October 2020

Propositions A and B - A New Transportation Era for Austin

Propositions A and B – A New Transportation Era for Austin?

  • Propositions A and B are new transportation proposals on the November 3rd ballot in Austin.
  • If passed, they will provide needed infrastructure improvements to Central Texas.
  • While passing the propositions will raise our taxes, the cost is worth it for the necessary improvements.

I’m sure I don’t have to tell anyone that we are getting close to election day. Between non-stop news coverage, constant commercials, and endless email solicitations, its pretty difficult to avoid election coverage.

I am not here to weigh in on the Presidential or Senate or City Council elections. If you’d like my opinion on that, call me up and we can go grab a beer and talk about it. But there is one election issue I want to address because its very important for the future of Austin.

Propositions A and B on the ballot in Austin are important for the future health of Central Texas. In this blog, I will talk about what they both are, why they are important, and why I am voting for them.

To be clear up front, I do have some clients who will likely benefit from Propositions A and B passing. But that is not why I am writing this blog entry. I have not been paid to advocate any position. I am writing this because I think passing the propositions is important to Austin’s future.

Proposition A

First, lets start with Proposition A. Prop A includes the following:

— New train routes

  • Orange Line – The goal of this line is to connect north and south Austin. The initial investment will be from North Lamar and US 183 to Stassney Lane.

  • Blue Line – This line will offer service to the Austin airport, with service from North Lamar and U.S. 183 to downtown and ABIA.

  • Green Line – This is a new commuter rail service offering service from downtown to East Austin’s Colony Park.

— Transit Tunnel Downtown – Light rail is proposed to travel underground downtown. The City expects operating rail service beneath the streets to increase the system’s travel time reliability and to be safer than operating at street level.

— New Rapid Bus Routes

  • The Gold Line (from the Austin Community College (ACC) Highland Campus to South Congress and Ben White Boulevard) – This will be a MetroRapid service that could eventually be converted to light rail as a part of the Project Connect System Plan.

  • Expo Center – from East Austin to the University of Texas and downtown.

  • Pleasant Valley – from Mueller to the Goodnight Ranch Park & Ride.

  • Burnet – from The Domain to Menchaca and Oak Hill.

— New Facilities – The plan includes as many as nine new Park & Ride facilities at Four Points, Loop 360, ACC Highland, Delco Center, Expo Center, Wildflower Center, Goodnight, McKinney Falls, MetroCenter, and a new transit center at the Eastside Bus Plaza.

— New Circulators – The plan proposes 15 new neighborhood circulators, on-demand pickup and drop-off to locations within zones. Circulators provide first-mile/last-mile service and connections to transit stations and other destinations.

— Anti-Displacement Funds – The plan includes $300 million for transit-supportive anti-displacement housing strategies.

Funding for Proposition A

According to city officials, Proposition A is expected to cost about $7.1 billion. Federal funding will cover approximately 45 percent of the project’s estimated cost. The rest of the cost – including the operations and maintenance of the system – will be paid by Austin residents. This will be raised through an increase in the city’s property taxes of 8.75 cents per $100 of property value.

Proposition B

Proposition B includes the following:

  • New Sidewalks – Approximately $50 million is earmarked for new sidewalks and $30 million for rehab of existing sidewalks

  • Urban Trails

  • Bikeways

  • Safety/Vision Zero – This includes projects that reduce conflict and increase safety, including:

— Intersection reconstruction projects at an estimated 25 major intersections.

— Speed mitigation projects on approximately 70 street segments.

— System-wide pedestrian crossing projects.

— A variety of rapid response projects on the High-Injury Network

  • Safe routes to school

  • Local transit enhancement program

  • Neighborhood partnering program

  • Improvements for publicly owned roadways

  • Major capital improvements

Cost of Proposition B

The cost of Proposition B, if approved, will be paid for through the issuance of $460 million in tax supported general obligations funds.

The Need for Better Transportation Systems

Anyone who has been in Austin the last few years knows the need for transportation upgrades. In 2019, Austin was the fastest growing large city in the United States. The metro area population grew almost 3% from mid-2018 to mid-2019. This is great for the area – more businesses and more people are flocking to Central Texas.

But our infrastructure has not kept up with that growth. There are too few ways to get around town and the predictable result is terrible traffic that makes all of us miserable. These effects are magnified when combined with our affordable housing problem. With a lack of affordable housing near the city center, many folks are forced to live some distance away. And then they must commute into town for work. By not keeping up with the transportation demand, We’ve made those commutes much worse than they need to be. Not only is this a drain on the commuters, its very harmful to the environment. Improved public transportation, therefore, should help alleviate traffic issues, make commuting more bearable and affordable, and have a positive impact on the environment.

Finally, as I mentioned above, I have clients who may be helped if Propositions A and B pass. That’s because additional transportation hubs are good for commercial property owners and developers. Transportation hubs become hot spots for development and help make it easier for people to live and work in new areas that can be developed.

Of course there is a cost to these transportation improvements. But we need to invest in our Central Texas infrastructure. This is, therefore, a cost that we should be willing to make because it will improve the lives of all Central Texas residents.

As a result, I will be voting for Propositions A and B. And I hope you will join me.

Propositions A and B – A New Transportation Era for Austin? Read More »

TAR Purchase Agreements - Good but not Great

TAR Purchase Agreements – Good but not Great?

  • TAR has form commercial real estate purchase agreements that can be very beneficial.
  • While they cover lots of the issues of a sale, they do not provide all the protection you may need.
  • As a result, its always best to hire a real estate attorney to help negotiate your purchase agreement.

If you have purchased commercial property in Texas, you probably know about the Texas Association of Realtors’ (“TAR”) form commercial purchase agreements. If you are unfamiliar, TAR has drafted a number of form purchase agreements to make the purchase process in Texas easier. Two that we deal with regularly are a) the Commercial Contract – Improved Property and b) the Commercial Contract – Unimproved Property.

The TAR agreements are often quite helpful in getting a buyer and seller to agree on contract language. But they are not always the right fit for everyone. In this blog article, I discuss what the benefits of a TAR form are and why you may not want to use one when purchasing a property.

Benefits of the TAR Agreements

As mentioned above, it can be a huge benefit to commercial property investors that TAR has drafted these forms. There are definitely some benefits to them. Specifically, the TAR agreements can be a help because –

  • Basic Terms – They have most of the basic terms that are needed in a purchase agreement. TAR addresses the most common disputed issues in its agreements.

  • Familiarity – Most buyers and sellers and their attorneys are familiar with the TAR agreements. As are the title companies. As a result, you generally know what you are getting when you use the agreement.

  • Missing Pieces – TAR has left blank spaces and blank paragraphs that allow you to update the agreements for any missing pieces that you may want to add.

  • Seller protection – The TAR agreements provide a fair amount of protection to a property Seller.

Because of these benefits, many people are happy with just using the TAR agreements. Its easy, convenient, and you know what you are getting. Having said that, there are some very good reasons why the TAR agreements may not be the best for you.

Why You Want to Use Your Own Purchase Agreement

So now that I have complimented TAR and the form agreements that it has put together, I’ll tell you why you shouldn’t use it – especially if you are a buyer. As mentioned above, the TAR agreement does a solid job of protecting the seller, but as a buyer we recommend more protections.

As a result, we much prefer to draft our own purchase agreements. Our agreements have additional clauses that provide extra protection. Specifically, we often want to add clauses that address the following –

  • Clawback – We want to make sure the buyer is fully protected if there are significant changes in the property prior to – or even after – closing.

  • Clearing title – Our clients are not going to accept any liens on the property prior to close. We want to make sure that is clearly spelled out in the agreement.

  • Seller default protections – The TAR agreements do not have clear enough protections for the buyer if the seller defaults. We add our own.

  • Seller reps and warranties – There are additional reps and warranties that are important for the buyer to get from the Seller.

  • COVID-19 clauses – Unfortunately COVID is here and it affects closings. Accounting for that in the purchase agreement is important.

These are just a sampling of some of the additional protections we think are important for a buyer to have. And it’s the reason we always want to use our own purchase agreement. At the very least, we would want to add riders to the TAR agreement.

What I hope is clear is that the TAR agreements can be very beneficial. But it should not eliminate you hiring a commercial real estate attorney. A good attorney can draft his or her own purchase agreement that provides more protection and coverage than the TAR agreement. So please do not go into a commercial property purchase without an attorney.

If you have any questions, please contact us at 512-614-0335.

TAR Purchase Agreements – Good but not Great? Read More »

From the Ground Up - What is the Future of Central Texas Real Estate

From the Ground Up – What is the Future of Central Texas Real Estate?

  • Thursday, October 15 – We are sponsoring a panel discussion on the future of Central Texas Real Estate.
  • We have some great panelists and will discuss a wide range of topics.
  • I hope you can join the discussion.

Hopefully you have already heard, but if you have not, the Austin Business Journal and Bukowski Law Firm are sponsoring a really great group discussion this Thursday, October 15. Its called From the Ground Up – A conversation on the future of real estate in Central Texas.

We have some great panelists lined up and I think it will be a terrific group session discussing many of the challenges and developments facing Central Texas real estate. Besides me, the discussion will include:

We have an hour for the conversation so I’m confident we will cover some really interesting areas. The conversation may travel into many different topics, but we think three specific areas we will cover are a) Covid-19, b) affordability, and c) the coming election.

How does COVID-19 Affect Central Texas?

Where else is there to start? It’s the number one issue of 2020 and it affects everything in its path – including commercial real estate. And, as you likely know, how real estate is affected greatly depends on what type of asset we are talking about. That’s why I am so excited to have such a great cross-section of speakers. It will be great to get input from everyone on different asset classes. Because the outlook for retail and hospitality is a lot different than it is for multifamily. And who knows what to make of office?

I’m also very excited to have Darin Davis on the panel. Presario is very active in the suburbs of Austin. And, as we discussed in this blog a few weeks ago, there is much discussion around the country about whether we will see an exodus from the cities to the suburbs. It will be great to get his input on that.

Central Texas Affordability

I’m not sure there has been a bigger topic in real estate the last few years than affordability. It is on the top of almost everyone’s mind – especially the city government.

It’s a great benefit, therefore, to have David Steinwedell on the panel. As you probably know, David has been working to provide significant missing middle income housing to Austin residents. It will be great to have his input on the future of affordability in Austin.

And, of course, Diana Zuniga and Jim Young have to work with governments to get variances for their developments. They will be able to bring that wealth of experience in knowing what is important to the City Council and how that affects development.

How will the election affect real estate?

Its hard to avoid that we have an election in 25 days or so. So what does that mean for the future of real estate? Interest rates are at all-time lows and have been so for a while. Will that change after the election? Will there be another stimulus package and, if so, how will that change tenant behavior?

As you can see, there is plenty to talk about on Thursday. And we are going to have some GREAT panelists. I hope you will all join.

If you have any questions, please call at 512-614-0335.

From the Ground Up – What is the Future of Central Texas Real Estate? Read More »

Travis County and Austin Put More Restrictions on Multifamily Owners

Travis County and Austin Put More Restrictions on Multifamily Owners

  • Travis County and the City of Austin released new orders abating evictions to out beyond December 31, 2020.
  • The orders also provide a moratorium on notices to vacate.
  • The City of Austin’s order also applies to some commercial tenants.

A few weeks ago in this Bukowski blog, I asked whether multifamily assets are COVID-proof. At the time, it seemed like a reasonable question. While delinquencies were certainly up, they had not exploded and it seemed possible that multifamily may be able to weather a COVID storm.

Well I officially apologize to all the multifamily property owners out there. I must have angered government officials when I wrote that article. Because since then, multiple levels of governments seem to be doing everything they can to ensure multifamily property owners see their investments damaged also.

As we have discussed, the CDC issued a nationwide moratorium on evictions (mostly). Then the Texas Supreme Court issued an order that allegedly was supposed to clarify the CDC order. But in reality, it presented more questions than it answered.

And now, Travis County and the City of Austin have issued orders that further restrict property owners there.

Travis County Order

We will first look at the Travis County order. There are two separate orders – one from the Travis County Judge and one from the JP Courts. The County Judge order prohibits landlords from issuing notices to vacate to:

  • A residential tenant who fails to pay rent if her or her monthly rent is $2,475 or less; or

  • A residential tenant who fails to pay rent and provides the landlord the CDC Declaration.

This order is in effect through December 31, 2020. And, importantly, it includes holdover tenants.

The order also prohibits landlords from removing a tenant’s belongings or locking a tenant out until December 31.

The JP Court order explicitly deals with eviction petitions that have been or will be filed in Travis County. It states that all eviction actions will be automatically abated until after December 31, 2020 if:

  • The grounds for eviction are solely non-payment of rent/housing payments; and

  • The defendant’s portion of the monthly rent/housing payment of the premises is $2,475 per month or less.

The JP Courts also state that if the landlord brings a petition under the guise of something other than non-payment of rent – but it really is a non-payment eviction, the JP Court can sanction the landlord.

There are undoubtedly going to be many questions arising from these orders. But one clear one is – what to do about holdover tenants. Can you evict a tenant who has violated his or her lease by remaining at the property past the end of the term? We are trying to find out the answer to that question with the help of the Austin Apartment Association. They have reached out to the JP Court justices directly and we should know more soon.

Mayor Adler’s Order

At first glance, Mayor Adler’s order may seem similar to Travis County’s order. But it goes further than Travis County’s order and affects more than just multifamily properties.

Adler states that, through December 31, landlords are prohibited from issuing a notice to vacate to a:

  • Residential tenant who fails to pay rent if that tenant’s monthly rent is $2,475 or less;

  • Residential tenant who fails to pay rent and provides the landlord the CDC Declaration; or

  • Commercial tenant.

The exceptions to this are if:

1) The tenant’s actions pose an immenent threat of

a) Physical harm to the poperty owner, employes, or other tenants;

b) Criminal activity; or

c) Property damage that interferes with the use of a dwelling that is occupied by other tenants; or

2) An insured casualty loss creates a condition that makes the residential premises unusuable.

The Mayor also includes a holdover tenant in the definition of a tenant.

A few areas where the Mayor goes beyond the County –

  • The county’s order only applies to evictions that are based on non-payment of rent. The Mayor’s order applies to all evictions UNLESS they fall into the two categories above.

  • The Mayor’s order applies to commercial properties. He defines a commercial tenant as someone who operates a childcare business, live-music venue, arts venue, or restaurant/bar.

I do not know how the Mayor decided on that limited definition of a commercial tenant. It’s a very strange and limited definition. But that’s what it is.

As you can see, with each new order that these government entities release, the restrictions on multifamily property owners grow. Lets hope that this is the end of the orders for now. And maybe, through challenges to the orders, some of them can be released.

Travis County and Austin Put More Restrictions on Multifamily Owners Read More »