AUSTIN | Waterline (98 Red River) | 1,022 Feet | 73 Floors | U/C

[The ATX]

The ABJ stumbled upon the WeWork news and is featuring it as "Breaking News":

https://www.bizjournals.com/austin/n...-downtown.html

[urbancore]

the deal is done....

https://atxrealestatenews.com/

[We vs us]

Originally Posted by Dcbrickley

the deal is done....

https://atxrealestatenews.com/

Great catch.

Interesting: the article seems to suggest that the open parking lot just south of the Fairmont -- across Cesar Chavez -- is part of the parcel. If so that's new info to me. I thought it was just solely on the west side of Red River.

[Geckos_Rule]

Originally Posted by We vs us

Great catch.

Interesting: the article seems to suggest that the open parking lot just south of the Fairmont -- across Cesar Chavez -- is part of the parcel. If so that's new info to me. I thought it was just solely on the west side of Red River.

It's my understanding that the article is accurate -- the portion of that block that's a parking lot is included in the deal, but the iHop spot isn't.

[Echostatic]

Dang, that's a lot of land. Almost 5 acres, based off a rudimentary Google Earth calculation. Really hope something good comes out of this site... Come on wework!

[The ATX]

That parking lot next to IHOP was planned to be Phase II of the WPP project (as if Phase I was ever going to get off ground.) No site plan was filed for a specific project, but Sutton said current zoning would allow for a 600K sq ft tower.

[StoOgE]

I wonder if the Airbnb tower nearby isn't a shot at we work.

The rumor here is cowork space, apartment share?

I assume condo and some whole floor managed by wework?

It's a massssssive campus. Hopefully they have some really great plans with some good street level

[austlar1]

Info is too buried in link (https://atxrealestatenews.com/), so I copied it. Here it is:

Hi Ho, Hi Ho, on the WeWork beat I go. Rainey District deal is done.

Marvelous Monday greetings,

What else could possibly be happening? Well, Frank McCourt, former owner of the Los Angeles Dodgers, really did sell all of his company’s Waller Creek property to WeWork, the coworking titan. Just check out Special Warranty Deed 2018193571 at the Travis County Clerk’s website.

The mammoth deal was recorded Dec. 17 at 11:26 a.m.

Waller Creek Land Company LLC conveyed the property to Waller Creek Owner LLC with an address at WeWork LLC at 115 E. 18th. St. in New York City. Frank McCourt signed the deed.

Of course no purchase price was disclosed for the 4.7 acres in several parcels along the south side of Cesar Chavez Street, both east and west of Red River Street. Travis Central Appraisal District valued the land at about $50 million in 2018, but trade publication Real Estate Alert reported last fall that the property was being marketed for about $150 million.

That’s probably chump change for WeWork. SoftBank invested $1 billion in the coworking company in August, and at the time Seeking Alpha reported that WeWork was seeking another $1 billion from other investors in advance of a planned IPO. In less than a decade, WeWork has attracted $4 billion in capital and is valued at $20 billion. At the end of 2018, it had opened locations in 99 cities and 26 countries. WooWee!

WeWork’s acquisition might signify a much different development than proposed originally by Austin-based Sutton Co. Partners Mac Pike and Wally Scott had grand plans — 3 million square feet of mixed-use, including a 60-story tower along Waller Creek south of the new Fairmont Austin.

The capital markets weren’t overly responsive, despite the torrid pace of development across downtown. Then in 2014 McCourt Global signed on. The Boston and New York-based company had a name behind it — Frank McCourt, the provocative real estate executive and pro sports owner.

Evidently it wasn’t enough to get Waller Park Place across home base.

After buying out Sutton Co.’s share in 2017, McCourt Global hired brokerage firm HFF last summer to find a development partner.

Instead McCourt sold it all to WeWork just before Christmas.

Though KBGE, McCourt’s civil engineers, secured a site plan extension from the city this fall, it may all be a moot point. I wouldn’t be surprised if the original plan is scuttled for something distinctly “WeWork.”

WeSee what happens.

While researching this story, I noticed an interesting detail. Austin-based World Class Capital Group bookends WeWork’s property on the east and west sides. Nate Paul’s company owns the IHOP restaurant at 707 E. Cesar Chavez east of the WeWork property and 99 Trinity St., a 1-acre development site to the west.

That’s today’s news. As always, many thanks to my sponsors — Beck-Reit Commercial Real Estate, The Tyndall and The Austonian.

[AusTxDevelopment]

I doubt this will affect the Waller deal, however, WeWork's luster is fading a little bit now that Softbank backed out of the $16B buy.

WeWork Gets a Visit From Financial Reality
The SoftBank Vision Fund's decision not to invest more in the office space startup shows it is just a real-estate company. And a risky one at that.
https://www.bloomberg.com/opinion/ar...ancial-reality

[The ATX]

The ABJ has an article:

https://www.bizjournals.com/austin/n..._news_headline

Meanwhile, the company on Jan. 8 announced the launch of The We Company, a rebranding that encapsulates three business lines: the flagship WeWork coworking business; WeLive, a housing initiative that emphasizes communal living spaces; and WeGrow, an education initiative that aims "to unleash every human's superpowers." WeWork has also raised another $2 billion from SoftBank.

[StoOgE]

Originally Posted by AusTxDevelopment

I doubt this will affect the Waller deal, however, WeWork's luster is fading a little bit now that Softbank backed out of the $16B buy.

WeWork Gets a Visit From Financial Reality
The SoftBank Vision Fund's decision not to invest more in the office space startup shows it is just a real-estate company. And a risky one at that.
https://www.bloomberg.com/opinion/ar...ancial-reality

I mean, that's an oped. It's not really factual, and it's not like softbank hasn't continued to pump money into them.

[We vs us]

FastCompany's write up blamed SoftBank's own financial setbacks for the dialing down of the commitment, not anything WeWork did.

https://www.fastcompany.com/90289512...g-funding-news

[austlar1]

Anybody here remember the Dot.com bust. We Work just feels like a dicey proposition to me. At least Frank McCourt made out pretty well by doing next to nothing.

[urbancore]

Originally Posted by AusTxDevelopment

The SoftBank Vision Fund's decision not to invest more in the office space startup shows it is just a real-estate company. And a risky one at that.

Anecdotally, I terminated my $1800/mo lease ($2500 with all bills) on S Lamar, and opted for a $400/all in at Fibercove on S Lamar...which includes booze, parking, coffee, snacks....24 hour access. Its a no brainer. I get that its a real estate play, but I think a very smart one.

Not to mention, the number of deals I've closed from the contacts I've made as blown my mind.

[austlar1]

Originally Posted by Dcbrickley

Anecdotally, I terminated my $1800/mo lease ($2500 with all bills) on S Lamar, and opted for a $400/all in at Fibercove on S Lamar...which includes booze, parking, coffee, snacks....24 hour access. Its a no brainer. I get that its a real estate play, but I think a very smart one.

Not to mention, the number of deals I've closed from the contacts I've made as blown my mind.

Are there enough people like you out there to make the numbers work for a huge We Works investment in Austin? You just moved into cheaper digs. I doubt We Works is going to want to match the price you are paying to get your business.

[StoOgE]

Originally Posted by austlar1

Are there enough people like you out there to make the numbers work for a huge We Works investment in Austin? You just moved into cheaper digs. I doubt We Works is going to want to match the price you are paying to get your business.

Startups that need flexible space to grow is a big market. As the US continues to shift into a service based economy from a production economy and becomes increasingly urban, the bet is it's a model that will continue to see increased demand. WeWork feels like they are getting out of the "floating desk" market (or at least not relying on it) and starting to focus heavily on the "5 person dedicated office market" all the way up to "whole floor office" market.

For start-ups that are growing its far more efficient than having to move offices every few years (or risk leasing a bigger space and not growing into it). It also lets you avoid the headaches of Triple Net leasing which most small businesses don't have the manpower to understand.

My company is leaning heavily that way as we grow. Right now everyone works out of my dining room twice a week and at home the rest of the time. But our efficiency loss of people working from home may be sufficient for us to benefit from dedicated space. Especially as we grow.

In larger markets (of which I assume Austin is about to become) for WeWork they also offer a nice feature to use space in any office in a city. In NYC for instance one of my best friends did consulting work and if he needed to be downtown to meet with a client could take space there, in downtown Brooklyn and Midtown but was able to do most of his work near home where he had rented dedicated space.

It's a cool concept. It's ultimately the office space equivalent of leasing a car. Kind of expensive, but with none of the headaches of ownership (or, Triple Net).

But if you are in an industry that is growing in an area networking benefits are real. I know a friend who does web usability consulting and has wound up with 4-5 clients from her (non-wework) co-office space, and my aforementioned friend in NYC was able to get a few database engineers to do some freelance work for his consultancy from people he met there.

My guess is they hype around co-office space will die down some, but the benefits are tangible. Especially when home-officing gets harder and not necessarily more affordable to rent a 2BR vs an 1BR and a co-office membership).

Long-term Wework I think intends to become a one stop shop for small companies, and I expect banking, financing, lending, HR services and pretty much everything that isn't the core business of a start-up to be offered (at a premium) by them. Given the 2-3 hours a day for months it took me to get a credit facility in place for our company, I'm betting a nice turn-key solution is going to be really appealing to a lot of start-ups. It may also put them in a cat-bird position to be first-position VC for startups globally.

It's an interesting long-term play that (if it works) may make wework one of the defacto largest VC players who can cash-out pre-IPO when "real" first-round financing happens. These larger clusters of offices (of which Austin may be the first) are going to let we-work transact in odd ways. I can see a start-up with cashflow problems but high prospects being handed "free" office space, hotel space, etc. in exchange for equity on top of financing payroll. This all of course may not work out, but I think their 47 billion valuation is around some of these "bigger" ideas.

[We vs us]

Excellent comment.

I wonder about this site, TBH -- it's biiig, and covers a bunch of weird separate parcels. Part of me wonders if the intent for this area is more than just a WeWork outlet (with expanded services/concepts) -- I wonder if there's an HQ-like element to it, too.

[StoOgE]

Originally Posted by We vs us

Excellent comment.

I wonder about this site, TBH -- it's biiig, and covers a bunch of weird separate parcels. Part of me wonders if the intent for this area is more than just a WeWork outlet (with expanded services/concepts) -- I wonder if there's an HQ-like element to it, too.

Their CEO is a big surfer, so unless Kelley Slater buying the surf park from the Coors kid to open up a surfing location

[ATXboom]

The problem for WeWork is they own no assets. Property owners and management companies are now copying the model. 98 San jac has monthly rental and amenities for example. No doubt this is a growing trend and WeWork was one of the first movers at scale. But it’s easy to copy and if u own the building and run this model you could probably undercut WeWork prices. Hence WeWork rebranding and expanding into living and health. The health thing could be disruptive. Imagine as an individual getting group insurance via WeWork membership.

Fwiw. Facebook took all 4 floors of the WeWork in Chase bldg. corporates are putting flex up/down teams in these short term spaces. Mainly sales and service or support functions.

[AustinGoesVertical]

Originally Posted by ATXboom

The problem for WeWork is they own no assets. Property owners and management companies are now copying the model. 98 San jac has monthly rental and amenities for example. No doubt this is a growing trend and WeWork was one of the first movers at scale. But it’s easy to copy and if u own the building and run this model you could probably undercut WeWork prices.

This is a big problem for WeWork longterm and one I think isn’t discussed as much as it should be. I think eventually we’ll see more developer - WeWork partnerships where they do turn-key build outs and design and then source members, like broker services or a real estate consultancy. But with added verticals, their extended play does seem to be in building a “physical social network” The more they can up-sell their membership base, the more opportunity they’ll have. Like you said, healthcare could be a big time dimension. They’re well capitalized, so they will survive but make no mistake, developers and property owners are adapting. Novel Coworking is WeWork, except they own their buildings, so their prices are already undercutting the former. I think this will be very mixed-use, definitely WeLive as well. And I do think we could be looking at a satellite HQ. I think it’ll be interesting to see when the sharing economy really hits retail - there are a couple early stage companies doing cool things there and WeWork is flirting with it with WeMarket. I think the winner will be someone who marries micro-retail on flexible leases with an Omni-channel approach, really making it a front gate to one’s e-commerce channel. Like an interactive ad almost for touch-and-feel and product discovery, but still online and direct to consumer fulfillment. A showroom approach but with a very interesting end user experience. You see so much empty ground floor retail and a lot of retail in new developments is all food or service. Something’s got to give. I was working on a project along these lines a few months back with a group - still am to a degree - but I’m just really excited to see how flexible real estate disrupts that traditional 3-5 year storefront lease. Change is coming.