Creating a major redevelopment opportunity in Central Austin, Austin Oaks, a 12-building office complex in Northwest Austin that sparked that sparked a lengthy zoning fight, has been put on the market.
Marketing materials tout the sprawling, 31.4-acre complex as a “one-of-a-kind opportunity” to acquire and redevelop Austin’s largest infill business park, which consists of 445,322 square feet of space at MoPac Boulevard (Loop 1) and Spicewood Springs Road.
Dallas-based Spire Realty Group LP, has hired HFF to offer the property to qualified investors.
After a zoning fight that went on for almost three years and faced heated neighborhood opposition, the Austin City Council voted 8-2 last year for new zoning that will allow the site to be redeveloped over time with 1.3 million square feet of office, retail and multifamily space, including up to 375 new housing units.
“It’s probably the last big redevelopment play of its size in the city of Austin,” said Rhonda Toming, managing director in Austin for Fischer, a Dallas-based real estate services firm.
Toming said the offering was expected by many in the local commercial real estate community, after Spire went through the effort and cost of the rezoning.
“The last four owners of Austin Oaks have worked towards positioning the property as a distinctive redevelopment opportunity for the last 15 years,” Toming said. “Given the recent rezoning approvals gained last year, the sale should attract significant interest from both equity players and local developers alike.”
Jon Ruff, president of Spire Realty, said Spire decided to put the property on the market after receiving inquiries from interested parties about the property, which he noted is a high-profile development in a high-profile market.
Ruff characterized the queries as being from “real estate groups” but declined to identify them.
“We had some people express interest in purchasing the property and developing it pursuant to the (new zoning approvals),” he said. Other parties expressed interest in owning the property in its current condition, he said, while still others expressed interest in investing equity in the future planned redevelopment.
Based on the inquiries, Ruff said, “we decided the prudent thing to do” was to take the project to market “and see what comes of that.”
“Clearly there’s interest out here,” Ruff said. “All options are open. My responsibility is to make the best decision for our investors. We’ll see what the market tells us.”
Absent any acceptable options, “we would just continue business as usual” and proceed with the redevelopment, Ruff said. He said there is no specific timetable for breaking ground, adding that Spire would “move forward based on market timing.”
“It’s a market-driven project,” Ruff said. “We don’t have architectural drawings beyond schematics.”
Ruff declined to quote a range of pricing that Spire might expect the property to fetch.
“I certainly wouldn’t want to put a number out there,” he said. “We’ll see what comes to us.”
The Travis Central Appraisal District valued the 12 buildings at $87.4 million in 2017.
Toming said she thinks the project “will be shopped hard in the capital markets.”
“I believe they are going to have aggressive offers,” whether for bringing on an equity partner to redevelop the site, or for an outright sale, Toming said.
Austin Oaks is currently 82 percent leased with more than 140 tenants, with rents averaging 27 percent below market and lease terms of two years, on average, remaining. The property offers significant upside revenue potential from new leases and lease renewals at increased market rates, in one of the city’s strongest office sectors, HFF’s offering brochure states.
Austin Oaks is in the district of Austin City Council member Alison Alter, who with Council Member Kathie Tovo voted last year against rezoning the project as a planned unit development, or PUD.
“Although I was able to negotiate for additional community benefits to be provided in this zoning case, I voted against the zoning change for the Austin Oaks PUD at each opportunity because I did not believe the project was superior,” Alter said. “That remains my opinion whether the current owner develops the site or whether another entity develops the site.”