Did you miss today’s email edition of ATX Real Estate News? I’m posting this just for you. Never a lack of real estate news in Austin, Texas. What has you riled up or excited? I touch on some intriguing topics today— property taxes, the homeless conundrum, an unexpected partnership in the Rainey District, the latest on WeWork, the viability of Compass and a “spicy” mystery project.
Though not mentioned in the newsletter — because I wanted to make sure it was OK to mention it — I’m requesting prayers from those of you inclined along those lines. Todd Wallace, managing director at JLL in Austin, welcomes them as he tackles lymphoma, which was diagnosed after emergency surgery. Chemo started today MD Anderson in Houston where he and his loved ones will be the rest of the week.
“The great news is we start chemo and will beat this,” Todd messaged me. “We are really in a great place and know this will be in the past very soon.”
Todd is a super individual, and I pray for his complete recovery and supernatural grace — for him and his family. Keep him in mind, please, and keep it all in perspective. As much as we all love real estate, people are the real reason we carry on. All my best, Jan
As Alex Trebek of Jeopardy would say, “Let’s get right to the board.”
• This weekend I posted a story about a surprising development involvingWeWork’s property in the Rainey District — sandwiched between holdings of World Class Capital Group and Endeavor’s The Quincy development under construction. Lincoln Property seems to be running the show on WeWork’s behalf as far as submitting plans to the city. Kairoi Residential, which is partnering with Lincoln on other projects, also appears involved. I’m sure there are many other details still under the radar.
• Don’t miss my in-depth feature on Jay Lamy, co-founder of AQUILA Commercial. He’s a fascinating, passionate person, and I’ve really enjoyed getting to know him. Already I’m receiving lots of comments about how beloved he is among many. There is never a dull moment with Jay!
• It’s been a year since Compass residential real estate opened an Austin office, and based on the local website the company has amassed 280 real estate agents and growing weekly. Those numbers are pretty amazing, and I bet that’s only good news for Gary and Michelle Dolch who made the jump from Kuper Sotheby’s to open the Compass office.
I still don’t understand how the numbers work — just as I’ve been mystified (like so many others) about how WeWork became the coworking titan of the world valued by some “experts” at more than $40 billion. Then overnight, the company was teetering on bankruptcy. Its future unknown. WeWork received most of its funding from SoftBank’s Vision Fund, which also happens to be the main backer of Compass.
Masayoshi Son, the CEO and chairman of SoftBank Corp, said in an interview with Nikkei Business and mentioned in Inman News, that he was “embarrassed and impatient” as the result of some of his investments — though he thinks both WeWork and Compass have a path to profitability.
Here’s the thing with Compass — residential real estate brokerages don’t make that much just on transactions, and in fact, Compass has built its appeal by giving agents a bigger piece of the commission pie, plus developing technology and leasing chi chi office space. I know Compass envisions controlling every aspect of the residential sales process, including creating its own mortgage company (which by the way, Denver-based Re/Max has already done). Locally, Mary Ann McMahon with Re/Max Posh Properties has already invested in the affiliated Motto Mortgage ATX.
Homegrown Keller Williams, led by dynamo Gary Keller, has become dramatically more aggressive at providing bells and whistles for its agents. Besides, how much technology and streamlining can anyone ever hope to provide? Plus, this ibuyer model is catching on — selling directly to investors or special divisions in a brokerage without the use of agents. In this time of dramatic disruption in residential real estate, I just don’t see Compass recouping its $1.5 billion in startup funding in any appreciable way. Don’t investors expect to be repaid with a significant ROI? What am I missing here?
• Speaking of Gary Keller, he’s recently purchased a couple of intriguing properties, including 503 Vale St. in Rollingwood, located near the southbound MoPac Frontage Road and Rolliingwood Drive. The house had been the topic of controversy this spring when the owner wanted to convert it into a sober living facility. Other homes along that street are valued in the $1 million-$2 million range and residents were none too happy about the proposal. In mid-May the Rollingwood City Council voted to seek legal assistance about the controversy, but it didn’t matter because the owner Big Toe LLC sold the property soonafter to an entity formed by Keller, Rock Odyssey LLC.
As you may know, Keller is a rock music devotee and also owns the building on South Lamar where music venue Saxon Pub operates. Keller owns that through entity, Music Mania LLC. On Oct.1, an entity affiliated with Keller Williams purchased the property at 2900 Bee Caves Road where the Finish Line Car Wash operates a pretty thriving enterprise. The seller was Bee Caves Road Properties Ltd. and the buyer was KC 2900 BCR Ltd. with an address at Keller Williams’ corporate headquarters. I feel a song coming on — “At the car wash … whoa, whoa, whoa, whoa … talkin’ about the car wash, girl … come on ya’ll and sing it for me.
Hundreds of lawsuits have been filed in recent weeks challenging tax valuations by Travis, Willliamson and Hays Central Appraisal Districts. This is an annual drill, and with Austin’s unprecedented growth, I don’t know how these government entities are able to thoughtfully provide accurate assessments. It doesn’t seem like there could possibly be the manpower. I thought for the fun of it, I’d look at some of the major office buildings in downtown Austin and see how much values have gone up — in one instance 22.4%. Yikes, but I think I know part of the reason.
County appraisers use a variety of techniques to appraise properties, and I’ve had some small business owners complain to me that the methods used seem to change year to year in a random attempt to extract the most money. I don’t know if it’s true, but I’ve heard that some retail properties are being appraised based on optimistic redevelopment potential, when in reality city of Austin land use code would not permit that kind of development. That would sure be a Catch 22.
• The Texas Real Estate Commission is seeking an executive director, and the annual salary is tempting — $160,000 to $180,000. Ok, so that’s not much compared to what veteran commercial and residential real estate brokers make, but it’s a decent chunk of change. You can read all about the job here.
• NAIOP, the national professional organization, is coming to town. When I arrived in Austin in 2012, I was surprised that there was no NAIOP because I’d worked so closely with them as sources in Denver and Phoenix. I quickly learned that the Real Estate Council of Austin held sway here, and to be honest, at first I found the organization totally disinterested in talking with me. Of course RECA’s big event is KnockOut Night, a bacchanal of 1,800 attendees that apparently raises money for charity — what about receipts from next year’s soiree earmarked for homeless solutions? See more on this topic below. But anyway, is RECA losing its grip with the emergence of NAIOP? And can Austin support so many commercial real estate groups — ULI, CTCAR, CREW, CCIM, CoreNet, to name a few. Who has time? What impact will any of them have? Here’s a link to NAIOP Austin.
• What’s your take on the latest news out of the city of Austin that its homeless strategy officer is “stepping back” from the full time position after just a month on the job? She supposedly will remain a consultant. OK, so a couple of things. Did the city not properly vet her? One month is barely enough time to figure out where the bathrooms are. This make no sense at all. How much did it cost to recruit her? How much will her consulting fees cost? I wish someone would get to the bottom of this, because “Austin, we have a problem.”
I know the city of Austin doesn’t like to take direction from anyone, but here is a great story about a model for homeless intervention in Denver where the Salvation Army’s Crossroads shelter rents beds and lockers, which really helps people get stabilized and find viable jobs. When will Austin’s mayor and city council stop excusing their lack of action and start collaborating with businesses and local nonprofits to solve this massive problem?
Recently, I was accosted and harassed by a homeless man in the middle of the day walking down Congress Avenue. I truly feared for my well-being. Though surrounded by young people, no one came to my defense, and I understand why. It’s dangerous on the streets of Austin. Yes, these homeless and mentally unstable people need help, but it’s sad that I no longer feel safe walking the streets of downtown on a weekday. Have you noticed that the JW Marriott has hired off duty sheriff’s deputies to stand at the entrance/valet station on West Second Street?
• As I write this, a hearing is scheduled in Travis County District Court about the lawsuit filed by Tuebor REIT Sub LLC over an alleged defaulted promissory note it holds and signed by Silicon HIlls Campus, aka World Class Capital. I’m thinking one of the big media will have the latest on that. A couple of more entities have filed lawsuits against WCC or its holdings in the last couple of weeks — mostly, it appears, properties that have been nightclubs, but I don’t know what the complaints are about or if they have any merit, as there is little online access to state court records.
• Don Quick & Associates in Round Rock is celebrating 50 years in the commercial real estate business, and they’ve pick 50 charities to support in celebration of their success. Congratulations to the Quick team!
• I want to draw attention to two new sponsors — LEVY and ISO Commercial. Thank you for your support. Recently I wrote about LEVY and its expanded focus on design and new principals, Jill Pierce and Ryan Begley. Check out the story here.
Next week I’ll have a story about ISO, which is headed by Dave van Heuvenand Tim Grondin. Some of you may know them from the downtown residential sector, but they’ve been cranking it up in the commercial niche and you are going to be impressed. Stay tuned.
• Also, Big Red Dog is officially WGI. The West Palm Beach-headquartered engineering/consulting firm described its growth in a press release last week, including news of 1,000 new contracts awarded in 2019 and 200 new employees/associates.
The release singles out BRD’s acquisition for its business development chops.
“We are building a firm with extraordinary talent and great vision. We are investing heavily in cutting-edge technology. We are evolving our corporate image through the addition of Big Red Dog’s disruptive marketing energy,” CEODavid Wantman said.
Just a reminder that WGI’s local presence remains in the hands of the team that started BRD, as you can read about here.
WGI has an impressive list of transportation-focused projects across the country. Two large private projects in the Austin area are highlighted, including the Rebekah Baines Johnson Center mixed-use development near Lady Bird Lake, and the Uptown Plum Creek planned unit development in Kyle. The inimitable Terry Mitchell of Momark Development is affiliated with those great upcoming projects. Congrats, WGI!
• Don’t forget to take a look at sponsor Austin Title‘s growing roster. Here is a link to the commercial division, and my buddy Chris Kemp.
• One last funny item. When I was scouring the city of Austin’s development services records I saw a project at 200 Congress named “One Spicey Center.” It’s been voided now, but you can still find it here with this number 2019-197239 BP. Just lead me to the chips and salsa. Ha.
Have a prosperous week, y’all. Thank you for reading. Jan
Lincoln Property represents WeWork in Rainey District development; meet the irrepressible Jay Lamy; what about Austin’s homeless debacle?
WCC faces new lawsuits; Moton Crockett passes at 96; More on WeWork, Amherst Holdings, 2020 Austin Parade of Homes
Even with nearly 1,700 rooms delivered this year, the average occupancy rate is a superb 77 percent, the highest in the state, according to Source Strategies, a hospitality research and data firm based in San Antonio.