BUSINESS

Chase Tower in downtown Austin to hit market

Shonda Novak
snovak@statesman.com
The Chase Tower in downtown Austin, which was built in 1974 and houses the private Headliners Club on its top floor, is up for sale.

[Courtesy Cushman & Wakefield]

The 21-story Chase Tower in downtown Austin will go on the sales block starting next week.

The building, which has been renovated since the current owners acquired it in 2017, is on a full city block at 221 W. Sixth St. The tower is 90 percent leased, with tenants including WeWork, Facebook and Procore Technologies.

The tower was completed in 1974 and has about 390,000 square feet of space.

"We are hitting the market next week," said Mike McDonald, vice chairman in Cushman & Wakefield's Dallas office, which is taking the lead in marketing the building.

McDonald said the building could command a price of $240 million, or about $625 per square foot. At $240 million, the sale price would be $65 million more than the $175 million ($449 per square foot) that Goldman Sachs Asset Management and Lincoln Property Co. paid in early 2017.

Rhonda Toming, managing director in Austin for Fischer, a Dallas-based real estate services firm, said the supply of top-tier office space in downtown Austin "continues to fall short of demand, which is why many market speculators project office rents to keep rising further, allowing for investors to pay aggressive pricing.”

The Travis Central Appraisal District valued the property at about $183.3 million last year, up from $175 million in 2017.  Goldman's and Lincoln's upgrades included a new lobby and courtyard, new roofing, and improvements to common areas and stairways.

Goldman and Lincoln bought Chase Tower from Dallas-based Spire Realty Group.

Spire acquired the building in September 2012 from several limited partnerships that included Austin-based Endeavor Real Estate Group and Grubb & Ellis Realty Investors LLC (formerly Triple Net Properties LLC).  When Endeavor and Triple Net bought the building in 2006, they paid $73.7 million — about $189 a square foot.

If Chase Tower sells for $240 million this time around, that would be a 225.6 percent increase over the 2006 purchase price, and a 37 percent increase over the selling price two years ago.

Another high-profile downtown tower currently on the market is the Third + Shoal, a new 29-story high-rise built on the site of the former Austin Music Hall.

Scott Fordham, chief executive officer of TIER REIT, announced the offering in an earnings announcement last month.

“As a result of significant capital looking for high-quality properties in Austin, our Third + Shoal joint venture has begun marketing the property for sale this week, potentially allowing us to capitalize on the value created,”  Fordham said. Dallas-based TIER REIT developed the building with partners Austin-based Cielo Property Group and Invesco Real Estate, a global real estate investment manager.  Facebook signed a lease for just over 230,000 square feet of space in the building.

Local commercial real estate brokers say the 375,000-square-foot building is generating strong interest, and that TIER REIT will call for first offers this month.

Brokers say they expect Third + Shoal to set a new record price, well above $700 per square foot. That price would put the sale at more than $260 million. It would surpass the $663 per-square-foot price that 5th & Colorado, a new 18-story tower in downtown Austin, sold for in 2017, brokers said.

“Austin is one of the most sought-after locations for commercial real estate investment right now, and this type of product (Third + Shoal) doesn’t come to market often,” Karen Judson, a vice president with Transwestern in Austin, said last month. “Depending on what the tenants are paying in rent, the sale of Third + Shoal should blow past our previous per square foot record-holder, 5th & Colorado.”