Developer of Hudson Yards in New York bets big on Lockhart, with cold storage site on the way – Austin Business Journal

One of the nation’s most prolific developers is bullish on Lockhart and potentially could bring upwards of 2.5 million square feet of industrial space to the Barbecue Capital of Texas.

That’s the word from representatives of New York-based Real Estate Fund Management, a subsidiary of the company behind massive developments like the Hudson Yards in Manhattan. They made the comments on Sept. 11, saying they’re less than six months out from delivering their first building in Lockhart — a $65 million, 310,000-square-foot cold storage facility that is being built by RealCold, a company that Related is backing.

But the cold storage facility is only the start of the project they’re calling Lone Star Logistics Center, which is located north of State Highway 130 along Farm to Market Road 2001. When it’s all said and done, the project could encompass almost a dozen purpose-fit buildings spread across 173 acres in the city of roughly 15,300 located 30 miles southeast of Austin.

Ivan Karpov, vice president at Related Fund Management, said the goal is to “meet the market.” The company had worked on the 600,000-square-foot Inf1nity Park complex in Del Valle being developed by Rastegar Property Company LLC, which has attracted a supplier to Tesla Inc. and is selling a building to the city of Austin, although that deal hasn’t closed yet.

Related wanted to “double-down” on that investment, he said. What it found was that there was a good labor market for warehouse employees in Lockhart, as well as availability of utilities and incentives and a faster development process than at the Del Valle site. Plus, the location along State Highway 130 and in proximity of the Austin-San Antonio market was attractive.

“It made all the sense in the world from a distribution perspective to be located in Lockhart,” Karpov said.

Davis Bass, a prominent industrial broker at HPI Real Estate Services & Investments, who is handling the leasing of Lone Star Logistics Center along with Brooks Benkendorfer, said the project is unique in that the developers are aiming to tailor the buildings to potential tenants. Rather than building speculatively, they’re completing all site work. Based on tenant needs, he said, they could build and lease the buildings for them, sell land and perform other tasks — essentially creating a shovel-ready industrial park.

Businesses “don’t always fit into this box that the developers are building” around the market, in terms of parking, power and utility availability, slab thickness and depth and much more, he said. That’s leading companies to lease or purchase buildings that might not necessarily fit them, and it could result in unnecessary spending by them to purpose-fit a site.

“These are really going to help the region attract these top-tier businesses,” Bass said. “There’s really no other site like this.”

Karpov added that Related also is future-proofing the buildings by doing things such as having the cold storage building LEED silver certified, or making it solar-panel capable for long-term sustainability.

“Unlike some of our other competitors — developers in the region that have land but have not gone through the entitlement zoning process, nor have they done some of the infrastructure site work on spec — we actually did it on spec to be able to meet market demand on an expedited time frame,” Karpov said.

The RealCold building is on track for delivery within the first quarter next year, officials said. RealCold was launched last year, and the Lockhart facility, along with another 376,000-square-foot facility planned in Lakeland, Florida, are the initial markets the company is targeting as part of a $1 billion plan. The Lockhart office will also house some company executives, including logisticians and technologists, a number of whom have already moved to the area.

RealCold CEO Keith Goldsmith said the company was founded to fill a market niche, by essentially having a developer offer the right facilities of the right size in the right location to service three primary tenants in the cold storage industry — grocery stores, food manufacturers and food distributors. That’s what the company found in Lockhart, where he said the demographics lined up.

Goldsmith said it likely will take about two years to fill up the entire building — after which the company is aiming to expand the building by another 147,000 square feet.

“We love the market. We think we’re a little bit ahead of our time there quite frankly,” he said.

RealCold and Related Fund Management received incentives for the project — codenamed  “Project Apple Pie” — that require at least $65 million to be invested in equipment, personal property, inventory, real property and improvements to real property. They have to hit the 100-job benchmark, and employees are expected to have an average annual wage of $38,380, along with benefits. Move in is required by Dec. 31, 2025.

The Caldwell County Commissioners Court agreed to provide an annual grant to the company in an amount equal to a percentage of the annual county property taxes paid by the company and the lessee as part of operations of the facility, starting with an 85% increment in Year 1, 70% in Year 2, 55% in Year 3, 40% in Year 4, and 25% in Year 5. The Lockhart Council also approved $1 million in utilities reimbursement and annual grants over a five-year period to the lessee equal to a percentage of the annual city property taxes paid by the company and lessee on the property and all improvements and personal property taxes, starting with an 85% increment in Year 1, 70% in Year 2, 55% in Year 3, 40% in Year 4, and 25% in Year 5.

Holly Malish, Lockhart’s director of economic development, said the project fits into the city’s strategic plan, which includes a target to recruit companies in the food and beverage industries. Another example includes frozen treat manufacturer The Ziegenfelder Co. building a factory.

Malish said Lockhart’s proximity to SH 130 and I-35 offers a competitive advantage for RealCold and others. The city is “an attractive location for drawing in a skilled workforce essential for future job opportunities and evolving skillsets,” she said.

The timing for buildout of the remainder of the site is expected to be flexible. So far, Related has purchased only 53 acres of the 173-acre parcel at 2835 Farm to Market Road 2001 that’s owned by La Tierra Realty LLC — but Karpov said it has an option for the rest.

The RealCold building takes up about half of the first phase, and five different options are being advertised. They could include as many as six more buildings or as little as two more buildings, ranging in size from 48,000 square feet to 600,000 square feet. A concept plan for the remaining 120 acres potentially includes 2 million square feet across four buildings, including a 1 million square foot building — a rarity in the market.

Bass described the interest as phenomenal, saying a sale or a lease could happen soon. Interest has come from suppliers to Tesla, which operates its gigafactory in eastern Travis County, and Samsung Electronics Co. Ltd., which is building a factory in Taylor, as well as others, he said.

“We don’t have another offering like this in the entire market where a group has done the horizontal work to accommodate these,” Bass said, adding that attaching the Related name and financial backing is a plus.

For Related, it marks another foray into the Austin market. The company’ve buying out of bankruptcy in 2022 a six-acre South Congress Avenue site primed for redevelopment that was part of the portfolio of Nate Paul’s embattled Austin real estate investment firm, World Class Holdings.

But he stressed they’re really bullish on cold storage and the Austin-San Antonio market – and are looking for more investments, whether it’s industrial, data center, residential or more. The biggest challenge is doing something new.

“I think it’s actually an opportunity for us, but I still think we have to prove our bet is right,” Karpov said.