TIER REIT Inc. is expanding the borders of the Domain — and considering adding 1 million more square feet of office space — in a plan to vastly grow what many people consider to be Austin’s “second downtown.”
The Dallas-based real estate company confirmed this week that it formed a joint venture with Endeavor Real Estate Group to purchase two office buildings totaling 240,000 square feet near Burnet Road and North MoPac Expressway. The 9.5-acre site could eventually be redeveloped to add 1 million square feet of additional office space in a tight sub-market already crowded with tenants such as Facebook Inc., Indeed Inc. and Amazon.com Inc., among others.
Previously known as Stonecreek, the buildings purchased by TIER and Endeavor have been rebranded as Domain Point I and II and officially incorporated into the Domain. TIER owns 96.5 percent of the interest over the site, and Endeavor owns the rest. It’s the first time the two real estate powerhouses have formed such a partnership, according to TIER.
“Looking forward, we are excited by the opportunity to continue creating value within Austin,” said Scott Fordham, TIER REIT CEO and president, in a statement.
With 2.1 million square feet of office space already standing or under development in the Texas capital, TIER is now one of the top office landlords in Austin among publicly traded real estate companies.
The combined assessed value for both Domain Point properties was about $64 million last year, according to the Travis Central Appraisal District.
TIER (NYSE: TIER) did not disclose the seller, but according to Travis County records, the property was previously owned by CH Realty VI/O Austin Stonecreek LP, which shares an address with Dallas-based Crow Holdings.
Core Logic Inc. is the largest tenant at Domain Point I, located at 11902 Burnet Road. Charter Communications — which offers Spectrum cable and was previously known as Time Warner Cable — is the largest tenant at Domain Point II, located at 11921 North MoPac Expressway.
About 90 percent of the Domain Point is leased at rents “significantly below market” rates, Fordham said in Feb. 13 conference call, the day after TIER announced its fourth-quarter financial results. That gives TIER wiggle room to raise rents to market rates or use the space to accommodate its existing or potential tenants in the short term.
In the long term, it’s considering completely redeveloping the site. Already it’s reviewing conceptual designs for redevelopment of Domain Point.
Meanwhile, TIER is making progress on other spaces nearby. The company said Domain 12 is fully designed and permitted. Domain 9 and 10 will be designed and permitted by the end of the first quarter. And it’s reviewing conceptual designs to revamp Domain 3 and 4, home to Blackbaud Inc. and Accruent LLC, respectively.
“With significant tenant demand, limited competition citywide and no competition in The Domain, we anticipate being in a position to announce leasing and construction commencement of one or more of these buildings [Domain 9, 10 or 12] later this year,” Fordham said.
Construction is already underway on Domain 11, a 324,000 square-feet tower that HomeAway Inc. has entirely leased for its new headquarters.
In downtown Austin, TIER is partnering with Invesco Real Estate and Cielo Property Group to develop a 29-story office tower called Third + Shoal. About 90 percent of the tower is pre-leased to tenants including Facebook, a prominent law firm and a Fortune 50 financial institution.
Currently the Austin market accounts for about 26 percent of TIER’s net operating income, said Scott McLaughlin, senior vice president of investor relations. That percentage should grow to about 40 percent once all of its current developments here are complete, he said.
“We’ve always known Austin is a special city,” Fordham added in a statement. “And we are pleased to see its prominence grow not only within our portfolio, but also as one of the nation’s most desirable places to live, work and play. Our existing ability to develop at least 1.2 million square feet inside The Domain, plus future redevelopment opportunities, positions us for significant additional value creation opportunities within Austin.”
The List: Austin’s largest multitenant office parks
Ranked by 2017 Total rentable s.f.
Rank Property 2017 Total rentable s.f. 1 The Domain 1,595,382 2 Broadmoor Austin 1,107,224 3 7700 Parmer 936,398 View This List