Where are we investing? ...a spotlight on Texas

It’s everyone’s favorite small-talk question at a cocktail party, “What real estate markets are you investing in?” Every investor knows it is all about location, location, location. The only thing you cannot change about a piece of real estate is where it is. We hear this question a lot too.

So where are we investing? The data and trends consistently point to the sunbelt region, or the “smile states”. This consists of the Southeast and Southwest and we also like the Midwest for its affordability, the Midwest is also generally less volatile during market shifts.

One of the top states that consistently meets our key indicators is Texas. We currently have an equity position in 14 investments in Texas
— Mark Khuri

We are long-term investors focused on demographic and employment trends and through this lens we implement our Recession Resistant Strategy – targeting assets we believe will continue to perform through an array of market outcomes. Given the tremendous uncertainty in the markets now and many economic indicators pointing to a slow-down in the future, we aim to reduce risk and protect our investments for a scenario where jobs are lost or a stock market correction inspires fear. In short, we want our investments to continue to perform during the next economic correction. 

With that in mind, we firmly believe that geographic diversification is a key component to achieving sustained and predictable investment performance. During economic downturns and recessions, real estate markets do not all react the same way. They do not adjust at the same time nor with the same volatility and they do not adjust for the same duration. 

Let me just note that no market is perfect, each has pros and cons and we prefer to invest in regions that have several positive attributes.

We look for these key indicators:

1) Population growth – where are people moving? Why are they moving there? Is the trend projected to continue?

2) Affordability and quality of life – can the median area income sustain the median cost of living? Does the region have a high quality of life?

3) Employment trends – Where are companies and jobs growing and relocating to? Is the trend projected to continue? 

4) Economic strength – what industry(s) support the local economy? What are the historical and projected economic trends? Growth? Stagnation? Decline?

5) Diversified employer base – what is the job base by industry sector in the region? Is the area supported by only a few industries or is it widely diverse?


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We currently have an equity position in 14 investments in Texas, 8 of these are in the Recession Resistant Fund. Texas continues to attract employees and employers to the region and there are many reasons why we believe it will continue to thrive for many years to come. 


1) As of recently Texas had an economy worth $1.6 trillion which accounted for 8.9% of the country’s total economy. This is second to California. 

2) Texas is the home to over 28,000,000 people and this is projected to rise to 40,000,000 in the next 25 years. 

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3) From 2010 to 2016 Texas added 867,000 new residents which was the highest number of migrants of any state. To compare, California was among the biggest net losers; it lost more than 380,000 residents. On average, nearly 60,000 Californians left their home for Texas every year from 2011 to 2015.

4) Over 75 companies from around the country have moved their headquarters to North Texas in the last 7 years, many are global powerhouses including: Toyota, Pizza Hut, Frito-Lay and Keurig Dr Pepper.

5) Texas has a relatively diverse employer base with no one industry encompassing more than about 15% of GDP. 


Join Managing Partner, Mark Khuri, for an update on some of the growth we are seeing in the Austin, Texas real estate market

Companies are opting to move to Texas to take advantage of the regions attractive cost of living, excellent schools, affordable housing and safe neighborhoods and close proximity to a major international airport, but one of the main drivers is that the Lone Star state does not have a state income tax or corporate income tax. This favorable tax structure is directly correlated to the surge of businesses relocating to Texas. 

Here are a just a few of the recent company shifts and expansions to Texas:

The PGA recently announced it was relocating to Texas after considered 212 possible locations, including staying in Palm Beach Gardens, Florida. The move will bring about 1,000 jobs to the region and they are now in works on a $500 million 600-acre mixed-use development in North Dallas which will include 2 golf courses, a convention center and hotel which is projected to open in 2022. The relocation is estimated to have an economic impact of more than $2.5 billion over the next 20 years based on a city-commissioned tourism feasibility study. The PGA of America will invest $30 million to build its 100,000-square-foot global headquarters and education facility. 

In 2017 Toyota Motor North America relocated more than 3,000 jobs to Plano Texas, a suburb just north of Dallas. These jobs came from headquarters in California, Kentucky and New York. In addition, they hired 1,200 new team members and noted that they found great talent in the local area. The move came with designing and building a massive 100-acre campus encompassing thousands of square feet of work space, a fitness center and 11 different places for employees to eat! North America Executive VP Chris Neilsen noted that the new location assists with integrating into a single logistics network. “We were three time zones apart from the Midwest to California; it’s a challenging way to run a business. Decisions that might have taken six months in the past now take six days”, he said.

Core-Mark, a Fortune 500 company, is the 2nd largest distributor to the convenience store industry with annual sales of $15.7 billion in 2017. They are based in San Francisco and recently announced plans to relocate its corporate headquarters in the first half of 2019 to Westlake Texas, a suburb north of Fort Worth and about 30 miles from Dallas. CEO Scott McPherson noted the fact that Dallas offers more favorable operating costs, lower taxes and a central location for Core-Mark’s nationwide business. 

In December, Fortune 500’s 6th largest U.S. company, McKesson Corp announced it will move its headquarters from San Francisco to Las Colinas in April. Los Colinas is located about 25 minutes north of Dallas and right near DFW airport.  The company is the nation’s largest pharmaceutical distributor, with more than 75,000 employees worldwide and revenue of $208 billion last year.  McKesson will be the 24th Fortune 500 company based in the Dallas-Fort Worth region which is third in the country for the number of Fortune 500 headquarters, behind New York City and Chicago.

Apple recently announced a major expansion of its Austin Texas campus. Apple already employs 6,200 people in Austin and the expansion will include an investment of $1 billion in development of the 133-acre campus. The new facility will initially accommodate 5,000 additional employees with room to grow to 15,000 jobs including engineering, R&D, operations, finance, sales and customer support. A 65% annual tax break is one attractive reason for Apple choosing Austin in addition to the high quality of life, low cost of living compared and lack of state income tax. 



It was recently noted that within Texas, 80% of population and economic growth in the past decade has been centered in what is known as the Texas Triangle. This essentially includes Dallas in the north, Houston in the east and San Antonio in the West. It contains 4 of the fastest growing cities in the U.S., is over 58,000 square miles and the home of over 17 million people. By 2025 the population is projected to reach 30 million people. Further, even during the last recession, in 2008 the 4 cities in the Texas Triangle were among the top 10 largest for job creation. 

Population growth is one of the key indicators we analyze when selecting a market to invest in. In 2017, six Texas counties (Harris, Tarrant, Bexar, Dallas, Denton and Collin) were among the top-10 population gainers in numeric terms, according to the Census bureau. We assumed that most of the population growth has been directly correlated to job growth. But what we found is interesting; the population growth is not simply resulting from people relocating for jobs.

From 2008-2017 about half of Texas's growth comes from the fact that births well outnumbered deaths during that period. Texas State Demographer Lloyd Potter noted, "Texas is a pretty young state, in terms of our age structure, and we're also a minority-majority state," meaning bigger families, Potter explains. "And so the result is, we have a pretty healthy natural increase" in the population. Potter also noted that, “California is the nation’s most populous state and it continues to grow at high rates but this growth is primarily the result of people moving from other nations and immigration. California is losing more residents than it is gaining from domestic migration, and is only growing because of immigration”.

With all the positive trends and growth also comes challenges. Changes in the rising cost of living, continued development and building, increasing income gaps, immigration and border governance policies, international trade policy and the volatility in the oil and gas industry will all be factors in Texas’s future and ability to continue to lead the nation in overall growth.