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Warehouse District vs. Capitol View Corridors

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Sign at 5th and Bowie providing direction to the Warehouse District
Sign at 5th and Bowie providing direction to the Warehouse District

Writer Katherine Gregor presents the story of the Warehouse District in this week’s Chronicle.

The Warehouse District is valuable for two reasons:

1) It’s an established destination in downtown.
2) It’s uniquely positioned outside of the Capitol View Corridors (map)

As Michael McGill astutely pointed out: “this is the sort of all day activity that 6th Street and Red River would kill for…this is the envy… this is what you want… this is what people work so hard to design in…”

From the article…

“The irony is that the district is so at risk because it’s so attractive – people want to do new developments in it and close to it,” said Jacqui Schraad, executive director of the Heritage Society. For example, the planned 18-story Westin Hotel will market itself as a chic “Warehouse District hotel”.

What is being proposed is clearly a taking of property rights, however, ROMA is offering an economic alternative that could potentially enable individual Warehouse District property owners to earn more money by transferring their air rights to other projects.  Currently, the adjacent property owners need to work with each other to create an assemblage site large enough to build a high rise.  ROMA’s solution appears to eliminate the need for these relationships of necessity and allow individual property owners to cash in on their property without the need to work with their neighbor.

A system of transference of development intensity could effectively put an end to the CURE based system to pursue additional entitlements.  Arguably, getting rid of the CURE system would eliminate the potential for backdoor lobbying efforts and could reduce the feasibility costs to developers.  Simply put, if you needed more density, you could just purchase it.  But, is there a real market for these air rights? Clearly the owners of the Warehouse District properties are not confident that there is.

This will be not an easy decision.  IMO, the real culprit is the Capitol View Corridors which artificially inflate and depress the intrinsic value of properties that are either outside or inside of the view corridor, respectively.  Were they not to exist, the extreme focus on this small assemblage of land we call the Warehouse District might not be at issue.  But, the existence of the Capitol View Corridors is a subject that is political wildfire with the “no growth” opinions who seem to equate “keep Austin weird” with “keep Austin low and sprawling”.

I’ve always believed that you don’t bite off the hand that feeds you, and Downtown Austin has been feeding off the charm of the Warehouse District for years.  The Warehouse District is an attractive destination for all of Austin and it’s visitors.  If ROMA’s recommendations aren’t adopted, it’s not likely that the Warehouse District will completely disappear, but we can expect it to change.  As our community works to create an amazing downtown experience, losing this district, in it’s current form, will take us further from that goal.

-Jude

Hyatt Place In Downtown Austin?

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Massing Sketchup Of Hyatt Place
Sketchup Of Possible Massing Of Hyatt Place

Following this thread over at SkyscraperPage, some readers found evidence of a forthcoming hotel on the southwest corner of 3rd and San Jacinto.  Currently the parking lot is owned by the folks who had planned to build 21c – which has moved to Red River @ Cesar Chavez – at the Whitely Paper company building.  Stay tuned!

Bel Air Auction Latest – Did The Auction Work?

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This past Sunday the Bel Air auction was hosted at the Hilton hotel.  I was out of town, unfortunately, and was not able to record the winning bids. Keye reported 300+ attendees.  All of the units had a winning bidder.

After Brazos Place, the Bel Air auction was the second high profile condo auction in Austin.  There was some speculation in my office that the undisclosed reserve would be roughly 2/3 of the original price.  My sources indicate that most of the winning bids were in the ballpark of 60% of the original list price, but these were all won “Sold Subject To Confirmation.”

Here is the shocker:  Of the 25 units that were auctioned at the Bel Air condos, only two of the winning bids were accepted! The Seller/bank was still negotiating hours after the auction and many of the units  may have added 5-10% on top of the winning bid [and on top of the 4% buyers premium] in order to meet the reserve minimum.

The auction rules clearly state that the Seller was allowed to set a reserve:

“All homes have an unpublished reserve price (Unpublished Reserve Price) which means that the seller has established an unpublished minimum selling price. The Starting Bid is not the reserve price. In order to become the winning bidder of a home, a bidder must have the highest bid and meet or exceed the unpublished reserve price. The highest bid is subject to acceptance by the seller (see ‘Subject to Confirmation’ section below). With respect to a high bid less than the seller’s reserve, the high bid and resulting purchase agreement/offer are subject to the seller’s acceptance, counter-offer or rejection during the auction, in the contract room, and/or within 3 days following the auction.”

The rules go on to state…

“With respect to a winning bid that is not immediately accepted by the seller, the auctioneer will inform the winning bidder that acceptance of their winning bid is ‘Sold Subject to Confirmation.’  The winning bidder acknowledges and agrees that winning bidder’s purchase/offer is subject to and contingent upon the seller approving the resulting purchase/offer, acceptance, counter-offer or rejection during the auction, in the contract room and/or within 3 days following the auction.”

Over the next couple of days we will see how the dust settles.  Because it was behind closed doors we don’t know how many of the auctioned units actually went under contract nor where the final negotiated price ended up for those units.  I wouldn’t be surprised if someone from the DAB readership was in attendance.  If so, please share your experience in the comments! 🙂

If we can confirm the final negotiated prices, then it appears we can expect the average clearing price at Bel Air condos to be in line with what I’ve been suggesting: a  25-35% discount is the magic number for a developer to quickly unload condos in bulk, in either the open market or the auction market.

When the undisclosed reserve is set too far above what the market is expecting it can ruin the effectiveness of the auction.  It’s situations like this that I suggest bidders bring a Realtor they trust – per the rules of the auction it cost bidders nothing – and they can help with strategy, understanding the project’s history, and negotiating when unexpected scenarios like this occur.

-Jude