Austin’s Railyard condo project sells for $104M

Add one of Austin’s oldest downtown condominium projects to the list of sites destined to be transformed with new high-rise development.

Los Angeles-based Karlin Real Estate confirmed that is has purchased the Railyard condominiums, a property with 112 units that spans two adjacent half city blocks at 201 E. Fourth Street and 301 E. Fourth Street.

“We’re pleased to complete the purchase of the Railyard Condominium site in downtown Austin today,” Matthew Schwab, Karlin’s managing director, said in a written statement. “Our team is proud to add this property to our growing global portfolio, and we look forward to announcing long-term plans for this location in the near future.”

The purchase price was $104 million, according to a July 23 letter to Railyard condominium owners from Connie Heyer, the homeowners’ association legal counsel. The letter included a spreadsheet showing the percentage share of sales proceeds to be distributed to each unit based on an appraisal.

The prices owners received ranged from $540,000 to $1.6 million, according to one of the Railyard residents, who spoke on condition of anonymity.

At $104 million, the 70,694-square-foot property sold for $1,471 per square foot, which is believed to be a record for downtown Austin land, according to some local real estate experts.

“As far as I know a closed land sale at close to $1,500 per square foot would represent the highest price per square foot ever paid for a significant tract in downtown Austin -- more than twice the highest sale price paid just last year,” Perry Lorenz, a downtown landowner and developer, said in an email.

The previous record was for a downtown property where an Extended Stay America hotel is being demolished at Sixth and Guadalupe streets. That site sold in March 2018 for $44.8 million, or about $630 per square foot, according to CoStar Group Inc. Lincoln Property Co. and Kairoi Residential bought the site to build a mixed-use project that is in line to become Austin’s tallest tower.

The Railyard Condominium Owners Association put their property on the market last year after receiving unsolicited inquiries from developers amid Austin’s ongoing blazing real estate market. Commercial real estate services firm CBRE was given the listing.

Last year, John Barksdale, a CBRE senior vice president in Austin, predicted the offering would attract “significant interest” from national and international prospects who would recognize the opportunity for “a large-scale, mixed-use development across two unencumbered half city blocks between Congress Avenue and the Convention Center in downtown Austin.

In recent months, a Karlin/CBRE marketing brochure circulated online with renderings depicting what 1.7 million square foot square feet of development in two towers, an office high-rise and a residential/office tower, could look like on the site.

Last year, a CBRE broker’s online listing for the property had images showing a 47-story foot office tower and a 51-story apartment tower.

Karlin declined to comment on the renderings.

The Railyard property would allow for a maximum development potential of over 1.8 million square feet across the two half blocks, and could include a mix of office, apartment, condominium and hotel uses, CBRE said when the property hit the market.

“This is an unparalleled opportunity in the heart of Austin’s central business district,” Mark Emerick, a CBRE senior vice president in Austin, said last year. “Interest will be far reaching due to the distinctly broad spectrum of development potential, including the ability to deliver an office campus of this magnitude.”

Lorenz said dense development is the only way to justify the “extraordinary prices” being paid for downtown Austin properties.

“Market price is a function of what is being paid for every net salable or leasable square foot of improvements that can be built on the site,” Lorenz said. “The economics of high prices translates into taller and denser buildings and, of course higher sales and/or rental rates. That's what drives the ever-increasing land prices.”

The Railyard was built in 1983 as an apartment complex and was converted to condos in 1999.