Raub Report: Welcome to the New Year!
January 7, 2021
Happy New Year! We are happy that the year is new, because the old one we just left is best viewed in the rearview mirror. Goodbye Year Too Zero and Hello Year 2021 – Year Number 1. Now is the time of year for resolutions and forecasts.
One very clear trend that will be affecting our lives this year and years to come is the relocation of major companies to Texas. Houston got the HQ relocation of HPE, Hewlett Packard Enterprise. This was easy as they already had 2600 employees in Houston compared to 1000 in Palo Alto. Then, Tesla relocated to Austin, as a result of Elon Musk’s very public criticism of California and its Governor for anti-business attitudes and policies. Musk had previously announced his new electric “Cybertruck” facility will be built in Austin. Then, Oracle, a major enterprise software provider that practically founded Silicon Valley, also decided to relocate its headquarters to Austin. Its founder, Chairman and 35% owner, Larry Ellison, also happens to be a 21% share owner in Tesla which has made a big contribution to his $81.5-billion net worth. His friend Elon, is the third richest man in the world at $148B, according to Forbes, which makes him the richest man in Texas. Oracle already had a major presence in Austin, so relocating the corporate flag will mean a few more very high paying executive positions in Austin, but not a wholescale move of the company. Then, Dallas received the relocation of Charles Schwab from San Francisco, which began pre-Covid and also CBRE, Commercial Real Estate Services just decided to relocate from LA to Big D this year. Dallas even got The Rose Bowl to move from Pasadena to Jerry World! Well, for this year at least.
San Antonio has not captured any major relocations at this time, simply because we do not yet have the intellectual and technology infrastructure our Texas sister cities have. You can see that Oracle and HPE already had a major presence in their new HQ cities, making their relocation very easy. Last time SA had a major relocation was AT&T back in 1996, but then it left for Dallas in 2008. We have netted Toyota Texas, Navistar and NSA over the past years and many smaller relocations and start-ups. We are a proud partner in the Austin-San Antonio Corridor and we will benefit greatly in the future years from the great Texas business climate, our proximity to Mexico and just being a really great place to live and raise families.
Investors are lurking, hoping they will see discounts in investment property opportunities in the coming year because of the distress in rental income from the Days of Covid. Will they see discounts up to 35%? Or are owners not going to turn into forced sellers because they have been smart operators, taking care of their tenants and properties and lenders. Only time will tell. From IRC’s viewpoint, we just looked back at the performance of our income properties under our management and leasing. I was very surprised to see that our portfolio overall only had a 1.5% reduction gross income comparing 2020 to 2019. We also have 7 of our 11 properties at 100% occupancy and sold a medical office building this past year. At this time, we do see distressed tenants in particular segments, like restaurants and fitness centers. However, we do not see distressed selling. With the vaccine rollout in the coming months, this should eventually relieve the pressure on small businesses. We are currently marketing a vacant restaurant location for lease and have had a surprising amount of interest. I think this is an indication that in San Antonio we are strong and resilient and we will not be kept down from our work and living our lives.
If we have the battle cry of “Remember the Alamo” in our DNA, then we can certainly come back even stronger and more successful from the battle of the pandemic. Happy New Year to you and your families! May you be safe and prosper in Year One! Welcome 2021!