AUSTIN | Waterline | 1,034 Feet | 73 Floors | T/O

[Spaceman]

Originally Posted by Tech House

Truth. There's nothing remotely dead about whatever's happening with that incredible chunk of contiguous real estate, at the mouth of the up-and-coming Waller Creek project. I don't think it's going to end up looking like any of the illustrations we've seen so far. I have big hopes for this to be the single greatest development in Austin's history, and I think we're going to be happy with it. I have no basis for saying any of this, other than a gut feeling combined with the knowledge that this is some CHOICE real estate. We ain't even ready for this. Our minds will be blown.

Austin has a lot going for it that is missing from many of the other top job-generating cities. And there's a funny little quirk about how global warming is playing out in North America: the data and the models are in agreement that the SE US will warm less than everywhere else on the continent. We've already got a superior summer climate to most of the land to the north and northeast of us, and the SW is going to be baked out of habitability. California's water woes haven't been solved, not even with the new discovery that there's about 3 times as much ground water as previously estimated under the San Joaquin Valley.

We don't have earthquakes, rarely deal with hurricanes or tornadoes. We just have flash floods and droughts, and these can be handled intelligently such that central Texas ends up looking like one of the best bets for the future, in terms of environmental and climatic factors.

With the Dell school, the recent massive investments by Apple, Google, Oracle, Facebook, and probably a bunch of other companies I don't know about, along with ample developable land and ample water (if properly managed), Austin is going to kick — for the entire 21st century. And this Waller Creek property is going to be in the thick of the action. Whatever the motives of Sutton for amassing all those parcels, it's clear that they get how valuable that land is, and unless our city council is asleep at the wheel, we're going to be able to have a say in what happens there. Biggest threat might be the incorrigible "I miss the old Austin" sentiment that's rampant in all the neighborhoods that get the most attention from city leaders. But look how quickly the Independent and other big projects have been approved --- that gives me hope that Austin's going to leave the nostalgia victims struggling to stay afloat in the massive waves generated by what's going to happen here.

I'm cutting loose with my praise for the city's development, and simultaneously plotting a move to Moscow, Idaho, possibly as soon as August. It will be fun to go online and see all the changes happening here, while listening to the stillness of the gorgeous, verdant Palouse. No freeways within 50 miles, what a wonderful thought!

AMEN....If one doesn't like the new Austin, then get the hell out...I've been here forty five years and I love the changes..The Hatesman said the tech community is going to interface more with city government..Screw interfacing, it's time to flex some muscle and time to curtail the neighborhood influence in the city..The 70's ain't coming back!!!

[We vs us]

Originally Posted by Tech House

Truth. There's nothing remotely dead about whatever's happening with that incredible chunk of contiguous real estate, at the mouth of the up-and-coming Waller Creek project. I don't think it's going to end up looking like any of the illustrations we've seen so far. I have big hopes for this to be the single greatest development in Austin's history, and I think we're going to be happy with it. I have no basis for saying any of this, other than a gut feeling combined with the knowledge that this is some CHOICE real estate. We ain't even ready for this. Our minds will be blown.

Austin has a lot going for it that is missing from many of the other top job-generating cities. And there's a funny little quirk about how global warming is playing out in North America: the data and the models are in agreement that the SE US will warm less than everywhere else on the continent. We've already got a superior summer climate to most of the land to the north and northeast of us, and the SW is going to be baked out of habitability. California's water woes haven't been solved, not even with the new discovery that there's about 3 times as much ground water as previously estimated under the San Joaquin Valley.

We don't have earthquakes, rarely deal with hurricanes or tornadoes. We just have flash floods and droughts, and these can be handled intelligently such that central Texas ends up looking like one of the best bets for the future, in terms of environmental and climatic factors.

With the Dell school, the recent massive investments by Apple, Google, Oracle, Facebook, and probably a bunch of other companies I don't know about, along with ample developable land and ample water (if properly managed), Austin is going to kick — for the entire 21st century. And this Waller Creek property is going to be in the thick of the action. Whatever the motives of Sutton for amassing all those parcels, it's clear that they get how valuable that land is, and unless our city council is asleep at the wheel, we're going to be able to have a say in what happens there. Biggest threat might be the incorrigible "I miss the old Austin" sentiment that's rampant in all the neighborhoods that get the most attention from city leaders. But look how quickly the Independent and other big projects have been approved --- that gives me hope that Austin's going to leave the nostalgia victims struggling to stay afloat in the massive waves generated by what's going to happen here.

I'm cutting loose with my praise for the city's development, and simultaneously plotting a move to Moscow, Idaho, possibly as soon as August. It will be fun to go online and see all the changes happening here, while listening to the stillness of the gorgeous, verdant Palouse. No freeways within 50 miles, what a wonderful thought!

+1. Quality rant.

I like your optimism about Austin's place in 21st century America. You're right on, IMO.

[ATXPhil]

I heard Mac speak yesterday at a Bisnow forum at the JW Marriott. He did not mention his project specifically but said that it is hard to get debt financing right now because so many lenders have downtown project loans on their balance sheets right now. He said that once some of the new projects mature and are eventually sold (thus paying off those loans at the sale) that should free up lenders to give higher leverage debt on new projects. Mac said verbatim that "equity is the easy part." Another panelist on the development panel said that lenders will call you to let you know that they "just did you a huge favor giving 55%-60% (LTV) at 400 basis points over." All of the panelists agreed that it has been that way for at least 6 months now.

Even with debt being as cheap as it is right now, LTVs below 65% make it very difficult for developers to underwrite projects to desired returns for the MASSIVE amounts of equity funding needed for the other 35%-45% of project cost. While we've seen a number of projects proposed recently, this sounds like the main reason we haven't had very many groundbreaking announcements since the start of the year. Lenders are being risk conservative and their outlook is that downtown Austin is too saturated with new supply right now, and with too much outstanding debt concentrated in the downtown submarket...financing is simply drying up.

[ivanwolf]

Could ATXPhil tell me what LTVs are?

Just as a pure observer not knowing much I agree with what your saying, we had a huge build out and now are just waiting for those projects to prove themselves, releasing funds for future projects.

My lease is up in my apt at Mueller and I am going to stay but when I took a quick look I found that there are lots of new projects that just completed are are about to in the last/next few months.

Azul, East Side Station, Burnet Marketplace, Arnold, Lucero, Water Marq, Northshore, Millennium, West Koening Flats, Uptown, and more opened within the last year or will open very soon. The market for apartments is flooded right now. However we have a huge influx of people moving here so that may not last long. These are just the east side and downtown ones I could think of off the top of my head, don't forget the Domain and other locations.

I say this only to show that you build a lot at one time like office, condo or apartment there will be a lull for a bit as these fill up and there is a new need for growth.

[GoldenBoot]

LTV = Loan-to-Value. It's a ratio used to underwrite debt.

This is what I have been alluding to for some time now. The current development cycle is ending. Additionally, I believe new Federal regulations regarding CRE loans are going to hit later this fall...further impending the ability to obtain debt for construction.

[We vs us]

Now tagging all future projects with #nextcycle

[AusTxDevelopment]

Originally Posted by H2O

At the price they paid for the Villas, it will have to have significant height and density. If I'm not mistaken, the price per sf for land is about twice the previous record for downtown land.

That's true, height and density are essential to make this deal work but it depends on how you account for the sales price. The Downtown Austin Blog calculated it to be $759 per square foot on "saleable" space (based on the rumored $50M price tag and the 57 Villas totaling 65,791 square feet) which is how the individual sellers will look at it, definitely. But the buyer is going to tear those condos down. He didn't buy the bricks and sticks, he bought the land.

Developers look at land cost based on the total square feet of the land, and more importantly for proforma purposes the total "buildable" square feet - which is the total allowable size of the building you can build on the land. In that scenario, aka the buyer's perspective, the land sold for $574 per "land" square foot (based on the approximately 2 acre land site size reported in the news and the $50M price). If you calculate it on buildable square feet (based on the 600,000 square foot building size Pike is quoted as saying his 60-story tower will total and the $50M pricetag), that's $83 per "buildable" square foot.

Smaller downtown parcels have sold for more per land square foot and per buildable square foot, but few downtown land parcels are 2 acres. They are usually 0.5 acre or less, so the total sales price is not as high. Regardless, $50M for land is a big number no matter how you slice it so if Sutton wants his investment to pay off a very tall tower has to go on that site.

[ATXPhil]

I agree with AusTxDevelopment that whatever is built on the WPP site and the VoTL site will be monster towers (whether Sutton builds them or someone else). I'm sure one if not both of them could easily be taller than The Independent. I'm just not so optimistic that they will break ground in the next 12-18 months.

The last three luxury apartment buildings to open downtown are 422@The Lake, Northshore, and Millennium Rainey. Those three projects combined delivered about 1,000 units to the downtown market. As of today I believe only about 200 of those units have been absorbed into physical occupancy. It will take a little while for that amount of inventory to be absorbed and in the meantime, some residents living at Seven, The Bowie, The Whitley, SkyHouse, and so on will move into the lease up projects to take advantage of lower rents given after lease up concessions, softening the stabilized apartment market downtown.

The financing issues and the glut of new & unabsorbed supply in the market make it unlikely that we'll see WPP, VoTL, 5th & Brazos, 48 East, and/or 99 Trinity break ground anytime before 2018. Hotel pipeline is oversupplied right now, and office is probably close. We'll also have to see what happens with the national economy as well as slower growth and recession could possibly be on the horizon...I think we're officially at the end of this cycle and now realizing it.

[GoldenBoot]

Lodging is oversupplied? We have an over abundance of multifamily/condo units? Please supply us with your data supporting your assumptions.

And, one must not discount debt financing on other forms of commercial development. Debt availability is shrinking for multifamily/condos right not. Lodging, retail and office is still available...for now.

We are beginning to see the end of the current "multifamily/condo" cycle. Not the lodging, retail, office, single family, etc. But, close. Each component has its own, distinct cycle. And they all move in waves which are not necessarily connected. Lodging, retail and office will see their day...soon.

Furthermore, one cannot look only toward developments in Austin's CBD to decipher where the entire city is in a particular cycle - we must take the entire metro as a whole. For example, just because we are not witnessing a lot of office development downtown does not mean office construction is at a standstill! Take a look at the Domain, off of Southwest Parkway, Bee Cave, Cedar Park, Round Rock, etc...there are a lot of new office developments underway. The same could be applied to apartment occupancy. As a city, Austin is over 94% occupied...a healthy rate (even with the thousands of units which have come on-line in the past 12 months).



**WPP, 5th & Brazos, and 99 Trinity were doomed from the start (pipe dreams). 48 East will happen. Even its developer, Robert Lee, said he would not begin construction until the next cycle (late 2017 at the earliest - more like 2018/2019 now - depending on the debt markets for multifamily/condo developements over the coming 18 months). I have worked with Robert before and I know he does not go public with something he will not complete.

**Oh, the WPP site may be doomed. There have been at least four major projects announced for that specific site dating back to the mid 1980's...obviously not a single one has come to fruition. Don't bet anything on some sort of major tower going up on that site anytime soon. I don't know what is going on with the site and I wish there would be a giant tower there...but, don't hold your breath.

[ATXPhil]

Golden Boot - I was referring to the high-rise development scene in downtown specifically. I agree that development of all types will continue to be robust in the suburban markets of Austin for several more years, particularly housing and retail.

Multifamily development downtown is probably going to be paused for a year or two as there is more move-in ready product available right now than any point during this cycle. We may see One Two East break ground but I don't think any other developments will start before 2018 at the earliest.

Condo development is also going to be heavily saturated with 5th &West (164 units) delivering, then Seventy Rainey (164 units) and The Independent (370 units) right behind it. Factoring in another 100 units delivered around the same time assuming Austin Proper breaks ground in Q3/Q4 as scheduled. We're talking 800 units of high-end ($400K+) inventory that should all be delivered within 12 months. According to AustinTowers.net, there were 249 condo sales downtown TOTAL between June 2015-May 2016, and 251 total between June 2014-May2015. I know many of these towers are building impressive reservations lists but that amount of new supply coming on is a main reason that debt is getting tougher to secure at favorable leverage ratios.

Office inventory has also been absorbed at a neck-breaking pace. I recall reading that both Colorado Tower and IBC Bank buildings were 95% leased at the time of delivery. Shoal Creek Walk landed a significant commitment from Whole Foods and 500 W 2nd landed a big one from Google but (correct me if I'm wrong) I don't believe either one of them are close to 95% leased yet. With Third + Shoal breaking ground later this year I think we may see one more tower (possibly 405 Colorado) break ground in the next 12 months.

Hotel inventory downtown will increase by nearly 30% from 2015 to 2018 if ZaZa and 416 Congress get underway (and assuming Austin Proper breaks ground on time). Obviously our downtown hotel market was severely under-supplied prior to this cycle but that is a tremendous increase in supply and already factors in what has been delivered up to 2015 in this cycle. A friend of mine who works at a lending firm said that right now hotel risk is scoring about a 37 out of 100 for new hotel projects in the CBD (good is considered 60-80 on their index). Everything I've been hearing is that lenders (and even some institutional capital groups) are weary about all the new supply in the pipeline right now.

Projects that are already approved for debt, capital and permitting will probably break ground this year or early next. I work in real estate and attend a lot of these industry forums and conferences. Most developers I've spoken with believe we are in the maturity phase of the cycle downtown. I just think we'll see a pause after Third + Shoal, Austin Proper and possibly The Avenue and 416 Congress start similar to what we saw after the W Hotel broke ground in 2010 (although the pause will probably be shorter this time).

[We vs us]

Originally Posted by ATXPhil

Office inventory has also been absorbed at a neck-breaking pace. I recall reading that both Colorado Tower and IBC Bank buildings were 95% leased at the time of delivery. Shoal Creek Walk landed a significant commitment from Whole Foods and 500 W 2nd landed a big one from Google but (correct me if I'm wrong) I don't believe either one of them are close to 95% leased yet. With Third + Shoal breaking ground later this year I think we may see one more tower (possibly 405 Colorado) break ground in the next 12 months.

Hotel inventory downtown will increase by nearly 30% from 2015 to 2018 if ZaZa and 416 Congress get underway (and assuming Austin Proper breaks ground on time). Obviously our downtown hotel market was severely under-supplied prior to this cycle but that is a tremendous increase in supply and already factors in what has been delivered up to 2015 in this cycle. A friend of mine who works at a lending firm said that right now hotel risk is scoring about a 37 out of 100 for new hotel projects in the CBD (good is considered 60-80 on their index). Everything I've been hearing is that lenders (and even some institutional capital groups) are weary about all the new supply in the pipeline right now.

Projects that are already approved for debt, capital and permitting will probably break ground this year or early next. I work in real estate and attend a lot of these industry forums and conferences. Most developers I've spoken with believe we are in the maturity phase of the cycle downtown. I just think we'll see a pause after Third + Shoal, Austin Proper and possibly The Avenue and 416 Congress start similar to what we saw after the W Hotel broke ground in 2010 (although the pause will probably be shorter this time).

I'm interested in how lenders might score additional hotel investment if the city decided to formally commit to a new convention center (even understanding that the building would be 5+ years away).

I'm also interested in how lenders might view committing to a hotel that won't break ground till the next cycle, though that would be announced now (thinking about the White Lodging Marriott that brewing on Cesar Chavez).

[Jdawgboy]

I'm curious about how fast multifamily and condo units are filling up once completed? Overall there is more demand for housing than there is supply but the kind of price range that is sorely needed is the biggest issue.

A little off topic but still relevant to the future of this project, I noticed when I went with friends to see the fireworks on the S. First Street Bridge, that the VMU apartments right there on Riverside and S.1st were finally completed. Moreover they already had residents living there. I noticed several people out on the balconies including the top northwest unit which I have secretly fantasized about living in cause that is one of the best views you can get. Wasn't that long ago that I passed by, I think about 2 weeks before that they were still working on it. If those apartments are considered to be in DT, they look to be filling up fast. I'm not sure how fast higher end residential units are being filled but wouldn't that bolster confidence in DT for future projects to get off the ground despite a pause in financing? No doubt things will slow down but if the demand is there then it should help.

[ivanwolf]

Originally Posted by ATXPhil

Condo development is also going to be heavily saturated with 5th &West (164 units) delivering, then Seventy Rainey (164 units) and The Independent (370 units) right behind it. Factoring in another 100 units delivered around the same time assuming Austin Proper breaks ground in Q3/Q4 as scheduled. We're talking 800 units of high-end ($400K+) inventory that should all be delivered within 12 months. According to AustinTowers.net, there were 249 condo sales downtown TOTAL between June 2015-May 2016, and 251 total between June 2014-May2015. I know many of these towers are building impressive reservations lists but that amount of new supply coming on is a main reason that debt is getting tougher to secure at favorable leverage ratios.

I kinda thought that the sales numbers would be higher but only 500 sales over two years. So with the 800 on the way in the next three years is interesting. I know of two smaller projects for condo's that's the The Celia Condos and Fourth &. Both smaller but might total 100 more (can't remember exact numbers). I'd love to be any any of these but my income from the County will never be enough to afford any of these.

[AusTxDevelopment]

It's true the condos don't sell as quickly as it seems, but there is a long lead time from announcement to reservations to construction to closing. We hear about all the new construction but the buyers aren't closing until close to delivery which can be as long as 12-24 months later. Sometimes it gives the impression that more activity is happening that there really is. Pricing is still ridiculous, however.

Apartments in Austin are leasing up very quickly, even the luxury apartments which are out of many average Texans' price range but not unreasonable to in-migrants from California and the East Coast. We have so many people moving to Austin for jobs and they have to live somewhere. Below is a quote from a Bisnow article covering their recent Multifamily Summit:

But Austin is like beachfront property; [housing] demand will hold strong even if other parts of the country dip. And with that appeal in mind, Austin may still be undersupplied. CWS Capital Partners CIO Mike Engels says Austin created 38,000 jobs in the last 12 months. That means demand for 28,000 housing single- and multifamily units (you multiply job growth by 0.75 to find demand in Austin).

Only 12,000 single-family homes broke ground in the last year, so multifamily developers probably could’ve began roughly 16,000 apartments—but only 10,000 units delivered in the last 12 months. The balance, of course, is that development is delayed; you don’t want to be stuck in a three-year construction cycle when the music stops.

I don't know if Bisnow included condos in their 'single family' numbers above, but even if they didn't the delivered condos wouldn't make a dent in that estimated under-supply of 6,000.


https://www.bisnow.com/austin-san-antoni...-development-pricing-demand-design-62307

[Geckos_Rule]

I spoke with an "insider" today that told me the current plan is 5 buildings, with more office space than originally planned. The biggest news was that he told me they're planning on a Whole Foods 365 going in here. A full-size grocery store would be awesome in this area....

[paul78701]

Originally Posted by Geckos_Rule

I spoke with an "insider" today that told me the current plan is 5 buildings, with more office space than originally planned. The biggest news was that he told me they're planning on a Whole Foods 365 going in here. A full-size grocery store would be awesome in this area....

Five buildings on the original site where the three buildings were supposed to go? Is there enough room for that?

Or are those two additional buildings going on the site they bought across the street at the southeast corner of Red River and Caesar Chavez?

Or are those the two additional buildings the ones on the Town Lake Villas site? (less likely I'm guessing since that's still in flux?)

[loonytoony]

Originally Posted by Geckos_Rule

I spoke with an "insider" today that told me the current plan is 5 buildings, with more office space than originally planned. The biggest news was that he told me they're planning on a Whole Foods 365 going in here. A full-size grocery store would be awesome in this area....

Any mention on height? There was talk of 60+ stories at some point.

[drummer]

A grocery store would be a huge help to the Rainey area - and even for neighborhood across 35.

[The ATX]

Including a grocery store option in the project makes sense now since the other three project proposals on the east side of downtown with a grocery component seemed to have vaporized. One Two East as planned was killed off, Plaza Saltillo seems to have dropped their plans for one, and the Lambie Cove Rainey residential project with a Fresh Plus IIRC seems to have stumbled and not get up.

[GoldenBoot]

Originally Posted by loonytoony

Any mention on height? There was talk of 60+ stories at some point.

As currently proposed...

Waller Park Place:
- 54-story hotel/residential tower (Bldg. C)
- 46-story residential tower (Bldg. B)
- 26-story office tower (Bldg. A)

"Town Lake Villas" Site:
-Roughly 60-story office/residential tower
-Roughly 45-story hotel/residential tower


*Note: Nothing has yet to be planned on the site Sutton acquired directly across Cesar Chavez from the Fairmont. It is currently a parking lot. As much as 600,000 SF may be built on that site under current zoning.