Austin Convention Center Expansion and Hotel Growth
Austin’s convention center expansion and infrastructure growth are strengthening the city’s long-term hotel demand outlook and investor confidence.
Barron’s - It’s a basic fact of real estate investing that rising interest rates are bad for property prices. The same goes for real estate stocks. They’re down about 15% from their highs of early 2022—before interest rates started rising from pandemic-induced near-zero levels. The sharp rise in bond yields in the past month added to the pain. The largest real estate fund, the $66 billion Vanguard Real Estate exchange-traded fund, is down 7% in that time. Its five-year average annual return is just 1%, thanks mainly to a brutal 2022, when it lost 26%.
Greg Friedman, CEO of real estate investment firm Peachtree Group, is bullish on the hospitality sector and notes the lack of new supply and the fact that young adults today love to travel, creating demand. His firm is developing hotels in Dallas and Austin, Texas.
“Senior debt positions secured by real estate are very attractive,” says Friedman. Investment firms can buy loans at a discount, and they either earn attractive yields or, in the event of default, may end up owning the asset, he says. Credit investments can be safer than equity because lenders get paid ahead of stockholders in a restructuring.
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