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Nonprofits Feel Squeeze To Flip Long-Held Downtown Property

Nonprofits and trade associations are thinking twice about keeping their choice locations in Downtown Austin as the price of land reaches record highs.

SXSW Center on Lavaca

The Texas Restaurant Association CEO Richie Jackson knew the property at 1400 Lavaca might one day go back on the market. TRA had owned the property since 1991, and it provided convenient access to lawmakers at the Capitol, but growing values soon won out. It sold to SXSW. 

Downtown is dotted with blocks owned by trade associations, sandwiched between new high-rise towers. The bankers are next door to the Governor’s Mansion. The Texas PTA is next door to the civil courthouse. School administrators, teacher groups, medical associations, realtors and broadcasters all own Downtown property a short walk from the Capitol. Many groups have owned their Downtown blocks for decades.

But the value of downtown land is growing. Developer CJ Sackman, who closed the deal for the city-owned land at 64 Rainey by the Mexican American Cultural Center, said the people happiest with the price of Downtown land are those who own lots that could close a deal.

"It's come to a point where it's not underwriting, especially where we're seeing escalations in construction costs," Sackman said at Bisnow's Future of Downtown Austin event. "Right now we see [Downtown] boundaries shifting east, boundaries shifting north. Developers are trying to find land they can underwrite, and we'll see where that goes."

TSTA's former building, now Westview Austin

Prices in Downtown Austin are rising as blocks have become more coveted. JLL named Congress Avenue as one of the 10 most expensive streets of 2017, along with Boylston Avenue in Boston, Fifth Avenue in New York City and Mission Avenue in San Francisco. Rents are averaging $58/SF, with many large blocks of space dominated by tech companies like Google, Cirrus Logic and Facebook. 

Some associations have been able to cash in on the high land prices. Texas PTA was one of the earliest to negotiate a land sale, back in 2009. The association subdivided its land, selling off two out of three lots to Travis County for a district attorney's office.

Texas PTA rebuilt on the third lot, its original location. CEO Kyle Ward said profits from the land sale, and three additional building tenants, have helped cover the cost of the construction of the new building.

"They got to build their office and we got to stay in the location where we had been for 60 years," Ward said.

Dallas-based Prescott Group picked up the Texas State Teachers Association building in 2016, and is completing an $11M renovation. TSTA officials will not discuss the sale, but the block was valued at $12.5M on appraisal rolls.

The Texas Restaurant Association's block was on the appraisal rolls for $4.4M when it sold to SXSW at the end of 2015, up $700K over the prior year. 

Now the Texas Restaurant Association is in a tower in University Park, where Concordia University once sat. Jackson said it is a good location, but he does not rule out moving back closer to the Capitol.

“We might be back Downtown someday,” Jackson said.  

Texas PTA Building

Some associations are resisting the pull. AFL-CIO decided against selling its headquarters at 1106 Lavaca. Spokesman Ed Sills said the building had reached a point where the cost of deferred maintenance was significant. Potential buyers liked the location, but they did not like the existing building. But they did not want to cash in and move.

"After a thorough vetting by our officers at the time, they decided the value of our location just two blocks from the Capitol outweighed any value we might be able to obtain from the land," Sills said. "After evaluating many options, we chose to renovate and stay put."