More Roads to Lead Austin to the Global Stage
- Feb 03, 2021
Austin’s fantastic performance during the past cycle is about to receive a new boost. City officials passed Proposition A in late 2020; the program is designed to solve the problematic local public transit system. Through a permanent increase in property taxes, the city aims to raise $7.1 billion to invest in mass transit. This sum will provide the initial funding for the project—the city’s first light rail system, complete with 31 stations along 27 miles of track, along with expanded bus routes, shuttles to transit stations and new park-and-ride stations. Plans also call for electric bicycle fleets stationed at transit hubs and a new 20-block underground tunnel through downtown for trains and cars.
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Project planners estimate that the new transit options, built out over the next eight to 10 years, could eliminate 250,000 daily car trips. Another infusion of cash is expected through the Federal Transit Authority Capital Investments Grant program. We asked local investor Ari Rastegar, CEO of Rastegar Property Co., about the plan and its impacts on the local economy and the real estate market. In the interview below, he also discusses how his business strategy adapted to pandemic-induced needs.
A lot has happened since we last spoke in 2019. How have things evolved for your company during this time?
Rastegar: It should come as no surprise that last year required some adjustments, but the Rastegar team did a great job adapting to the temporary new normal. I cannot stress enough how important it has been over the last year to not get too attached to any particular process and remain adaptable.
The pandemic has and will continue to change everything around us and the only way to stay productive is to be flexible. Work hours have bled into mornings, nights, weekends—whenever they can be fit in—out of necessity. The Rastegar team understands this and that allowed us to have a fantastic business year in 2020.
How has the pandemic impacted your business strategy?
Rastegar: We have identified what we believe to be the best real estate buying opportunity of the last 100 years and that’s not hyperbolic. Investing in Class B vintage multifamily apartments in the American Sun Belt has proven to be a winning strategy, as they are both spacious and affordable. These apartments can be refurbished to have the feel and amenities of a Class A property, but with a Class B price tag. We have had strong rent collections amid the pandemic with this strategy.
Considering recent events, what do you have planned for 2021?
Rastegar: We had a fantastic 2020 and plan to build on our success into the new year. More Millennials are living at home right now than any previous generation, but as it comes time for them to finally move out, they’re not going to be able to afford a house or even an expensive, luxury apartment in the urban core. These young adults will flock to multifamily properties in Sun Belt cities like Austin, Texas; Phoenix; Raleigh, N.C., and Baton Rouge, La., which afford them more space at a reasonable price, with easy access to the urban core for work or nightlife.Let’s dive into the recently passed Proposition A program that is touted as the most ambitious transit plan ever proposed in Austin. What’s your take on the plan?
Rastegar: The passing of Prop A is fantastic news and will catapult Austin onto the global stage. For years, the biggest knock against Austin has been the lack of practical public transportation. With Proposition A, we are going to start seeing the city grow at a rapid pace. Major tech companies are ditching Silicon Valley for Austin en masse, and their executives and employees are coming here with them. Public transportation is going to play a huge role in servicing these new residents in their eventual commutes.
What does the project mean for the local real estate industry?
Rastegar: This is going to be great for Austin, as it will turn it into a mixed-use, walkable and accessible city. Property values along the light rail route are going to increase, so the time to get in is now.
Your company has currently more than 4.9 million square feet of commercial property classes under development, as well as various multifamily properties across the city. How does the infrastructure project affect your investment portfolio?
Rastegar: It couldn’t be better for us. Our properties are going to become more valuable as this light rail will make Austin an even more attractive city for those looking to move. We have an assembled site on South Congress where property value will increase considerably over the next decade, as the light rail is completed. This is fantastic for Austin, providing terrific, sustainable transportation to downtown, the airport and other dynamic parts of the city.
There are opponents to the plan who believe Proposition A is an improper use of taxpayer dollars, as with more people working from home, investing in light rail resembles investing in landline telephones. What would you say about their concerns?
Rastegar: This is such a short-sighted critique of the project. All the greatest cities in the world have many transportation options, and now, Austin can be added to that list. Construction will certainly be a temporary hindrance, but in the long term, Prop A will be a great catalyst for local businesses to thrive along the new transit corridor.
The city of Phoenix estimated $11 billion and 35,000 jobs followed within 0.5 miles of their light rail system since 2008, and I expect Austin to have an even greater return on investment, especially considering Tesla, Oracle, Facebook and countless other employees from top-tier tech companies are making their way to the city. Also, everyone is looking forward to decreased congestion on Interstate 35.
Are there any downsides to this project?
Rastegar: This light rail is exactly what Austin needs. The city is growing, and proper public transportation is the next logical extension for a city that is readying for more recognition on a global scale.