Credit crunch putting a hold on more Austin projects
By Shonda Novak
AMERICAN-STATESMAN STAFF
Thursday, March 12, 2009
http://www.statesman.com/business/content/business/stories/other/03/12/0312delays.html
The recession and frozen credit markets have put more Austin projects on hold, including proposed hotels downtown and in North Austin and a large condominium project on East Riverside Drive.
JMI Realty is ready to start work on the Hotel Van Zandt, a 327-room boutique hotel at Red River and Davis streets, at the eastern edge of downtown. But obtaining financing for the hotel is "very, very difficult," said Greg Clay, senior vice president with JMI, which recently moved its headquarters to Austin from San Diego.
"We are ready to start construction on the hotel project, but there are no lenders willing to make loans on new construction," Clay said Wednesday. "We are having some dialogue with lenders, but even with a lot of equity in the deal, the banks are not willing to actually make loans. We have lots of jobs ready to be created with this project, but until the banking environment improves, we will be on hold."
Also on ice are CWS Capital Partners' plans to build hundreds of apartments and condos on East Riverside, just east of South Congress Avenue. The original plans for three towers as high as 200 feet set off a major debate over waterfront development, and CWS later scaled back the height to 96 feet and reached a compromise with the project's opponents. The company had planned to start the project this year. "Obviously, financing is an issue for everyone right now until the capital markets return," said Greg Miller, vice president of investments for Texas-based CWS Capital Partners. "Until the capital markets stabilize and return to normal, it will be a very difficult environment to develop in."
In North Austin, Atlanta-based Novare Group and its local partner Andrews Urban are holding off on a 28-story tower that would house condominiums and a 145-room Twelve Hotel at Endeavor Real Estate Group's Domain mixed-use project. The developers say the delay of the $100 million-plus project stems from the postponement of three major retail projects at the Domain: new stores for Nordstrom, Saks Fifth Avenue and Whole Foods Market Inc. "We intend to defer on our residential community at Domain, as well as the Twelve Hotel in the same building, until such time as we are clear about the status of the retail, apartments and the Whole Foods," said Taylor Andrews, president of Andrews Urban. "The challenge with mixed use is that even if one of the uses is delayed, it can impact the feasibility of the others." Under the revised timetable, Nordstrom and Saks — as well as 490 apartments, 450,000 square feet of additional retail space and 125,000 square feet of offices — would not open until fall 2012. The Whole Foods store opening would be pushed back to May 2012, about a year later than planned.
The lending environment is difficult in all markets, JMI's Clay said, even in those like Austin that are said to be faring better than others because of job growth. "It is especially difficult to get loans over $30 million," Clay said. "But even the small loans from local banks are more difficult to get today and will only get more difficult in the future as regulators review the local banks' asset base and require additional capital infusions."
Bob Barnes, president and chief executive of IBC Bank in Austin, said bank credit is generally less available now than it was six to 12 months ago. However, Barnes said loans are available "for well-capitalized borrowers with experience and demonstrated business plans or projects." "Essentially, there is little room for speculative projects right now," Barnes said. His bank provided the construction loan for the Barton Place condominium project under construction on Barton Springs Road.
Some developers are plugging away on the financing front, and some say they are beginning to see encouraging signs of banks' interest in getting back into the lending game. The Louisville, Ky.-based Poe Companies still plans to build an art-themed hotel and condo project on Cesar Chavez Street across from the Austin Convention Center. "We're committed to the project and committed to Austin," said Michael Bonadies, president and CEO of 21c Museum Hotels. "We are optimistic but patient and are working to obtain financing."
(edited to create paragraphs)
Prev
Linear Mode
