As Texas transitions from one of the hottest real estate cycles in its history to a more measured, fundamentals-driven environment, capital partners are becoming far more selective about the operators they back. According to Shravan Parsi, founder and CEO of American Ventures, this shift marks a return to disciplined investing—and an opportunity for sponsors who can clearly articulate their strategy, sub-market knowledge, and execution capability.

“Capital has choices again,” Parsi said. “To be selected in this market, a sponsor must demonstrate why their approach makes sense now and not rely on the old narrative that everything in Texas will go up forever.”

Parsi outlines the four traits that distinguish the sponsors investors are choosing to partner with in 2025:

Sub-Market Precision

“General statements like ‘we like Austin’ no longer move investors,” Parsi said. “You must know the exact micro-location who the employers are, how households are forming, what the supply pipeline looks like, and how infrastructure will evolve. Selection starts with specificity.”

A Clear, Defensible Value Proposition

Parsi says a sponsor must be able to define the asset’s purpose and the path to creating durable cash flow.

“Is it a cash-flow play? A value-add repositioning? A long-term land strategy? You need to show investors exactly what success looks like and how you plan to get there,” he noted.

Conservative and Transparent Underwriting

“With rent growth slowing and operating expenses rising, aggressive assumptions are a red flag,” Parsi said. “Investors want sponsors who are honest about risk and realistic about performance. If a deal only works in a perfect scenario, it’s not a deal for this environment.”

Operational Excellence

Parsi emphasizes that execution is what drives returns today.

“In a flat or slightly negative rent environment, leasing, renewals, expense management and customer service is where the real alpha is created,” he said. “Investors are selecting teams who can operate at a high level, cycle after cycle.”

“Momentum investing is over,” Parsi concluded. “Sponsors who combine disciplined underwriting, local market knowledge and a repeatable operating playbook will be the ones investors choose in this new market reality.”

View source version on businesswire.com: https://www.businesswire.com/news/home/20251117186930/en/