PSP Investments Backs Development of Tallest Building in Texas
The Capital of Texas is making room for a 1,022 feet skyline that’s to include a public space for eatery, luxury apartments, Class-A office space and the 1 Hotel Austin — with an expectancy of completion in late 2026.
Development partners Lincoln Property Company and Kairoi Residential revealed Waterline to be a 74-story mixed-use high-rise, underway in downtown Austin on Sept. 6, 2022. Both partners are based in Texas, with LPC being based in Dallas and Kairoi headquarted in San Antonio. The Public Sector Pension Investment Board (PSP Investments), one of Canada’s largest pension investment managers, is the major contributor to the project.
“We are pleased to be increasing our portfolio exposure to high conviction markets and green assets in one of the fastest growing cities in the United States,” said Carole Guérin, managing director for real estate at PSP Investments. “This investment provides significant upside potential as the city of Austin continues its expansion to become a top-tier U.S. market that offers high quality of life, a supportive business environment, exciting employment opportunities and a hotbed for technology and innovation.”
Waterline’s location at 98 Red River St. will cover 3.3 acres near the intersection of Waller Creek and Lady Bird Lake. With 352 luxury apartment homes, 700,000 square feet of office space and the 251-room 1 Hotel Austin, the development team is after a LEED Gold certification to have a healthy, highly efficient, and cost-saving green building. According to development partners, Waterline will be the first Texas location for the global sustainability-focused hospitality and lifestyle brand of SH Hotel Resorts.
A global architecture firm, Kohn Pedersen Fox, will design floor-to-ceiling windows, warm textures and native stone at the Waterline. The firm has done work in New York City for 55 Hudson Yards and One Vanderbilt towers.
“To achieve a successful mix of program and planning ideas, we leveraged the unique character of the waterfront and the Rainey District,” said Andrew Klare, KPF director. “Sculptural columns draw inspiration from sacred species of trees in Austin, while native stones and landscaping speak to the character of the creek across the site to Red River Street. With the spirit of the place set, mixed-use program requirements needed to be thoughtfully placed to create hierarchy of space and activity.”
The construction loan for the project was footed by Blackstone Mortgage Trust, Inc. (BXMT)
“We continue to see strong demand for new, best-in-class residential, office and hospitality assets in high growth markets like Austin and are excited to support this trophy, mixed use development that will make a meaningful contribution to the community as well as the Austin skyline,” said Katie Keenan, Chief Executive Officer of BXMT. “We look forward to continuing to lend on low-leverage, high-quality projects and serving as a partner to well-capitalized, experienced sponsors like LPC, Kairoi, and PSP Investments.”
The 24,000 square feet ground floor of the building will be for restaurant space that affords visitors a view over Waller Creek and the Waterloo Greenway, separated by a floodplain forest.
1 Hotel Austin will hold the next 13 floors, including a ballroom and meeting spaces on the 14th floor and a rooftop pool with food and beverage service on the 16th floor.
The section for office space will have 27 stories with a 14th-floor amenity deck, encompassing 24,000 square feet of outdoor space with a bar and lounge, indoor meeting spaces and a prep kitchen for special occasions.
Also, office tenants will have access to a 7,000-square foot fitness center on the second floor featuring cardio equipment and weights along with a yoga and dance studio.
The top 33 stories will contain upscale residential homes, offering residential access to two pools on the 41st floor along with a lounge, bar, kitchen and co-working space. A movement studio, workout studio and steam room will be located one floor above along with soaking tubs, hammocks, a BBQ pit and a communal dining area.
“Waterline will offer a truly unique experience with unrivaled views, world-class amenities and a thoughtful design that connects the building’s interior with the project’s unique natural surroundings throughout the building,” said Michael Lynd Jr., CEO of Kairoi Residential. “We’re thrilled to introduce Austin’s next iconic project.”
Last week, PSP Investment released a press release revealing plans for this project:
Development partners Lincoln Property Company (LPC) and Kairoi Residential have broken ground on a 74-story mixed-use high-rise called Waterline in downtown Austin that will become the tallest tower in Texas when it opens in late 2026. The Public Sector Pension Investment Board (“PSP Investments”), one of Canada’s largest pension investment managers, is the main equity partner in this major development project.
Located at 98 Red River St., Waterline will extend 1,022 feet above a lush 3.3-acre campus near the intersection of Waller Creek and Lady Bird Lake.
Targeting LEED Gold certification throughout the building, the project will include 352 luxury apartment homes; 700,000 square feet of office space; and the 251-room 1 Hotel Austin — the first Texas location for the global hospitality company SH Hotel Resorts’ sustainability-focused 1 Hotels brand.
Reaching new heights
Waterline is the third downtown Austin high-rise that LPC has co-developed and broken ground on in the last three years. Sixth and Guadalupe, also co-developed with Kairoi Residential, will open next year with 66 floors of residences, offices, and ground-level retail. The Republic, a 48-story office tower adjacent to Republic Square Park, is scheduled to open in late 2024. When completed, all three buildings will be taller than any high-rise on the ground in Austin today.
“Downtown Austin offers one of the most dynamic markets and skylines in the nation, and we’re excited to help drive its ongoing transformation,” said Seth Johnston, Senior Vice President of LPC in Austin. “Waterline marks a new milestone for downtown not only because of its height but also because of the positive impact this project will have on improving connectivity, enhancing public amenities, and attracting more people to this beautiful area of downtown.”
Situated on the eastern bank of Waller Creek along the Waterloo Greenway, Waterline will serve as a new gateway from the Central Business District to the Rainey Street district. The development will add two new pedestrian bridges over the creek from the west, as well as three additional public pedestrian and bike access points to the Waterloo Greenway from the east.
The development team will contribute $1 million to the Waterloo Greenway Project to help fund improvements to the 1.5-mile urban trail that connects the University of Texas at Austin to Lady Bird Lake.
On the trail of exceptional urban living
Designed by Kohn Pedersen Fox — a global architecture firm with a portfolio that includes the 55 Hudson Yards and One Vanderbilt towers in New York City — Waterline will feature floor-to-ceiling windows, warm textures, and native stone.
“Waterline will offer a truly unique experience with unrivaled views, world-class amenities and a thoughtful design that connects the building’s interior with the project’s unique natural surroundings throughout the building,” said Michael Lynd Jr., CEO of Kairoi Residential. “We’re thrilled to introduce Austin’s next iconic project.”
The building’s vibrant ground floor will feature 24,000 square feet of publicly accessible retail and restaurant space overlooking Waller Creek and the Waterloo Greenway, separated by a floodplain forest to protect the natural experience for trail users.
1 Hotel Austin will occupy the next 13 floors with a ballroom and meeting spaces on the 14th floor and a rooftop pool with food and beverage service on the 16th floor.
The office portion of the tower will occupy 27 stories with a 14th-floor amenity deck featuring 24,000 square feet of landscaped outdoor space along with a bar and lounge, indoor meeting spaces and a prep kitchen for special events. Office tenants also will have access to a 7,000-square foot fitness center on the second floor featuring cardio equipment and weights along with a yoga and dance studio.
Upscale residential homes will fill the building’s top 33 stories offering residents access to two pools on the 41st floor along with a lounge, bar, kitchen, and co-working space. A movement studio, workout studio and steam room will be located one floor above along with soaking tubs, hammocks, a BBQ pit, and a communal dining area.
“We are pleased to be increasing our portfolio exposure to high conviction markets and green assets in one of the fastest growing cities in the United States,” said Carole Guérin, Managing Director, Head of Americas, Real Estate Investments, PSP Investments. “This investment provides significant upside potential as the city of Austin continues its expansion to become a top-tier US market that offers high quality of life, a supportive business environment, exciting employment opportunities and a hotbed for technology and innovation.”
Blackstone Mortgage Trust, Inc. (“BXMT”) provided the construction loan for the project.
“We continue to see strong demand for new, best-in-class residential, office and hospitality assets in high growth markets like Austin and are excited to support this trophy, mixed use development that will make a meaningful contribution to the community as well as the Austin skyline,” said Katie Keenan, Chief Executive Officer of BXMT. “We look forward to continuing to lend on low-leverage, high-quality projects and serving as a partner to well-capitalized, experienced sponsors like LPC, Kairoi, and PSP Investments.”
Eastdil Secured served as the financing advisor to the sponsors.
ABOUT LINCOLN PROPERTY COMPANY
Lincoln Property Company (LPC), founded in 1965 by its chairman Mack Pogue, is a privately-owned real estate firm involved in real estate investment, development, property management and leasing worldwide. Lincoln’s international reputation for successful management of their own properties quickly attracted a large client base of owners and investors who recognized the value that LPC could provide in development, property management, brokerage, investing, advisory, construction management, engineering and all real estate consulting services. LPC has developed over 148 million square feet of commercial space with an additional 8 million square feet currently under development. Today, LPC is one of the most respected and diversified service firms in the United States, serving a growing client base that reaches coast-to-coast, as well as into Mexico and Europe.
ABOUT KAIROI RESIDENTIAL
Kairoi Residential is a premier, vertically integrated, multifamily investment, development, and property management company headquartered in San Antonio with offices in Austin and Denver. Since 2003, the partnership has transacted on $7.7 billion across 65,000 multifamily units in many cities and states around the country.
ABOUT BLACKSTONE MORTGAGE TRUST
Blackstone Mortgage Trust (NYSE:BXMT) is a real estate finance company that originates senior loans collateralized by commercial real estate in North America, Europe, and Australia. Our investment objective is to preserve and protect shareholder capital while producing attractive risk-adjusted returns primarily through dividends generated from current income from our loan portfolio. Our portfolio is composed primarily of loans secured by high-quality, institutional assets in major markets, sponsored by experienced, well-capitalized real estate investment owners and operators. These senior loans are capitalized by accessing a variety of financing options, depending on our view of the most prudent strategy available for each of our investments. We are externally managed by BXMT Advisors L.L.C., a subsidiary of Blackstone. Further information is available at www.bxmt.com.
ABOUT PSP INVESTMENTS
The Public Sector Pension Investment Board (PSP Investments) is one of Canada’s largest pension investment managers with C$230.5 billion of net assets under management as of March 31, 2022. It manages a diversified global portfolio composed of investments in public financial markets, private equity, real estate, infrastructure, natural resources and credit investments. Established in 1999, PSP Investments manages and invests transferred to it by the Government of Canada for the pension plans of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, PSP Investments has its principal business office in Montréal and offices in New York, London and Hong Kong. For more information, visit investpsp.com or follow us on Twitter and LinkedIn.
Global architecture firm Kohn Pedersen Fox also posted a press release and revealed images of Waterline which you can view here.
Financial details were not released but Commercial Observer reports that Blackstone Mortgage Trust is providing the $675 million construction loan to build the 74-story mixed-use tower.
PSP's development partners Lincoln Property Company and Kairoi Residential are going to oversee this mega project and they both have excellent reputations.
Once Waterline is completed, PSP and its partners will own one of Austin's most iconic towers.
Carole Guérin, Managing Director, Head of Americas, Real Estate Investments, at PSP Investments commented:
“We are pleased to be increasing our portfolio exposure to high conviction markets and green assets in one of the fastest growing cities in the United States. This investment provides significant upside potential as the city of Austin continues its expansion to become a top-tier U.S. market that offers high quality of life, a supportive business environment, exciting employment opportunities and a hotbed for technology and innovation.”
She's spot on, Austin is booming and there is more upside:
Quality of life has been a motivating factor for remote workers since the pandemic. Then there are the professional draws. Some 100,000 employees are expected to head to Austin’s downtown core over the next three years. Facebook’s parent company Meta just signed the largest lease in Austin’s history, and other companies including Tesla and Samsung are establishing stronger footprints there. It is not only tech companies—a number of private-equity firms are also opening up shop in Austin and bringing relatively young employees in with their families.
By the way, PSP isn't the only one investing in mixed-use projects in Austin.
In May, Ivanhoe Cambridge announced a partnership with Greystar to build the new Symphony Square mixed-use project in downtown Austin:
Ivanhoe Cambridge, a global real estate subsidiary of public pension fund manager Caisse de depot et placement du Quebec, has interests in more than 1,000 buildings in the residential, office, retail, industrial and logistics sectors around the world.
The investment firm has recently broken ground on a seven-story commercial office building in Texas, a key element in the new Symphony Square mixed-use project in downtown Austin. Occupancy is expected in the spring of 2023.
In partnership with Greystar Real Estate Partners, the building will include 15,000 square metres of Class A office space and 500 square metres of restaurant and retail on the ground floor. The Symphony Square project also includes The Waller, a 32-storey residential tower already under construction.
Located in the heart of the burgeoning Austin Innovation District and across the street from the landmark Waterloo Park and Moody Amphitheater, Ivanhoé Cambridge says the building known as 1121 at Symphony Square will embrace the concept of “live, work and play.”
“Created with today’s workforce in mind, 1121 at Symphony Square will foster creativity by offering flexible work environments and unique open-air spaces that accommodate solo or collaborative work, and even lab spaces,” the company said.
Tenants will be able to link to The Waller residential tower next door via a fifth-floor bridge, giving them access to an exclusive 6,000-square-foot roof deck and a two-storey fitness center equipped with turf lawn, a lap pool, locker rooms and yoga room. The Waller also offers private balconies for residential tenants on floors one to four, and end-of-trip facilities that include bike storage.
“Ivanhoe Cambridge is happy to bring its vision of the creative office of the future to life in Austin with 1121 at Symphony Square,” said Jonathan Pearce, executive vice-president of leasing and development. “Amenities such as the terrace, fitness center, and pool deck will offer a unique indoor-outdoor experience that promotes wellness. Our future customers will undoubtedly benefit from a vibrant and creative working environment that fosters a sense of community and collaboration, as well as drives productivity and connects them to Austin’s rich culture.”
The project, designed by R2L: Architects based in Washington, DC., is intended to achieve LEED Gold certification. Austin firms Page and TBG Partners are responsible for the building’s interior design and landscape architecture respectively.
Ivanhoe Cambridge’s attraction to Austin is not surprising given the optimistic demographic and economic surveys recently released.
According to a report from Chicago-based Jones Lang LaSalle Inc., the state government and University of Texas provide a solid foundation for Austin, even during economic downturns.
“While the publicity of the large employers moving into the city is important, the state government and the university continue to serve as a sustained employment base for now and the future.”
Austin’s continued growth in public sector and university employment underpins demand for quality rental residential developments among the city’s young population. One study says 30 per cent of Austin’s population is in the prime rental age group of 25 to 34 years.
Greystar’s director of development, Matt Stevenson, says the Symphony Square joint venture with Ivanhoe Cambridge matches the lifestyle needs of this prime demographic with prospective employers. “1121 at Symphony Square presents a remarkable opportunity for a tenant looking to attract and inspire top talent.”
In the meantime, Ivanhoe Cambridge has other commercial partnerships underway in Texas, indicating the company’s continued confidence in the state’s prospects.
In a joint venture with Hines Interests Limited Partnership, the company opened a 47-storey, one-million-square-foot Class AA office tower in downtown Houston late last year, called Texas Tower. Privately-held Hines has developed or otherwise acquired properties comprising over 485 million square feet. It currently manages 622 properties totalling 256 million square feet.
Similar to Symphony Square, Texas Tower is forward-thinking in its overall design and tenant amenities.
“Texas Tower features a grand, activated and hospitality-centric lobby, flexible workspaces and innovative common-area designs,” Ivanhoe Cambridge said in its release. “Designed by Pelli Clarke & Partners, the building is built to the highest standards that Hines and Ivanhoe Cambridge have ever developed in Houston, including LEED Platinum, WiredScore and WELL Building Standards.”
In June 2021, Ivanhoe Cambridge also entered a joint venture with Los Angeles-based Mount Auburn Multifamily. Together, the two companies hope to expand their exposure to the Austin residential market, targeting projects with 200 apartment units or more.
It's worth noting that Canada's large pension funds are not only investing in iconic projects in Austin and other cities in Texas and around the world, but they are doing so in a responsible way, focusing on green assets that offer top amenities and partnering up with world-class partners who share their vision.
When we talk about ESG at Canada's large pension funds, look closely at what the real estate divisions are doing because that is one huge area where they are lowering their carbon footprint in a significant way.
Below, FOX 7 reports that once complete, the Waterline will be the tallest building in Texas and it will also do some big things along Waller Creek. Canadian pensions are continuing their tradition of funding some of the world's coolest skycrapers but now they are doing so in a much better and sustainable way.
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