A rendering of a planned 64,000-square-foot creative office complex at 1141 Shady Lane in Austin as part of a joint venture of Saxum Real Estate and PlaceMKR — Courtesy: Saxum Real Estate
By Joshua Burd
Saxum Real Estate has landed in Austin for its first investment under the federal Opportunity Zone program, teaming with a local developer to acquire a site for a new ground-up office building.
The real estate investment and development firm, which is based in Summit, announced its purchase of 1141 Shady Lane in partnership with PlaceMKR. Located in East Austin, three miles from the city’s downtown, the nearly two-acre site is fully permitted for Saxum to build a 64,000-square-foot creative office complex, which will include 2,000 square feet of adjacent retail and restaurant space and some 9,000 square feet of outdoor courtyard space.
The partnership has preleased about 20 percent of the project.
“This acquisition provides our investors a tax-advantaged investment in one of the best-located Opportunity Zone sites within Austin and the United States,” said Anthony Rinaldi, managing principal of Saxum Real Estate. “Austin represents some of the strongest growth fundamentals in the country, and for East Austin to be included within the Opportunity Zone program provides an extraordinarily unique investment opportunity.
“Additionally, the acquisition continues to place Saxum at the forefront of the Opportunity Zone program.”
The deal comes nearly a year after Saxum launched a $100 million fund under the Opportunity Zone program, making it among the first in the region to do so. Created in late 2017 under the Tax Cuts and Jobs Act, the program provides major tax incentives for investors that redirect capital gains into certain low-income and distressed areas throughout the country.
Saxum expects to begin construction immediately at the Austin project, with a groundbreaking slated for July, the firm said. The property is part of the thinkEAST master-planned development within East Austin, offering live-work space, flexible studio space and services adjacent to the proposed rail project known as the CAPMETRO Green Line.
The developer hailed East Austin as the region’s cultural hub and as one of the most vibrant and diverse communities in the greater Austin area. The neighborhood is also a hotbed for millennials and for venture capital-backed technology companies.
The project at 1141 Shady Lane will represent the sole office supply immediately adjacent to some 875 multifamily units of planned development, Saxum said. Its partner, PlaceMKR, is a privately held real estate investor with offices in Austin and New York City.
“While the Opportunity Zone program has been heavily talked about over the last 12 months, we have found there is still a limited number of groups currently deploying capital,” said Sean Gilbert, Saxum’s director of acquisitions. “This has allowed us to lock up key sites in markets with significant growth fundamentals regardless of the Opportunity Zone designation.
“East Austin is a market we are particularly excited about given the increasing demand for creative office space in a market that currently has a sub-3 percent vacancy rate.”
The deal also marks Saxum’s first investment in the Texas market, where it has two other large-scale projects in its pipeline. The firm says it is pursuing other Opportunity Zone investments across the country, with a second such project scheduled to close in Philadelphia next month.