The Expanding Real Estate Focus Of Houston Texans Owner Bob McNair's Investment Firm
Houston Texans owner Bob McNair’s investment company is increasing its real estate portfolio in a big way.
McNair Interests invests in energy, life science, tech and real estate, but that last bit was almost nonexistent five years ago, McNair Interests President and Houston Texans Chief Operating Officer Scott Schwinger said. Now the segment is the company’s fastest-growing investment bucket.
McNair’s real estate activity has been eclectic.
“We have no single strategy, no core focus, we’re all over the place,” Schwinger said.
McNair, a long-term-hold investor that earlier this month announced a 1.2M SF mixed-use project in Uptown Houston, began picking up its real estate activity about six years ago by investing pretty passively, but now it is actively building and acquiring properties across sectors and in both infill and suburban areas. Real estate could grow to become up to 25% of McNair’s investment portfolio, Schwinger said, but for now the platform is young, and he likes the diversity of investments as it figures itself out.
“We’ll see where this takes us.”
Its activity has been primarily in Houston because it is in McNair’s backyard and because it is so large and diverse. But the company has projects in South Carolina, San Antonio, and Jacksonville, Florida, and Schwinger said that it will eventually extend into other regions, too.
Multifamily has been McNair’s most active sector to date. ADEF, its Apartment Development Equity Fund, is raising its third fund. The first two deployed north of $100M — purchasing eight properties and building three. Schwinger thinks the third fund, which will close in about a month, may bring in more than $50M in equity. Schwinger said ADEF is a workforce housing play, since people need “middle of the fairway” communities, and most of its activity has been in suburban Houston. Its Houston multifamily investments to date include a property bought and sold in Kingwood and assets in Cypress, Katy and Richmond/Rosenberg, and it is looking for opportunities springing up around the Grand Parkway. Beyond Houston, it has built multifamily in San Antonio and is underway on an apartment project in Jacksonville, Florida.
It is also stepping into the luxury world: McNair partnered with Giorgio Borlenghi to build Belfiore, a condo development in Uptown, and is in predevelopment on a luxury multifamily project in the River Oaks area. McNair plans a multifamily tower plus 80 luxury residences in a 150-room Rosewood Hotel in the unnamed 1.2M SF Uptown Houston mixed-use project. That development will take the lion’s share of McNair’s resources for some time, Schwinger said, but when it has cleared the pipeline, he expects the company might do other high-profile mixed-use. McNair will announce a general contractor, interior designer and brokerage team in the coming months. Schwinger is already getting a lot of calls for the office space even though it won’t deliver for another five years.
McNair entered the industrial space for the first time last year by partnering with Pontikes Development to co-develop the Port 10 Logistics Center by Port Houston. It is building 400K SF of spec there now and is keeping its eyes open for other Port-proximate deals. It is also entering the healthcare world for the first time, building a boutique medical office building on 4 acres in Houston’s Tanglewood, just north of Belfiore.
McNair hasn’t played much in office yet — it has passive investment in a small office project on Houston’s south side, but the 350K SF office component of the 1.2M SF development will be its first significant office investment. That will also be the company’s first toe into hospitality, though Schwinger said it likely has more appetite to build that out in its portfolio. It also intends to build a boutique resort hotel (and retail) in Kiawah River, a 2,000-acre master-planned community McNair is developing on John’s Island, South Carolina, near Charleston. That project has broken ground and will likely deliver its first homes next year.
Perhaps surprisingly, McNair has not invested around the Houston Texans stadium or practice facilities. It is always looking at the nearby Medical Center for opportunities, and Schwinger said the company always keeps the area around NRG Stadium in its sights.
“I would love at some point, if it made sense, to couple activity with the Texans, another great brand of ours,” Schwinger said. But though there are some large tracts available nearby, he hasn’t seen demand yet for new development.
Through the process, McNair hasn’t grown as an organization, so many of the same people working deals in other industries are having to become real estate experts, too.
“We’ve all become utility men now, we’re all doing a little bit of everything,” Schwinger said.
McNair brought on a real estate consultant about three years ago but primarily deals have been done via partnership. Schwinger feels his team has been strong at identifying great partners and structuring deals that are favorable for all partners. But soon it may start building out an internal team.
“We are at the point now we need to bring in what I call real real estate people. We’re reaching our capacity soon,” Schwinger said.