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Shorenstein capitalizes Austin office development

The San Francisco-based private real estate investment firm will inject fresh capital into the development of two office buildings within a vast mixed-use community owned by Deutsche Asset & Wealth Management and Endeavor Real Estate Group.

Shorenstein Properties has formed a partnership with Deutsche Asset & Wealth Management (formerly RREEF Real Estate) and local developer Endeavor Real Estate Group to capitalize the development of two office buildings within a 304-acre mixed-use community called The Domain, located in Austin, Texas. The San Francisco-based office owner and operator completed the capitalization on behalf of its latest real estate fund, Shorenstein Realty Investors Ten, which raised $1.233 billion of equity in 2011 and now is more than 50 percent invested. Terms of the partnership were not disclosed.

The transaction, which marks Shorenstein’s first investment in Austin, involves two fully entitled and designed office buildings, Domain 2 and Domain 7. The partnership expects to break ground on Domain 2, a five-story, 139,675-square-foot property, later this month. The building, which is scheduled to be completed in 2014, also will include approximately 25,000 square feet of ground-floor retail and an adjacent parking structure. Meanwhile, the venture anticipates beginning construction on Domain 7, a six-story, 221,886-square-foot building, later this summer. Shorenstein also has the option to participate in the development of a third building on the site. 

“We see this as an excellent opportunity to make our first investment in Austin, a market that we have considered for some time due to its strong employment growth and office demand drivers,” said Douglas Shorenstein, chairman and CEO, in a statement.  “The opportunity to participate with highly regarded partners and substantial pre-leasing in a multi-building development in a unique, mixed-use environment such as The Domain was highly attractive.”

The Domain is one of the development projects that RREEF Real Estate undertook on behalf of its $1.3 billion open-ended fund, RREEF America REIT III. During the fourth quarter of 2008, the firm reportedly wrote down the value of the fund’s development portfolio by $342 million, with the majority of the loss coming from The Domain and two other projects. According to a promotional brochure, The Domain was envisioned to encompass 1.6 million square feet of retail, 3.5 million square feet of office space, three hotels and 4,500 residential units.