to develop a speculative office tower in The Domain? With a lot of strategic planning, Domain Tower, an 11-story, 310,000 square-foot office building with a 2,400-space garage, was constructed on time, on budget, and leased to an A+ credit-rated technology company for 15 years.
In 2014, HPI saw a shift in the office market toward urban mixed-use locations. Tech companies placed a premium on spaces that would appeal to tech-savvy millennials, wanting to be located in 24-hour districts affording them a live-work-play lifestyle. In Austin, The Domain and the Central Business District (CBD) emerged as the preferred locations for young tech talent to do just that. In response to these trends, HPI went in search of a development site in The Domain; however, almost all the land was controlled by one owner. Stonelake had recently acquired a large building sitting on nearly 30 acres at the south end of The Domain, which was leased to IBM.
The strategy was simple, but the planning was complex: HPI approached Stonelake about converting a portion of the surface parking lot into structured parking, thus freeing up land to construct a premier office tower situated at the front door to The Domain. Some considerations included:
- Phasing construction to first build half of the parking garage to immediately provide 1,200 required parking spaces for IBM and enable the construction of the office tower and final half of the garage
- Minimizing the impact to IBM during construction
- Underwriting a speculative building with an aggressive IRR goal on a 5-year hold
After the site development permit was obtained, site work and construction of the western half of the parking garage commenced. Once Certificate of Occupancy was issued for the first half of the garage, IBM’s parking requirements were met, and Stonelake could also begin construction of its 350-unit apartment joint venture with StreetLights Residential.
In December 2017, while still under construction, the building was fully leased to a single tenant, and in June 2018, Certificate of Occupancy was obtained on the tower and the remainder of the garage, and the project was delivered to the tenant. The result was an IRR more than double that of the underwriting on a 3-year hold with an equity multiple 150% higher than originally underwritten.
As the Office Partner, Sam Houston leads all office development and investment for HPI. Sam helped grow HPI’s office portfolio from 2 people and 30,000 SF in 1995 – to overseeing a management and leasing team of 90 people, with an active portfolio of over 5 Million square feet of institutionally and privately-owned office assets across Austin, Dallas, and San Antonio. Sam has been directly involved in developments, acquisitions, and dispositions of office projects with a total asset-value of almost $1 Billion. Sam has overseen the development of over 3 Million square feet of office projects, including Barton Oaks Plaza III & IV, San Clemente at Davenport, and the most recent Domain Tower. Prior to joining HPI in 1995, Sam served as project leasing director for Charter Companies in Austin. For more than 4 years he worked as a leasing agent for Capital Associates in Raleigh, N.C. and was a broker at Cushman & Wakefield’s Raleigh office from 1987 to 1989.
Austin , TX 78746
Proof of Concept - Developing The Domain's Southend District
Runi graduated from The University of Texas at Austin with a Bachelor’s of Science degree in Civil Engineering and a Master’s of Science degree in Construction Engineering & Project Management. She joined HPI in 2016 to focus on ground-up construction, primarily in Central Texas. Runi serves as the Owner’s Representative on industrial, office, and senior living construction projects varying in size from $2M – $100M. She collaborates with contractors, design professionals, city officials, utilities, legal personnel, property managers, and many other project team members from feasibility through design and permitting, construction, and closeout. Prior to joining HPI, Runi was Senior Construction Manager for Hanger Clinic, the nation’s leading provider of prosthetic limbs and orthotic devices, managing all aspects of construction for the 800+ national portfolio.
Austin , TX 78746