Daily Briefing: ❄️ Stay Cool and Funded: Austin's A/C Mandate Meets Chatham's $83M Play 💰

September 2nd, 2023 News Brief TLDR:

• Council's A/C Mandate: Austin mulls making A/C in homes a must-have by 2024. ❄️

• Spiking Power Costs: Rising electricity prices send data center developers on a location hunt. ⚡

• Austin Office Revamp: Fintech firm spices up Austin offices with Flex-Ability Concepts. 🏢

• Chatham's $83M Debt: Chatham Lodging secures $83M, eyes upscale extended-stay hotels. 💰

REAL ESTATE & HOUSING

New, Affordable Rental Housing Units Approved for Southeast Austin

Source: AustinTexas.gov

Summary: The City of Austin Housing Department has confirmed funding for two affordable, rental developments totaling 160 new units in District 3, aligned with recently approved General Obligation Bonds. These developments, known as The Roz and The Sasha, are supportive of low-income inhabitants and were accepted as recipients of the 9% Low-Income Housing Tax Credits (LITHC). All 100 units of The Roz and 60 multi-family units of The Sasha will be available for lease by 2025. These projects mark substantial milestones in the availability of affordable living spaces for vulnerable populations within Austin.

Why this matters: Commercial real estate professionals can leverage this information to inform their investment-focused clients looking to diversify their portfolios, given the city of Austin's continued commitment to the promotion and funding of affordable, multi-family housing development projects.

Construction begins on 95-acre project that will bring industrial, office and retail space to Cedar Park

Source: BzJournals.com

Summary: Construction on a 95-acre development project known as "New Hope project" is in progress at the intersection of U.S. Highway 183-A and New Hope Drive. The project is estimated to cost around $250 million, with expected offerings such as 430,000 square feet of industrial space and an additional 29,000 square feet dedicated to retail.

Why this matters: Being knowledgeable about large-scale developments, like the New Hope project, not only provides a beacon of future commercial and retail opportunities, but also becomes an investment advisory tool to guide clients' investment decisions proficiently in areas surrounding major projects.

Council approves push to make air conditioning a requirement in Austin

Source: AustinMonitor.com

Summary: The Austin City Council has approved a resolution pushing for amendments to the city's Land Development Code. These proposed changes will necessitate residential property owners to provide effective cooling systems, responding to the continuing extreme heat and ultimately enhancing the living conditions of tenants. State Rep. Sheryl Cole's House Bill 2592 failed to obtain legislative traction; it would have guaranteed air conditioning in all Texan apartment units and decreased the repair window from seven days to five. The Austin Apartment Association stressed necessary enforcement and support of existing standards and the consideration of potential effect on rental affordability. While full implementation, scheduled for August 2024, requires another vote for ordinance status, the resolution reflects pre-existing cooling laws in other Texan cities.

Why this matters: Awareness and understanding of this potential Code Amendment could help commercial real estate professionals better advise their clients contemplating residential investments in Austin, while emphasizing property improvements and renovations considering tenant health and safety are good for returns.

Expert: Austin-area new home sales are healthy, and prices are expected to 'stay strong'

Source: Statesman.com

Summary: Sales of new homes in the Austin area remain healthy with strong prices expected to continue, according to HomesUSA.com CEO, Ben Caballero. In July, the three-month moving average of new home sales in the Austin market was 918, showing improvement from June's sales. Despite potential seasonal downturns, house prices are expected to stay robust. The average home prices for new homes dipped slightly in July to $536,842 from $541,517 in June. Active listings are stabilising, with the three-month moving average for active listings last month being 5,294 new homes. Moving forward, market fluctuations are depending on interest rates and government policy.

Why this matters: Understanding the health of new home sales can assist commercial professionals in predicting growth opportunities, particularly those interested in residential development, providing key data to make decisions for project investment or land acquisitions within central Texas.

Pros And Cons Of Living In Leander, Texas

Source: RealtyBizNews.com

Summary: Leander, a rapidly growing city north of Austin, provides a bevy of benefits to relocators, particularly those looking to start or expand a family. Citing a vibrant community vibe, strong schooling system, and vast natural beauty, Leander is commended as an attractive residential option. However, drawbacks include limited entertainment, sparse public transport, and fewer local job opportunities. Bellyfeel, despite a quieter vibe than Austin, commuter flexibility to the state capital enables access to the latter's energetic nightlife and employment offerings.

Why this matters: The highlighted development in Leander signals potential opportunities for commercial growth and heightened industrial activity, thereby drawing investors and enterprises to the area.

BUSINESS & FINANCE

Spiking Power Costs In Big Markets Pushing Some Data Center Developers Away

Source: BizNow.com

Summary: The increasing costs of electricity and energy market volatility are leading data center developers to reconsider their building site choices, particularly for developers in the colocation data center subsector, because energy power prices play an integral role in overall facility costs. Though leading developers have continued massive projects even in markets where the price spikes have flown high, exorbitantly priced areas might push transcript-oriented data center providers to regions where power rates are more reliable. Major metros - such as those found in Los Angeles, Austin/San Antonio, Las Vegas/Reno, and New Jersey - have seen their average industrial power rates jump over 20% in the last year, have proved a causal colonist effect on building location. Power costs, generally transferred to tenants, imply elevated rents in zones known for considerable power outlay and offer lesser leasing dependability, remaining a fundamental concern for those with large computational loads. Simultaneously, notable players like Microsoft and Google focus more on power accessibility over cost.

Why this matters: The escalating energy costs in markets like Austin/San Antonio—as mentioned in the article—can directly impact commercial real estate professionals, especially if their clients include or are anticipating including colocation data center providers. This information can be harnessed to advise such clients to reconsider location choices based on power cost considerations and reliability within Central Texas and potentially anticipate the larger commercial shifts and property demands due to varying utility pricing.

Austin Office Space Makes Use of Flex-Ability Concepts Products

Source: FacilitiesNet.com

Summary: A confidential financial tech firm has revamped spaces within the Statehouse Building apartments on South Congress Avenue, Austin, with rapid new changes that help the building hold up the "Keep Austin Weird" vibe. Part of their re-design included adopting Flex-Ability Concepts Products – namely, Flex-C Trac and Flex-C Angle – contributing to efficiencies in both budget and time. Buda, Texas-based Marek Brothers has acted as the framing and drywall subcontractor on the intriguing 6,650-square-foot office space slated with extensive elements of radius walls and furr downs.

Why this matters: By renovating to feature a recognizable name like Flex-Ability Concepts products, commercial brokers can contribute towards clients desiring a 'modern renovation' aspect for their listings or elevate conversations around value-add improvements with potential buyers or current tenants.

Chatham Lodging Trust Debt Issuance Clears Path Through 2025

Source: MarketScreener.com

Summary: Chatham Lodging Trust, a hotel REIT, has successfully issued approximately $83 million in fixed-rate debt, further bolstering its balance sheet. Split into several individual first mortgage loans, the new issuances are earmarked for repayment of all debt due through 2024 beside one $19 million maturing mortgage in 2025. Notably, two 10-year loans totaling $39.9 million are secured by Austin's Residence Inn and TownePlace Suites at The Domain.

Why this matters: Grasping the financial moves of major hospitality players like Chatham Lodging Trust can assist Austin-based real estate brokers in identifying attractive investment opportunities for their clients, particularly those interested in the hotels and hospitality sector.

HGI Acquires Myrtle Beach Project From Asset Manager

Source: MultiHousingNews.com

Summary: Harbor Group International (HGI) recently acquired a newly built luxury multifamily property, Artisan Carolina Forest, with 276 units for $64.4 million in Myrtle Beach, South Carolina. This marks its second acquisition in a week. The property was sold by Bell Partners and facilitates amenities including a resort-style pool, fitness center, business center with co-working spaces, and more. Notably, last week, HGI re-entered the Austin market by securing the acquisition of The Warner, a luxury multifamily community with 336 units in Round Rock, a suburb in Austin, Texas.

Why this matters: HGI’s Austin market re-entry underlines the growing investment interest in Central Texas, and could provide a benchmark for local professionals to learn about market dynamics, emerging opportunities, and planning strategies related to multifamily property transactions.

Houston investor buys Terrell Plaza shopping center

Source: Recenter.tamu.edu

Summary: After nearly four months on the market, the Terrell Plaza shopping center in San Antonio has been bought by Houston-based retail investor Property Commerce. The investor acquired two parcels at prime positions within the retail complex, costing around $21.8 million of property value. The key spots are currently 96 percent leased with high-profile anchor tenants including Target, Petco, and Ross Dress for Less. The selling entity was Ohio-based trust SITE Centers—acquired the complex back in 2008 for $16.9 million.

Why this matters: The transaction evidences a lively real estate market that continues to spur interest between cities, offering valuable insights into local comparative market economies for commercial real estate advisors and their clients in Central Texas.

CORPORATE TROUBLES & DEVELOPMENT

StoryBuilt: Receivership & Abandoned Projects

Source: Blog.thebrokerlist.com

Summary: StoryBuilt, known for its ambitious urban, mixed-use development across Central Texas, is in serious financial turmoil forcing a corporate restructuring and lawsuits on multiple fronts concerning investor and construction disputes. These originate from closely-related to challenging costs, insufficient controls, and rapidly expanded growth; Investor suit claims and a controversial diploma over alleged negligentcuts in large condo development bring further complications. Facing unscalable financial hurdles, StoryBuilt thrust itself into voluntary receivership in an extraordinary effort to safeguard creditors, shareholders, along with customers, and streamline warehouse operations through court-appointed guidance.

Why this matters: For real estate professionals engaged in Central Texas, this unfolding scenario presents an opportunity to spearhead solutions for the clients potentially affected by StoryBuilt's ongoing crisis, by identifying applicable alternatives or mitigations in this rapidly evolving landscape fraught with burgeoning unrest. A discerning prognostication can leverage clients apprehensive about parallels from StoryBuilt's sudden decline, recouping valuable trust and strategic partnerships in this tentative market.   

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