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Prime site south of downtown Austin hits market

Shonda Novak,
The Extended Stay America site at 507 S. First St., near Barton Springs Road and not far from Lady Bird Lake, is on the market. [JAY JANNER/AMERICAN-STATESMAN]

A site south of downtown Austin that houses an Extended Stay America hotel is on the market, and local real estate experts say they expect the property to command strong interest and an attractive price.

The Austin site is one of four Texas properties that North Carolina-based Extended Stay America is placing on the market, with the other three sites in Houston. Texas-based NewQuest Properties is marketing the properties, and called them “trophy locations” with high barriers of entry for developers.

The Austin site is at 507 S. First St., near Barton Springs Road and not far from Lady Bird Lake. The 2.9-acre property is within the city’s South Central Waterfront District, a swath of 118 properties along the south shores of the lake that are under the control of 32 private owners. The city’s vision for the district calls for allowing developers to build taller, denser projects than current zoning would allow, in exchange for developers providing public benefits.

The property was valued at $14.7 million for 2019 by the Travis Central Appraisal District.

Extended Stay acquired the four properties in the early 1990s and built mid-rise hotels on each from 1995 to 1998. Over time, the value of the land in each respective market has skyrocketed.

“Extended Stay has identified a few properties where the land is far more valuable than the improvements on the property,“ NewQuest vice president Glenn Dickerson said in a writen statement. ”These are being sold for the land value. The seller specifically wanted a land broker and we won due to the strength of our pitch and market knowledge."

The Extended Stay America site in Austin is next to the city-owned One Texas Center, a 13-story office tower built on the former location of the Armadillo World Headquarters music venue that closed in 1980.

In addition to One Texas Center, the site is near Stream Realty Partners’ 15-story mixed-use development called RiverSouth that is under construction on land bounded by South First Street, West Riverside Drive and Barton Springs Road.

Austin-based Endeavor Real Estate Group is among the developers with a significant stake in the south waterfront area. Endeavor is working on plans to redevelop the 19 acres where the Austin American-Statesman is currently housed. Endeavor also has been acquiring other properties across from RiverSouth, including sites that housed Zax Restaurant & Bar, which closed Dec. 31, and an adjacent property that is currently home to Aussie’s Grill and Beach Bar.

Bryce Miller, an Endeavor co-founder and managing principal, said the company would be interested in the Extended Stay site.

Charles Heimsath, an Austin-based real estate consultant, said he expects the site to generate keen interest.

“There is no question that the NewQuest site will receive a lot of attention and many bids from developers who are interested in the area,” said Heimsath, president of consulting firm Capitol Market Research. “It is, however, difficult to say how much the property is worth since it is not clear what type and density of development the city will allow on the site. Given the location next to the city’s office tower it’s possible that this site could also be developed with an office tower.”

Jack Burton is executive vice president of Crockett Properties, which has numerous holdings in the south waterfront district, including the site near the Extended Stay that formerly housed Threadgill’s restaurant that closed in late 2018. Threadgill’s Owner Eddie Wilson cited escalating property taxes as a factor in the closure.

Burton said that the marketing of the Extended Stay hotel site “is further evidence that the South Central Waterfront area is rapidly changing with increased density and higher-end development. With nearly three acres, it’s likely to be a mixed use project taking full advantage of its good location. The city should welcome this type of change, as it will increase the tax base and do so along our transportation corridors.”

City planner Alan Holt has spent several years heading up the South Central Waterfront planning effort. Holt said the Extended Stay site is “an interesting property because of its location adjacent to One Texas Center” --the only city-owned property in the district -- and directly across Bouldin Creek from the Texas School for the Deaf.

Although it is within the waterfront plan’s boundaries, the plan doesn’t address the Extended Stay site specifically, Holt said. However, the plan recommends that the city leverage its own site to create affordable housing, Holt said. In addition, the plan calls for a multi-use trail to connect South First Street to Congress Avenue along the creek bank on the Texas School for the Deaf property, with potential bridge connections across the creek.

“As the property in between, the Extended Stay location could be the linchpin to connecting these two big ideas,” Holt said.

NewQuest said most of the property owners within the South Central Waterfront District are unwilling to part with their properties. The going rate for property in the area ranges from $300 per square foot to $400 per square foot, NewQuest said.

Rhonda Toming, managing director in Austin for Fischer, a Dallas-based real estate services firm, said that as “a large site in such a prominent and visible location in the central core,” the sellers of the Extended Property “should expect aggressive pricing from a large number of credible players.”