Ignoring Criticism, Travis County Buys Key Downtown Block

Ignoring public criticism and without a public process, Travis County closed on a prime downtown block just South of Republic Square in downtown Austin for $21.75 million. With this transaction, Republic Square is likely destined to become a dead block surrounded by government buildings.

As a result of the transaction, the prime park block is unlikely to have retail, restaurants, or adjacent residents. In evenings and on weekends the buildings will be dark and deserted. As we originally reported, the new 17-story courthouse will create a dead zone on one of the most important vacant lots in the City. With the County's record, the architecture will be uninspiring and won't be engaging. Republic park -- one of the few downtown open spaces -- will be cut off from the emerging second street district and historic warehouse district. The move will also remove a prime block from the tax rolls, limiting available funds for future downtown development.

While the lot purchase is a strong signal of the county's intentions, they do not have the funds to complete the project. As a result, the county must initiate a multi-hundred-million dollar bond election in order to fund the project. Hopefully, the project will be voted down at that point.

Significant opposition to the project sprung up as soon as the project was announced. A Facebook group dedicated to stopping the courthouse project can be found here. Travis County Judge Sam Biscoe publicly stated that he has not heard much criticism and seems open to hearing from the community on this issue (sam.biscoe@co.travis.tx.us).

New East Austin Condo Project Planned

If you take the new light rail from downtown, the first stop is at Plaza Saltillo on 5th and Comal just 8 blocks East of I-35. With a thriving bar and restaurant scene evolving on east 6th street and great new public transportation options, it's no wonder that developers are headed to the area.

Plaza Saltillo in East Austin
Plaza Saltillo Austin

Over the last few weeks, developers have announced preliminary plans to develop two new projects in the area.

First up is a 40-unit mixed-use condo development is planned at East Seventh and San Marcos streets. Earlier this month, the City Council unanimously approved a development bonus for the project in exchange for a commitment from the developer to provide affordable housing units as part of the condo project.

Nearby, a second project is in the works. On East 6th and Waller streets, a 40,000 square foot boutique hotel is currently on the drawing boards.

In the future, a 10 acre site owned by Cap Metro could also be sold for development.

As one of only five red line stops in the City of Austin -- and the closest stop to downtown, Plaza Saltillo is ripe for future transit-oriented development. With an evolving dining, shopping, gallery, and bar scene in the area, development is likely to greatly accelerate over the next few years.

Travis County to Ruin Republic Square

Over the last decade, the Austin Museum of Art has attempted to build a new downtown museum on the south side of Republic park multiple times. With a prime lot (now a parking lot) between 3rd and 4th street off Guadalupe, the museum aimed to be a cultural anchor for the second street and warehouse districts.

Today, Travis County announced that they have entered into an agreement to purchase the lot for $21.75 million to build a county courthouse. For downtown Austin, this is a disaster.

First, it raises the question of why the county would use tax payer money to buy one of the most expensive parcels in the city for a courthouse. Second, they seem ignorant to the fact that a county courthouse will kill the block. With government buildings on all sides of the square, there will likely be no retail, no commercial, and no residential uses. The new courthouse will create a dead zone on one of the most important vacant lots in the City. With the County's record, the architecture will be uninspiring and won't be engaging. Republic park -- one of the few downtown open spaces -- will be cut off from the emerging second street district and historic warehouse district.

While development options may be limited in today's stressed commercial lending environment, this is not a time that we need the county to step in. Hopefully, there is still time for the county to reconsider and find a different lot that better uses taxpayer money and that preserves what is evolving to be one of the most dynamic and high-potential corners of downtown.

Downtown Condo Sales Heat Up

According to the Austin Business Journal, sales at the newest downtown condo projects including W, the Austonian, the Four Seasons Residences, and Spring have accelerated in recent weeks with more than 30 closings in October for downtown condos

Sales at the five newest downtown condo buildings heated up in recent weeks, showing a continued trend since late summer that condos are selling well despite the sluggish housing market overall. According to the report, the W has now sold 60% of its 159 Units and BartonPlace has sold 54% of its 270 Units. SInce these units are sold directly by the sales offices, they do not hit MLS and are not reported in monthly MLS statistics.
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The Condo Mortgage Crisis

In the current real estate market, condo sellers need all the buyers that they can find. With mortgage lending requirements still incredibly tight, the pool of available buyers is much smaller than it was just a few years ago. Now, new rules for FHA loans targeted specifically at condos will further limit the options for condo buyers.

According to National Mortgage Professional Magazine, "Tens of thousands of condominium unit owners across the country may not know it, but their ability to sell or refinance could be jeopardized by a rolling series of federal government deadlines."

On December 8, as many as 25,000 condo projects across the country missed the deadline for FHA recertification and approval which is required for FHA loan approval through normal processes. According to the magazine, "What this means, lenders and condo experts say, is that unsuspecting unit owners nationwide could suddenly be cut off from an increasingly important source of mortgage money. In some markets where FHA-insured mortgages are used for 75 percent or more of first-time home purchases, condo sellers could be severely handicapped."

The only silver lining is that the FHA has liberally granted last minute extensions for many projects into next year. According to the story, "the eligibility issue dates from November 2009, when the FHA published new rules on the types of condo projects acceptable for mortgages on unit sales and refinancings. The rules were the outgrowth of a review that found that the FHA - which is essentially a government-owned insurance company - had approved thousands of projects over the previous two decades but possessed inadequate information on their underlying homeowners associations' budgets, legal documents, insurance coverage, renter-to-owner ratios, delinquencies on condo-fee payments, the amount of commercial space, and a variety of other characteristics that could affect a project's financial stability."

According to the HUD condo approval tool (here), the following downtown Austin condo projects have received approval so far:

- 360
- Avenue Lofts
- 904 West Condominiums
- Spring
- BartonPlace

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Exclusive: October Downtown Condo Sales

We've updated the AustinTowers | urbanspace Downtown Austin Condo Market Index for October, 2010. For the second month in a row, sales volumes fell far below the year ago level. With the sale of two high value units, however, average sales price spiked 28% to $571K.

Month
Sales
Avg. Price
$/SF
Avg SF
Avg Year
% Ask
ADOM
Oct-09

13

$444,173

$323
1,376
1988.461538
94%
151

Oct-10

8

$570,625

$295
1,834
1995
96%
74

Change

-38%

28%

-9%
33%
6.54
2%
-51%

During October, 8 units worth a total of $4.6M were transacted on the MLS: 5 less than during the same period in 2009. The % ask increased year over year to 96% of the listing price.

Over the last few months, the vast majority of transactions have been for units priced below $300k. In the first nine months of the year, only four units of 130 sold were priced above $1M. In October, however, two units sold for more than $1M -- one in Westgate and one in 5 Fifty Five. The higher priced unit sold for $1.425 million -- the second highest downtown condo transaction that we have on record. In counter to the long-standing trends, only one unit sold in October was sold for less than $300k.

So where were the units that sold? Unusually, none of the units were in 360. Three were in the Shore and two were in Milago.

As always, the results show the weakness of the MLS. While 8 units sold through MLS, additional units went ton sale at the Austonian, the Four Seasons, Spring and other new projects outside of the MLS. While the MLS numbers slid in October, the market has grown year-over-year in 14 of the past 16 months showing increasing strength. As we have noted, as more projects hit the secondary market, MLS transactions are expected to grow and diversify. In particular, we expect to see more expensive units sell on MLS v. through private transactions in the new high end projects, That said, it is difficult to know exactly what is happening in the broader market as sales office transactions are rarely included in the MLS numbers.

Over the next few months, the MLS will grow to become more representative as new construction inventory dwindles and resale units in the Austonian and the Four Seasons Residences begin to hit the market.

See the full index here.



Hello W Austin!

Tomorrow morning, the W Austin hotel will finally open.

The 251 room hotel and many of its key amenities will come to life tomorrow at 11:30AM with the rest of the project to be completed over the next few months. The hotel will open with a limited number of guests with public bookings beginning on December 12. The gym and spa will open at a later date.

The 36-story project, located at Second and Lavaca in the heart of the second street district, is the last of the major downtown condo towers to be completed.

According to the developers, more than half of the 159 units at the W Austin Hotel and Residences have already been sold. Although the condos have not yet been completed, the developers expect that the first residents will be able to move into their units in late January or Early February. Sometime after that the new Austin City Limits studios will be completed.

W Austin Hotel

Today, the entire staff of 300 employees treated the neighborhood to a 5 minute dance sequence performed to in front of the hotel on Second Street and Lavaca. With the W opening, the second street district will finally come to life. Like other W Hotels, the Austin W will likely become a thriving social hub at all hours of day and night.