5/18 Austin Site Visits

Ronald McDonald House

We began our day at Austin’s Ronald McDonald House which serves the municipalities Dell Children’s Hospital. It is a Platinum LEED certified building that was designed to maximize efficiency by through site strategies, design, development, water efficiency, construction, energy systems, recycled material, waste management, lighting quality, thermal quality, and air quality. This building is 30 units and had a construction cost of $11.3M, up from the $9.5M proposal figures. There is typically 16%-18% increase in construction costs for a LEEED Platinum project. This building was able to recover those extra costs in two and a half years. It is a LEED Platinum rated building and was one of the first of its kind. Upon its certification, it was one of twelve LEED platinum buildings in the world. Twenty percent of the LEED points came from using environmentally friendly construction material. It is also a brownfield development located on the old Austin airport, which is slightly north of downtown and just west of interstate 35. Its features and benefits include: underground drip irrigation that saves %50 of irrigation and uses runoff water, 30% water use reduction, 48% of building materials was purchased from within 500 miles of Austin, 94% of rooms have a view of outside, ambient lighting, film on glass to reduce, low VAC materials, no formaldehyde in any material used, and 82% of waste from construction was recycled. The film placed on regular windows as opposed to using tempered glass saved $100K in construction costs. This building is one of the benchmarks for sustainable development. Its unique non-profit use was the driving factor behind being frugal money by reducing operating expenses and extended the intended life of the “House.”

Seaholm Power Plant

This is one of the few redevelopment projects that the City of Austin has chosen to pursue and provide funding and incentives to. The city has contributed $13M to the clean-up of the contaminated site. This may be the first and last time that Austin decidedness to get involved in a project of this scale. Their intention is to save this historically significant landmark by providing enough incentives to make the project profitable for the private sector. They have succeeded in attracting a developer through by getting the site a federal RFR (ready for re-use) certificate and issuing a RFP (request for proposal. The MDA (Master Development Agreement) will allow the seven acre site to be made into a mixed use development that utilizes the existing structure. The new development will also include a 26 story tower while working around the capital view corridor that exists in this area.

MuellerDevelopment

Our second stop for the day was the Mueller Development, which is a multi-use development adjacent to the hospital district which houses Dell Children’s Hospital and the Ronald McDonald house. The Mueller project is a “brownfield” development which was previously the Austin Airport. It has PUD zoning and is very flexible as far as uses go which ensures that highest and best use will be maximized by the developers throughout its continued construction. Currently, the site has 1150 Residential units and 100 acres of parks that have been donated to the city. 600 homes are having been sold and currently are occupied. They are 85% leased on their 440 rental units. 25% of all homes are affordable and at or below 80% MFI with many financing options for needy home buyers. There is a Austin Energy Rating minimum for every type of structure. Homes must be at lease 3 stars, while commercial building must be at least 2. The developer has chosen to focus on energy efficiency and environmental conservation because of the green nature of Austin and its citizens. Many of the plants are natural and habitats of the original Blackwood Prairie are taken into consideration.

Hill Country Galleria

This retail and office center is a prime example of a lack of due diligence and market research on the part of the developer. The 1.3M square foot shopping center and office facility is located on Bee Cave, which is slightly southwest of downtown Austin. The original construction cost of this site was approximately $180M. This cost was unsustainable and toward the end of construction the owners could not find a bank to provide permanent financing. As a result, the center went into foreclosure and was bought for $75M of pure equity by two principles of the Weitzman Group. According to the retail leasing broker, besides the office, the site will be 70% leased soon and he thinks that the current owners will have a good return on their investment when they sell the project, which will hopefully be fully leased, in a few years. There are various complex co-tenancy and other issues with the current leases that would have doomed a owner at any higher of a price point. This purchase will likely prove that great investment opportunities still exist, but the risk they entail comes with the territory.