Windfall – Villas on Town Lake is being sold

Windfall – Villas on Town Lake is being sold

Downtown Austin’s Villas on Town Lake condos home owners’ association (HOA) will agree to sell the entire property – comprised of 57 individually owned condos – to The Sutton Company, who beat out a handful of bidders.  More than one source close to the deal has rumored the amount of the offers [plural] were in the ballpark of $50,000,000.

This is exceptionally interesting because we normally expect to see development activity on surface parking lots, or on an assemblage of adjacent parcels.  The Villas is a fully occupied condominium!  This means there are multiple owners, strong personalities, and diverse motivations.  Corralling everyone into agreement is a herculean task.

What’s so special about the Villas?

Villas on Town Lake

Villas on Town Lake

Situated along Waller Creek, the Villas on Town Lake condominium is one of downtown Austin’s older mid-rise residential buildings.  Villas is a modest, courtyard-style, community, built long before the Rainey Street neighborhood became a “district.”

Most importantly, Villas On Town Lake is coveted for its location.

The site is one of downtown Austin’s most desirable.  With only city-owned park land between it and Lady Bird Lake, if Villas were to be razed and rebuilt as a tower, it would deliver views of the lake and hill country, with adjacent access to Waller Creek, Lady Bird Lake, and the hike & bike trail.  The site is not encumbered by Capitol View Corridors and has CBD zoning.

Villas vitals:

  • Located at 80 Red River Street, Austin, TX 78701
  • Built in 1982
  • Number of units = 57
  • Total Square Feet (private, conditioned) = 65,791
  • Total Square Feet (including Common) = 99,770
  • Average unit size = 1,154 ft
  • 80% of air-conditioned area = 52,631.2 ft (appox: 46 units)
  • 80% of Total Area = 79,816 ft

How does this happen?

Property rights in Texas are such that a condominium association can dissolve itself.  When this happens ownership reverts to a single parcel with tenancy in common, and proceeds from a hypothetical sale are distributed based on percentage of ownership.  The HOA can sign deeds of units that have not volunteered to sell.

(I welcome comments from real estate attorneys who can shed light on the mechanics of this.)

Years ago the Villas HOA had the foresight to realize the market would eventually grow to a point where the modest condo community was no longer the best use of the land.  In 2006, the Villas HOA revised their bylaws to allow 80 percent of the Villas ownership could vote to dissolve the entire HOA.  This change paved the way for a deep pocketed buyer to buy the whole shebang with only 80% of the owners needing to agree.

In September of last year, the Villas HOA issued a Request for Proposals from development groups.  Groups like World Class Capital are rumored to have been among the bidders.  The winning bidder, The Sutton Company, is one of Austin’s most prolific developers, responsible for several downtown Austin condo projects, including: Plaza Lofts, Avenue Lofts, Brazos Lofts, and the 5 Fifty Five.  They also assembled the land for the Millennium Rainey, and are developing the land adjacent to the Villas as Waller Park Place.

Is it a good deal?  

Yes, it is, for both buyer and seller.

If the rumored $50,000,000 is close to the purchase price, then the average price per foot of “saleable” space is $759/ft!!  Based on the average unit size, were someone to try and accumulate control of 46 units – the number I estimate required to gain 80% control of the Villas – would take approximately 14 years to do based on historic sales velocity.

Accelerating 14 years of effort requires offering a premium to market right now; however, the winning bidder also owns the adjacent property and can reasonably expect to recoup that premium.

Villas on Town Lake - History of Sales

Villas on Town Lake – History of Sales

 

Per the MLS, 63 units have sold at the Villas since the summer of 1997.  In 1997, market price for a typical condo at Villas on Town Lake was ~$100 per foot.  Now, imagine for a minute that you’re an owner at Villas back in 1997 and a someone approached you saying, “I will pay you double the market rate, $200 per foot!”  Most reasonable people would agree to less than double the market rate from an unsolicited offer.  If anyone wants to pay me twice market value for my place… I’m ready to talk!

The most recent sales record we have for a one bedroom at Villas was from March 2015, when a 675 sf condo sold for $279,000.  So, if the rumored amount of the winning bid – $50,000,000 – is close to accurate and proceeds are distributed by square foot, then that same built-in-1982 Villas one-bedroom may be closing for $512,325.  That’s a windfall.

Kudos to the Villas for getting it.

~ Jude

About Jude Galligan

Jude Galligan, REALTOR, Principal of TOWERS Realty and publisher of Downtown Austin Blog (aka. "DAB"), spends his time matching remarkable people with remarkable properties in Austin’s urban core. A resident owner in downtown Austin, Jude has served on the Board of the Downtown Austin Alliance (DAA) and the City of Austin Downtown Commission. Contact Jude.

Comments

  1. avatar Matt Shaw says:

    Great write up Jude!

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