Day 1: Austin, TX

Today we met with city officials in Austin who specialize in the Economic Development of Austin.

First, we met with Fred Evins who deals with economic growth and redevelopment. I was surprised to find out that the downtown Austin area only has two TIFS. One is for the Seaholm Powerplant redevelopment and the other is a small TIF that is only used for the updating and maintaining of the streetscape. He also told us that most of the developments are done on 99 year ground leases and when they expire the land and the improvements revert back to the city. I thought the most interesting thing was the view corridors that restrict the zoning of downtown. Basically from designated spots in the city there has to be a clear view of the capitol building and there can be no developments to hinder the view.

Next, we met with Christopher Johnson and Leon Barba. Christopher is involved with a one stop shop that helps people with development ideas get those ideas up and running by helping them apply for permits and such. Leon is the Assistant Director of Inspectors and he told us that 20% of residential properties fail inspection and 10-15% of commercial properties fail inspection. He went on to say that two big reasons for failed inspections is framing and plumbing.

Then we met Michael Knox who works on the downtown economic development team. He infomed us that Austin does not offer any incentives such as financing, tax credits or abatements, to developers or businesses. He says that Austin would love to have them, but the city will not really try to persuade interested parties with incentives.

Finally, we met with Richard Morgan who talked to us about green building. He told us that all municipal buildings must be LEED Silver certified. He then outlined some of the differences between his firms' rating systems and LEED rating systems.

Austonian

Our first site visit was the Austonian. This is a luxury high rise condo development. We met with Terry Mitchell who partnered with Benchmark Land Development (parent company is big Spanish conglomerate). The project began in September of 2007 and is approximately 165 units after owners have bought and combined units. The units are 45% sold and the average square footage of the units are 2400 SF with a sale price today of about $650/SF, but Mr. Mitchell said at the market peak some units were selling for $1000/SF.

The developers had 4 main goals or selling points that they wanted to maintain throughout the development of this project.
1. Convenience - they wanted a location in which the owners could walk to work, eat, play. Within a ten minute walk to the Austonian are many restaurants, retail, nightlife, and cultural attractions.
2. True Luxury - wanted the best finish outs and the best amenities available
3. Exclusiveness - wanted the owners to feel special about buying in such an upscale development. Actually to keep this goal alive the developers turned down putting a restaurant on the top two floors as it would allow many non owners in the building every night.
4. Privacy - Wanted owners to feel safe and not like they were crammed into a densely populated area.

The most fascinating part about this project to me was that it cost about $170 million and there is ZERO debt on the project. Originally many European banks put up the debt while Benchmark and its parent company put up $65 million in equity. When the market tanked the creditors pulled out of the deal and the parent company made up the difference by providing equity to make sure the development continued on a timely schedule.

Chestnut Commons

This was our second property visit of the day. It was on a much different scale then the first. This development essentially is for young professionals looking for a less expensive and more affordable place to live. It is 64 units with 32 cottages and 32 one bedroom apartments which are situated over the gararges. The average square footage of these units is about 1250SF and Mr. Mitchell gave a price range between $130,000-$240,000 for these units. It is completely sold out and it is located near a train and shuttle station so residents can get into downtown for work and play relatively easy.