downtown Austin's real estate and neighborhood blog
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.
Hey everyone!
Recently, all of my energy has been focused on building TOWERS.net, where I’m still helping buyers and sellers of downtown Austin condos, and covering the urban core with a troop of quality writers publishing even better Austin real estate news. I hope you’ll follow our coverage on Facebook or subscribe to TOWERS’ weekly newsletter.
-Jude
I’m not talking fresh air. I’m talking about the municipal zoning God given right to build to the heavens.
The recent plan for 3rd & Colorado – a residential tower that I’m excited to see more of, if not disappointed that it isn’t taller – reminded me of a policy discussion that lost steam a few years back focused on preservation of the Warehouse District. Back in 2009 influencers with a preservationist slant vocalized concern that the charm of the Warehouse District would eventually lead to its demise unless measures were taken to limit height and density in the district.
Proposed Warehouse District (2009)
Back then, one of the recommended approaches to preservation was facilitating the Transference of Development Rights (TDR), aka. “air rights.” That seemed like a smart way to handle preservation of low-rise historic-ish buildings sitting on highly desired CBD building sites. Creating a market for air rights in Austin would, in theory, enable property owners to capture the value of their dirt, without having to build on the site, thus able to preserve historic buildings.
Transferring Development Rights (aka “Air Rights”) to facilitate preservation and density. Image via nyc.gov
The topic was dropped in 2011 when the Downtown Austin Plan (DAP) was formally adopted featuring a “density bonus” program. Recently, I’ve been participating in the DAA’s CodeNEXT task force, and we’re discussing policies that would encourage building tall on small CBD sites, notably sites that are mid-block. With CodeNext happening, this seems like a good time to rekindle the discussion.
Why would a builder want to buy air rights?
Why would a property owner want to sell air rights?
Why would a city want to permit air rights to be transferred?
That last question is the one I can’t reconcile completely. The City of Austin uses the Density Bonus program to subsidize affordable housing.
Would an air rights market, in its simplest form, circumvent those fees-in-lieu [of building affordable housing] from being collected? [Read more…]
[UPDATE January 30, 2017: Link to first official draft of CodeNEXT]
You’ve likely stumbled across the phrase “CodeNext” somewhere on the interwebs, figured it was another facacta Austin planning scheme, and so you just jumped back to reading Deadspin.
CodeNext (single word) is the multi-year effort to redevelop Austin’s Land Development Code, also called the LDC. In theory, the LDC codifies what can be built, where it can be built, and how it must be built.
The CodeNext project is massive, and not without controversy. It’s fair to point out the project has drawn fire from the community for getting off track and over budget (a latter point the city flatly refutes).
The planning stages are almost complete, and a draft will be released to the public in January. God only knows what will come after the release, given the myriad of special interests that have a stake in shaping what parts of the draft would stay or go. But, we’ll deal with that in 2017.
Monthly CodeNext meetings are held each month through October, with the next being August 22nd. They are quite lengthy and to that end can be viewed online. You can also request a presentation from the city here.
The city has devoted an entire web page to that question, but in very simplistic real estate terms, this effort had the potential to improve the ease, speed, cost and consistency of new development and redevelopment in Austin.
As a result, CodeNext will directly affect your life in three key areas:
In the most literal sense, you will see and feel the results of CodeNext as you go about your future life in Austin.
More subjectively, you should care because one day you may own property. On that day you will realize you’ve morphed into a gray-haired republican, realize that property taxes are a bitch, you’ll hate that the big government tells you what you can/can’t do with your own damn property, and that Reagan had some not-so-bad ideas about small government. OR, you’re one of those perpetual renters (media calls you “Millennials”) who can only afford to live 13 gridlocked miles from downtown Austin, and you’re rightfully indignant observing all the undeveloped land in Central Austin where density is blocked by zoning in Dixiecrat fashion.
Well, the city has laid different zoning types here in a fairly simple manner. They’ve also summarized various zoning classifications in a “simple” to read 100 page pdf here. If you’re a glutton for punishment you can wade through the current LDC here.
I wanted to try to explain it in the context of why this effort is underway.
Follow me so far? Good because here is where it gets messy.
Moreover, Austin has 39 base districts described in the Land Development Code that “zone” parts of town for development. For example, they might be zoned “SF-1” for “single family – large lot” or SF-6 for “townhouse or condominium”. However, when you add all the layers that can be overlaid on top of the base zones, you end up with almost 400 possible different combinations!
Revamping the LDC is essential because navigating Austin’s code is like walking through a labyrinth, and depending on who you speak with in which city department and how they interpret one piece of code versus another conflicting piece, the labyrinth is always shifting. Not good.
Austin seems to do more planning than actually doing. At times, keeping up with all the planning efforts can be demoralizing, when most of us simply want pragmatic and moral leadership at City Hall. Truthfully, the point of this post was so that I could answer: “why I should care about CodeNext?” If you live in Austin, then CodeNext will touch something in your life… where you live, where you work, what that building looks like, and how you get there.
Whatever is adopted will certainly be better than the labyrinth of laws and plans that citizens of Austin currently must navigate in order to comply. Hopefully, the next time you see “CodeNext” it won’t be a nebulous city process, and instead, you’ll understand why people are passionate about it when the draft is released this coming January.
~Jude
Check out the Rue de Rainey Market on August 14th, from noon to 7pm.
This is the kick-off event for what is planned to be recurring every other Sunday in the Rainey District. Rue de Rainey Market will feature an array of local artisans, designers, and merchants.
The marketplace will be hosted at 604 Driskill, which is the parking lot to the across from Bar 96.
~Jude
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
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:
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
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
Contact Jude Galligan, REALTOR, Broker and publisher of Downtown Austin Blog (aka. "DAB") at 512-236-8898. A long time downtown Austin resident and owner of TOWERS Realty, Jude has served on the Board of the Downtown Austin Alliance (DAA), Downtown Austin Neighborhood Association (DANA), and as a commissioner with the City of Austin Downtown Commission.
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