A high-profile downtown block that is home to the W Austin Hotel and the ACL Live concert venue, along with shops, restaurants and offices, is on the market.
The property, known as Block 21, is home to the 251-room W hotel, which opened in late 2010 in a 37-story tower on the block, just north of City Hall. The tower also includes 159 condominiums that aren’t part of the sale. To date 131 of the condos have been sold or are under contract, at an average price of more than $600 a square foot, according to the offering brochure. Jones Lang LaSalle’s Hotels & Hospitality Group is marketing the property.
A marketing brochure, obtained by the American-Statesman, doesn’t list a price for the property, which was built by Austin-based Stratus Properties Inc. at a cost of $300 million. The 11 parcels that make up the block, excluding the condos, were valued at just over $101 million by the Travis Central Appraisal District last year.
The city tapped Stratus to develop the block in 2005. Stratus had a joint venture partner in the project, Canyon-Johnson Urban Funds LLC, a partnership between Canyon Capital Realty Advisors and Magic Johnson Enterprises. NBA superstar-turned-businessman Earvin “Magic” Johnson came to Austin when the project kicked off in late 2007.
Stratus CEO Beau Armstrong said the block “is an irreplaceable asset in one of the hottest markets in the country.”
“It has met or exceeded our expectations,” Armstrong said Wednesday. “The market is terrific right now. We’re going to test the market and see what kind of interest we can generate.”
Armstrong said the commercial space has leased well, most of the condos have been sold, the hotel is performing “exceptionally well” and he said the 2,750-seat ACL Live venue “has been wildly successful.” He said it was Stratus’ plan all along to develop the property and sell it once its occupancy had stabilized.
“That’s our business. We’re more developers than long-term holders,” he said.
On Wednesday, the project’s first day on the market, Armstrong said his phone was “ringing nonstop all day.” If Stratus is unable to find the right buyer, he said, “we would be proud to own it for many years to come.”
The nationally televised “Austin City Limits” music program is filmed at the ACL Live venue, and a sale “would have no impact whatsoever” on the iconic program, Armstrong said. “We have a long-term agreement and we love working with them,” he said, noting that a new owner would essentially run the venue, subject to the existing agreement.
Jones Lang LaSalle is billing Block 21 as the city’s “premier mixed-use project.” It also says that the building commands some of the highest rents in downtown Austin. Tenants include Urban Outfitters, a Coal Vines pizzeria and Stratus’ corporate offices.
“We believe that the property should be operated as a whole and that is the way we are offering it for sale,” Armstrong said.
Armstrong declined to say what price he thinks the project might command. “We’ll wait and see what the market will bear,” he said.
Randy McCaslin, a hotel industry consultant with PKF Consulting, said the W hotel “has experienced great success” and “would be a great purchase for any potential buyer.”
“The area surrounding the W Hotel has become a hub of activity with the Second Street retail, City Hall, Austin City Limits, and luxury apartments and condominiums, which should generate a lot of interest for the sale,” McCaslin said.
The offering comes as Austin is seeing keen interest from investors in commercial and hospitality assets, and Stratus “is exploring all options,” said Jeffrey Davis, managing director of Jones Lang LaSalle’s Hotels & Hospitality Group.
“I think there are a lot of eyes on Austin, given the fundamentals of what’s happening in the local economy. The lodging fundamentals are very strong and people see Austin as a hot market today,” Davis said.
Dani Tristan, a commercial real estate agent with Austin-based McAllister & Associates, said he would like to see the block remain under local control.
“It will be a sad day to see long-term total control of an Austin institution like ACL fall into the hands of some private equity group or hedge fund in Chicago or New York that don’t understand Austin, but that’s the way the cookie crumbles. Hopefully someone here locally will step up to the plate,” Tristan said.
However, Armstrong said the “excitement generated by the Austin City Limits relationship has contributed greatly to the success of our project, (and) any serious buyer would recognize this.”
“Anyone that buys this is going to be a sophisticated buyer that would recognized the importance of maintaining an Austin identity for the project,”Armstrong said. “We’re looking to certainly maximize our profit, but we also want to make sure it’s the right fit for everybody.”