Betting on a Project: The Pre-Construction Purchase Process

If you are interested in living in a downtown condo, the best buying opportunities are often during the “Pre-Construction” process. Before a project has funding, the developer must fill at least 50% of the proposed units with prospective buyers. To do this, they often offer discounts and other incentives to draw in buyers.

Those that are willing to take the risk, and wait the longest time -- often 2-3 years -- may get the biggest reward. They get the most choice units, and often at slightly reduced prices. The risk, however, is real: If the project is never built, the buyer will get their money back but must start anew in their search for a condo. For buyers in projects like 360, the best units went quickly and at reasonable prices. Today, the project opens with no available units and a waiting list of more than 200 potential buyers whose only option will be to wait for units to hit the secondary market.

Perry Henderson published a great summary of the pre-constructions sales process in his blog which we have reprinted here:

Pre-Construction Condos: How the Process Works in downtown Austin

When you buy a home that's not built yet, there can be setbacks before you move in. Here are steps to buying a pre-construction condo

Pre-construction condos are units that have been proposed by a developer, but have not yet been built. When you purchase a pre-construction unit, you are putting money down before construction begins. Buying a pre-construction condominium can be a great opportunity, but you should proceed with caution. Because you are buying into something that does not yet exist, there is greater potential for unforeseen problems and setbacks before you move into your home. By understanding the risks and planning carefully, you can avoid complications and come out a winner.

The main advantage to buying into a condominium development before construction starts is that you often get a lower price than if you buy when construction is complete. The reason for this is that developers typically need pre-construction sales of 50 percent to 90 percent of the units in a development before they can borrow funds to begin construction. Pre-construction condos can also get you in on the ground floor of an investment that will appreciate. The market value of pre-construction units generally increases during the one to three years it takes to build a development, so your unit may be worth more than you’ve paid for it before you set foot in the place. In addition, you can often choose from a variety of finishes and flooring options, allowing you to customize your home.

How the process works
There are several steps to buying a pre-construction condo. They can vary from developer to developer, but the basic components are:

1. Reservation agreement You give a deposit (usually between $5,000 and $10,000) to reserve the unit and set the price (although the builder can reserve the right to change the price in the contract). The deposit is held in escrow and you can cancel the agreement at any time with a full refund.

2. Condominium documents When a development is approved for construction, the developer submits condominium documents (including budgets, association rules, unit descriptions, materials and other important information) for approval by the state. Once the documents are approved, they are sent to you for review. Read them carefully to make sure that you will be comfortable living by the association rules.

3. Right of rescission Once you receive the condominium documents, you have a 15-day period to decide whether you would like to proceed into a binding contract. If you don’t, you can exercise your right of rescission and withdraw with a full refund.

4. Hard contract If you don’t withdraw, you’ll provide the balance of the required down payment, usually 15 to 20 percent of the purchase price, and sign a binding contract agreeing to purchase the condominium. You generally have seven days after that to cancel. This is your last chance to walk away with no penalty.

5. Closing When construction is nearly finished, the developer will issue you a Certificate of Occupancy. A closing date is set when you will hand over the balance of the purchase price and sign the final documents. If all goes according to plan, your closing will coincide with your move-in date, and you will be ready to enjoy your new home.

The original article can be found here.

Inside 360: The Amenities Deck

When it comes to downtown Austin condos, the biggest news of 2008 is the recent opening of 360. With the opening, residents have begun to occupy the 430 sold-out units in the 44-story condo tower.

In many ways, the heart do the 360 project is the 9th floor amenity deck: the social center of 360 where residents go to swim, exercise, watch movies, play pool, socialize, or simply lunge among the palm trees near the outdoor fireplace. Located above the garage and below the residences, the Amenity Deck provides both indoor and outdoor entertainment for 360’s residents.

The images below provide an inside look at life in the 360 tower:

It's Back: 800 West Applies for Height Variance

Last September, Fortis Development proposed a 250-foot, 200-unit, 25-story tower on 8th street and West Avenue near downtown. Since the area is currently zoned for buildings no taller than 60 feet, the project required a zoning variance or zoning change.

This week, the developers continued to press their case to the ciry for the zoning change, proving that the project is very much alive. As part of the process, the architects have presented four design options for the city to evaluate. all design have public parks in the back facing shoal creek. In the future, a trail will run alongside the creek connecting the building directly to the hike and bike trails and Ladybird Lake.

As we have reported, this decision may be a tough one for the city council: they need to decide on the boundaries of Austin's high-rise downtown. In the projects favor, it is within two blocks of the Nokonah at 9th and Lamar, CLB's proposed 33-story super tower on 7th and Rio Grande, and another project on 6th and West. As the developer points out, it is one of very few downtown blocks free of capital view corridor restrictions.

Here are the details on the proposed project:

- 200 condos in a single 25-story tower
- Lot size is 1.2 Acres
- Proposed building size is 25 stories totalling 130,605 square feet
- The project would include 143 parking spaces
- Planned amenities include a sun deck, gardens, and public trails connecting the building to the Shpal Creek greenbelt

Here are additional details from the Austin Chronicle:

Another test of council will concerning building heights in western Downtown: The zoning case for 800 West Ave., a 1.2-acre Shoal Creek-front site at the corner of Eighth Street, returned to council for a final vote at press time. Last fall, Cypress Real Estate Advisors sought an upgrade to Central Business District zoning to build a 250-foot condo tower, to be designed by Muñoz + Albin Architec­ture and Planning. (The contested 33-story 7Rio condo tower, at nearby Seventh and Rio Grande – now on hold – won CBD from council last year.) When 800 West Ave. came before council in November, members instead approved, on first reading, Downtown Mixed Use Condi­tional Over­lay zoning, which limits height to 120 feet. But according to unhappy project neighbor Ben Procter, retiring Council Member Betty Dunkerley then encouraged a developer-friendly "pass" on height-limiting compatibility standards triggered by nearby residences – a perk of CBD, not DMU. Definitive development guidelines for this peri­pheral urban district, rich in historic homes, are due later this year in the Downtown Austin Plan.

Trammell Crow to Develop 6 Acre Downtown Site

Today, the City of Austin offically selected Trammell Crow, Constructive Ventures, and USAA toredevelop the six acre Green Water Treatment Plant site into a dense multi-use extention of downtown. As part of the deal, the development team will pay the city $57.9 million for the right to develeop the prime site.

With the developer selected -- Trammell Crow proposed the most dense and ambitious plan for the site -- downtown Austin is now set for it’s most radical transformation in decades. With the redevelopment of the Green Site, as many as five high-rise buildings - some as tall as 40-stories -- will be added to the Austin skyline. In addition, a new retail district will connect the 2nd street district to the Seaholm development, creating a vibrant new downtown region which will draw many more residents, workers, and visitor downtown for shopping, dining, and entertainment.

As previously reported, the Trammell Crow proposal includes the following components:

- A 350,000-square-foot hotel and a 250-unit senior assisted living facility in addition to condos, apartments, offices and retail space.

- Five public squares could accommodate as many as 2,700 people.

- 5,200 new parking spaces

- The proposal includes an Austin Car Share program, bicycle bays, and electric refueling stations

- Restoration of the downtown street grid which will ease congestion and streamlie the flow of traffic into downtown

- The proposal offers to make 25 percent of its rental units affordable--defined at 80 percent of the city's median family income--and offered to make a donation to the city's affordable housing fund for every condo it sells, estimating that total donations could reach $2.5 million.

Here is a summary from the Statesman:

The Austin City Council on Wednesday unanimously chose Trammell Crow and its partners Constructive Ventures and USAA for the single biggest development project ever to take place downtown.The group beat four other development teams to win the right to negotiate with the city to buy and transform five isolated blocks of city-owned land bounded loosely by the Seaholm Power Plant and San Antonio, Fourth and Cesar Chavez streets into a residential, commercial and cultural hub.But a city official familiar with the proposals said the Trammell Crow team offered to pay $57.9 million for the six acres appraised at $55.5 million. The official requested anonymity because the official is not authorized to speak about the unsigned deal.Of the five teams, Trammell Crow proposed the biggest and tallest buildings, the most uses and the most parking for the current sites of the Green Water Treatment Plant and Austin Energy Control Center.Two weeks ago, members of the city staff announced that they had determined that the Trammell Crow plan was the best deal for the city.Their decision was based largely on financial information the city has refused to release, including: the proposed sales price for the land, sales and property tax projections, the financial backing of the developers, and the amount of public money needed to achieve the developers' plans. City officials say the information won't be released until the city has signed a deal with the selected developer, a process that could take more than a year.

Star Riverside Begins Construction

Star Riverside, a four building condo complex on Riverside Drive just east of I-35, has officially commenced construction on the first 2 buildings. In this first phase, two 6-story lake front buildings will contain 64 large mostly 3/3 units ranging from 1,500 to more than 2,500 square feet with prices starting at $600k. The first two buildings are expected to be completed by Summer, 2009. A second phase will add 9 and 12-story towers with units as small as 600SF and starting around $350K.

Star Riverside Austin Condo Rendering CPG

Star Riversideis being developed by Constellation Property Group on the 4 acre former site of the Wellesley Inn & Suites just East of I-35. Constellation, an Australian firm which has developed some very cool modern projects (examples), has targeted a small number of cities in the U.S. for new projects. Austin is one of their targets, and Star Riverside is the first new project to break ground.

The first phase of the project features a relatively small number (64) of large units (1,500 - 2,500) in two buildings that sit as close as the rules allow to the lake. With prices starting at $600K, or about $400 / SF, the projects are mid-priced for downtown condo units. While the architecture is interesting and the projects looks to be modern, tasteful, and well-conceived, it remain to be seen whether this price point will succeed East of I-35 and South of the lake. Pluses include direct access to the hike and bike trails, a private dock (non-motorized water craft only on Lady Bird lake) and a planned swimming pool for residents.

In addition, Star Riverside is one of the first projects to transform the shores of Riverside drive on the south side of Ladybird lake. Constellation, and four other developers, are planning to build more than 2,000 luxury condo and apartment units near the shores of Ladybird lake. With close access to downtown, the South Congress entertainment district, the lake, and the hike and bike trails, the location is highly desirable yet less expensive (theoretically) than the city core. As part of thee projects, the Hike and Bike trail is likely to be expanded to fill long missing gaps between Congress Avenue and I-35 and with Star Riverside, the trail will be extended East of I-35.

Star Riverside was scaled back from 364 units to 201 units after the City planning commission denied the developers request for an impervious cover variance. Constellation had attempted to get a variance by building green roofs that were fully landscaped. The planning commission, however, has been very strict when it comes to variances for new buildings on the shores of Lady Bird lake.

The full and updated Star Riverside Profile can be found here. And below, here are additional images and renderings of the Star Riverside project:

City Staff Recommends Trammell Crow Proposal for Green Water Treatment Site

This week the city staff recommended Trammell Crow's proposal for redevelopment of the Green Water Treatment plant tract in downtown Austin. Trammell Crow and it's partner Constructive Ventures, which has been involved in the development of Spring and BartonPlace, proposed the most ambitious plan for the site with the tallest buildings, the most parking, and the biggest diversity of uses.

While the staff’s recommendation is not biding, it is a strong endorsement for the project and makes Trammwll Crow the clear front runner for this important project. Here are some details of their proposal:

- The Trammell Crow proposal calls for a 350,000-square-foot hotel and a 250-unit senior assisted living facility in addition to condos, apartments, offices and retail space.

- Five public squares could accommodate as many as 2,700 people.

- The proposal includes 5,200 parking spaces

- The proposal includes an Austin Car Share program, bicycle bays, and electric refueling stations

- The proposal offers to make 25 percent of its rental units affordable--defined at 80 percent of the city's median family income--and offered to make a donation to the city's affordable housing fund for every condo it sells, estimating that total donations could reach $2.5 million.

Here are renderings from the Trammell Crow Proposal:

Nestled between Whole Foods, Ladybird Lake, Seaholm, Austin Music Hall, and the 2nd Street District is the City's oldest sewage treatment plant - the Thomas C. Green Water Treatment Plant - which began purifying water from Ladybird lake in 1925. The plant covers 6 acres across 4 city blocks. In addition to using a key tract of land to process water using 1920's technology, the plant also serves to disrupt the natural grid of the city -- it stops second street at its west end and blocks Nueces and Rio Grande from reaching Cesar Chavez.

The Green site offers an incredible development opportunity. With four downtown blocks, it is a huge chunk of land. The location is perfect -- it is on the lake and adjacent to both the hot second street district and the future Seaholm multi-use development. The site is free of Capital View Corridor restrictions, although portions of the site close to the lake are limited to 45 feet in height.

Here is a summary from the Statesman:

After sorting through five partnerships' proposals for developing the Green Water Treatment Plant site, city staff members on Thursday recommended Austin go with Trammell Crow, which proposed the biggest and tallest buildings with the most uses.Staff members ranked Stratus Properties second, followed by Forest City, Catellus and Simmons Vedder.The site is five city-owned blocks roughly bounded by the Seaholm Power Plant and San Antonio, Fourth and Cesar Chavez streets.The recommendation is based largely on financial information the city has declined to release. The information won't be released until the city has signed a deal with the selected developer, a process that could take more than a year after the City Council makes a choice June 18.The staff recommendation is not binding."We now have a couple weeks as a council to continue to get a bit of public feedback while, more importantly, drilling down through the staff analysis, asking questions of staff and ultimately coming up with our decision in two weeks," Mayor Will Wynn said.

New: W Austin Residences Listings

Earlier this month, the developers of the W Hotel & Residences announced successful funding of the project and immediately broke ground on the 165 condo unit and luxury hotel project. Once the W Hotel is completed in 2010 and the Condos completed in 2011, the project will also contain the 2,480-capacity venue for "Austin City Limits" as well as other restaurants, bars, and retail.

For the first time, actual listings are now available on the MLS, and as always, we have added the W to our Condo Listing Page.

As of the beginning of the month, just more than half, 85 of the 165 units, are under contract with nonrefundable 10% deposits. Amazingly, the average price of sold units is an amazingly high $1.1 million with prices ranging from the high $400,000s to more than $3 million. The three listings on the market today (many more are being sold directly) range in price from $617,500 for a large 1,149 square foot 1 bedroom / 1 bath unit to $2.875 million for a 3,932 SF 3 bedroom / 3 bath unit.

Owners of W Austin Residences will have full use of all the hotel's facilities as well as access to 24-hour room service, daily housekeeping service and concierge services, and a spa in the building. Whatever, Whenever service provides the closets thing to a personal butler: call them to shop for groceries, take a dog for a walk, fix a flat tire, of pick-up take out on your behalf.

Here are renderings of the planned interiors:

W Austin Condo Interior Rendering

The W Residences Listings can be found here.

360 Retail, Lance Armstrong Bike Store to Open

According to the Statesman, four new businesses will move into retail spaces on the ground floor of the nearly complete 360 project on 4th and Nueces:

* Blue Café Bar Lounge will open in an 1,100-square-foot space in June. The European-influenced shop will feature coffee drinks, lunch items, desserts and wine among other items.

* Lora Reynolds Gallery will move from its current space on West Avenue to an 1,800-square-foot space at 360 in the fall. The gallery, which opened in 2004, features nationally and internationally recognized artists. It organizes six to eight shows annually, and has promoted gallery artists through a number of platforms including published catalogs and placement in public and private collections.

* Mulberry is the brainchild of local entrepreneur Michael Polombo and designer Michael Hsu. The shop slated to open in July will feature a variety of light cuisine in a neighborhood restaurant and wine bar format.

* Royal Blue Grocery will open its second location at 360. The compact urban market's first location is in Austin's Second Street District. The 1,900-square-foot store -- a hybrid of sorts between a convenience store and gourmet grocery -- will welcome its first customers in August.

With these tenants, 7,909 square feet remain unrented, the highlight of which is a 3,300-square-foot restaurant space overlooking Shoal Creek.

Just a block away - on Nueces between 4th and 5th-- Lance Armstrong's new bike store / coffee house / commuter hub is also opening. The store, named Mellow Johnny's, is certain to be a major downtown destination. According to Austin 360:

Besides road bikes, Mellow Johnny's will sell commuter bikes, mountain bikes, triathlon bikes, fixed-gear bikes, low-riders, cruiser-style bikes and even hand-made "art bikes" that look as good hanging on a wall as they do rolling down the street. Stock will also include gear by Giro, Nike and Oakley.Showers and a locker room will allow commuters who don't have facilities at their offices to ride downtown, store their bikes at the shop, bathe and catch a ride on a pedicab or walk the rest of the way to work.The building covers 18,000 square feet on a main floor and basement level and will have garage doors that roll open at one end. The site has served as a distribution center for Pearl beer, a paint company, a steel manufacturing facility and a resource center for the homeless. Demolition work began in June, and construction inside the shop started two weeks ago. Armstrong and his partners are leasing the property from an undisclosed owner.

Lance Armstong's Mellow Johnny's Store is one block north of 360