Sabine Auction Results!

Today, more than 200 registered bidders showed up to compete for 31 units in the much anticipated Sabine auction. In the end, 29 of 31 units sold for an average 30.5% discount with a final price per square foot of $228. With strong demand, the developer added four units into the auction: three just days before the sale and the fourth unit during the auction.

Prices were about 19% lower on a price per square foot basis than the recent Brazos Place auction -- the Sabine's closest comparable. The additional discount is appropriate given the problems that have plagued the project. In a recent valuation analysis, Austin Towers estimated that a fair sales price would be a 30% discount and units traded hands for slightly less than that.

Here are the key metrics on the sale:

Sale Prices by Unit Type
Unit Type
Original Price
Sale Price*
$/SF
Discount
1/1

$252,631

$189,120
$264
25.1%

1/1 + Study

$289,900

$196,733
$210
32.1%

2/2

$464,083

$310,007
$214
33.2%

All Units

$341,697

$237,388
$228
30.5%
* Includes 4% Buyer Premium

Sale Prices by Unit

Unit #

SF
Bed/Bath
Original Price
Starting Bid
Sale Price*
$/SF

303

693

1/1

$234,900

$85,000
$172,640
$249
305
1462

2/2

$409,900

$145,000
$276,640
$189
308
925

1/1 + Study

$267,900

$95,000
$193,440
$209
401
1461

2/2

$485,900

$165,000
$319,280
$219
404
728

1/1

$249,900

n/a
$194,480
$267
409
918

1/1 + Study

$259,900

$95,000
$193,440
$211
501
1461

2/2

$485,900

$175,000
$327,600
$224
502
755

1/1

$239,900

$95,000
$193,440
$256
504
728

1/1

$249,900

$85,000
$192,400
$264
508
951

1/1 + Study

$279,900

$95,000
$188,240
$198
510
682

1/1

$204,900

$85,000
$166,400
$244
605
1467

2/2

$434,900

$155,000
$287,040
$196
610
682

1/1

$229,900

$85,000
$167,440
$246
701
1461

2/2

$469,900

n/a
$350,480
$240
703
695

1/1

$240,900

$95,000
$197,600
$284
704
728

1/1

$259,900

$85,000
$195,520
$269
705
1467

2/2

$449,900

n/a
$315,120
$215
707
1426

2/2

$409,900

$135,000
$279,760
$196
801
1461

2/2

$530,000

$185,000
$357,760
$245
802
755

1/1

$273,400

$105,000
$205,920
$273
804
728

1/1

$311,900

n/a
$196,560
$270
805
1460

2/2

$469,900

$165,000
$309,920
$212
808
951

1/1 + Study

$311,900

$95,000
$198,640
$209
904
728

1/1

$263,900

$85,000
$197,600
$271
907
1426

2/2

$434,900

$135,000
$263,120
$185
909
918

1/1 + Study

$294,900

$95,000
$195,520
$213
910
682

1/1

$244,900

$85,000
$180,960
$265
1001
1419

2/2

$550,000

$195,000
$365,040
$257
1004
728

1/1

$279,900

$95,000
$197,600
$271
1007
1426

2/2

$437,900

$145,000
$268,320
$188
1008
951

1/1 + Study

$324,900

$105,000
$211,120
$222

AVG

1,043


$341,697
$117,222
$237,388
$228
* Includes 4% Buyer Premium

Interestingly enough, the developers still own about a dozen units which they plan to sell directly to buyers and through MLS listings. In can be assumed that these units will sell for approximately the same price as the auctioned units which raises the obvious question: why didn't they sell the remaining units in the auction? While it's hard to know what they are waiting for, the developers likely wanted to avoid flooding the auction with too many units and driving prices even further down.

For the developers, the auction is likely a relief. It does go to show that these sorts of auctions do work and that there are many potential downtown Austin condo buyers on the side lines looking for a good deal. The prices of the remaining units -- and the speed with which these units sell -- wlll determine whether the auction prices were in fact a good deal.

UrbanSpace to Hold Monthly Q&A for Downtown Buyers


In an effort to reach out to new downtown Austin condo buyers, urbanspace has announced a monthly downtown Q & A that will be held at the urbanspace office the first Saturday of every month.  It is free to anyone interested in learning a little bit about downtown Austin and the development taking place.  

The Downtown Q&A was founded by Emily Crawford and developed in conjunction with Bryan Cady. As former first-time buyers and former Downtown Austin newbies themselves, they wanted to provide an interactive forum to help new buyers understand the options in the current Downtown Austin marketplace. Likely questions: Should I lease or buy downtown? What is the Downtown Austin lifestyle all about? What are the best deals out there? Why live downtown?

You can join them March 6th from 11-noon.



Sabine Auction Pricing Analysis: Looking at MLS Sales

With one week until the Sabine auction, it is clear that many potential buyers are considering participating in the sale. With starting bids as low as $85,000, bargain hunters will inevitably emerge looking for a great deal. The big question, however, is what is the right price for a Sabine unit.

For a few reasons, valuation of the Sabine units is particularly difficult. First, the building has had real problems with noise complaints, elevator issues, and a tenant lawsuit. The developers claim that the issues have been fixed but the history will still impact the value. A building is a brand, it is part of your identity, and the Sabine brand is damaged.

Second, not a single Sabine unit was transacted on the MLS in 2009. Not one. The most recent comparables are 5 transactions from mid-2008. These show an average price per square foot of $256 for one bedroom units (2 sales) and $352 for two bedroom units (3 sales) -- an unusually large difference between unit types. Since these prices were during the market peak and since they predate the buildings problems, they are just about useless.

Third, the Sabine is a condo conversion project and not a new development. This greatly restricts the comparable units that can be considered in a real analysis. Essentially, it leaves Brazos Place as the primary point of comparison. Since Brazos place also went to auction, it may be a good indicator of where the auction prices will land. But the Brazos Place auction was held during tougher times and the building did not have the problems that have plagued the Sabine. One other possible comparable is the Brown building, but we have seen very few recent MLS transactions.

So, while those are the problems, we had to start somewhere and here is the analysis: we used three valuation methods:

(1) We looked at condo conversion sales on MLS in Brazos Place and the Brown Building over the last 4 months. During this period, the average price was $271 / square feet for transacted units.

(2) We looked at the Brazos Place auction which resulted in an average price of $281 / SF (although not really relevant, the average discount was 29%).

(3) Peak MLS sale price by floor plan from early 2008. Useful information but in no way indicative of the value today.

See the full analysis: Read More...

Austin is Very Very Very Lucky

2009 was a tough year for job creation in the United States. Since job creation drives home prices, the 2009 job losses are likely to leave a lasting impact.

How lasting? Economists estimate that it may take the United Stated 125 months (10+ years) to fully recover the jobs lost during the great recession of 2009. In Texas, which had the strongest job growth of any state over the last decade, it is predicted to take 37 months or just over 3 years for the job losses to be recovered.

So, what about Austin? In 2009, Austin lost 2,600 jobs. In a normal recovery, the city would be expected to make up these losses in about two months -- that's 10 years and 3 months faster than the rest of the country. Local economist Angelos Angelou is predicting 26,300 new jobs and a healthy real estate environment through 2011 while warning that Austin’s economic development performance, especially around clean technology, is lagging.

While the future looks bright, we are not out of the woods yet. Technology does not perfectly follow the normal business cycle and Austin remains disproportionately dependent on the technology industry. In new areas like clean technology and biotech, the City is losing ground. Until we see job losses in the tech industry end, we're unlikely to see strong local job growth.

That said, the economic mood in town is definitely improving. One example of this is the local single family home market. In December, Austin home buyers returned in force, increasing sales 5 percent from the same time in 2008. The median price of the 1,373 homes sold in December rose to about $194,000, an increase of 6 percent year over year.

The bottom line is that we are very very very lucky. There is almost no other place in the U.S. that has emerged from 2009 as unscathed as Austin, Texas.

Sabine Auction Update

As we reported last month, 27 of the 44 long-vacant units remaining in the Sabine are finally headed to auction on February 28th. The auction is a last hope for the project which is currently facing foreclosure.

According to the Austin Business Journal, "Beverly Hills-based auctioneer Kennedy Wilson will sell-off 27 of the available 44 units Feb. 28, taking bids as low as $85,000 and $195,000. The apartments were previously listed near $204,900 and $550,000. Condo buyers would receive a one-year Tower Health Club and Spa membership and up to $1,500 in closing costs paid by the seller."

Kennedy Wilson has handled many condo auctions in the last year, including the successful Brazos Place auction in Austin. The auction will be held in February 28th at 1 p.m. at the downtown Hilton. According to the auction firm, potential buyers must register by Feb. 25. The company has set up a Web site specifically for auction information here.

It's always hard to predict what will happen in an Auction like this. In the Brazos Place auction, held during tougher times, all 19 remaining units were sold in less than 90 minutes to a packed room of bidders. In that case, the units sold at a 29% discount to the original listing price. This is, however, is a useless barometer as the units were not selling well at the original prices. More useful is the average price / square foot which at $281/SF is a 9% discount to the 2008 downtown condo average of $308. Unfortunately for the original Brazos Place residents, the units sold for 24% less on a $/SF basis than the $370/SF average of the 12 Brazos Place units sold via MLS in 2008. We'll see what will happen with the Sabine, but discounts of 20 - 35% off original prices are likely.

The Sabine is an 80-unit condo conversion project of a mostly-empty office building on Waller Creek into a new condo project adjoining the Hilton Garden Inn on 5th Street near I-35. The project was completed in 2007 and the majority of units still remain vacant although they have been removed from the market due to pending litigation. Unit plans range from one-bedroom, 682-square-foot units to two-bedrooms with as large as 1,419 square feet.


Get the full details on the auction here.

Waller Creek Tunnel Project Advances

On Thursday, City of Austin officials approved eminent domain proceedings to reclaim a parking lot between 4th and 5th street that is required to begin the Waller Creek tunnel project.

The half-block property is essential to development of the mammoth downtown tunnel project. According to officials, it is needed for two tunnel easements, one temporary and one permanent. The approval does not initiate proceedings to claim the property, but allows city officials to do so if they can not reach agreement with property owners.

The Waller Creek Tunnel Project is a storm water bypass tunnel beginning with an inlet structure in Waterloo Park and an outlet structure at Lady Bird Lake near Waller Beach and the Four Seasons Hotel. Nearly, a mile long, the tunnel will vary between 22 and 26 feet in diameter. The project is expected to reduce the size of the 100-year floodplain of the lower Waller Creek watershed by an estimated 28 acres and allow denser development and redevelopment in a very desirable area of downtown Austin. A pump station at Waterloo Park will maintain constant water flow in the creek during the dry season, thus improving water quality and fostering a creek side atmosphere suitable for public venues or natural settings. Creek side inlets located between 4th and 5th streets and 8th and 9th streets will capture and divert additional flood waters south of 12th street.

The tunnel project is comprised of several construction projects, including utility relocation, the tunnel, the inlet, outlet, creek side inlets, and site restoration. The Tunnel project will cost approximately $127 million—an initial estimate based on 2006 dollars. Construction will take place from January 2010 until July 2014.

Waller Creek
Waller Creek Tunnel Austin

According to the Austin Business Journal, "the lot discussed this week is owned by the Strenger Real Estate Holdings Ltd. and is used for paid parking. City technical resource and professional engineer Stan Evans said the temporary easement is needed for staging construction and the permanent section is needed to restore the creek and install draining infrastructure. He said the city and the property owners are currently in negotiations, but if the two do not reach an agreement by an undisclosed deadline, eminent domain will proceed."