Jan Buchholz Austin Business Journal
Lance Sallis has spent the past two years overseeing an Extreme Makeover: Austin downtown edition masterpiece.
A partner with Texas-based Stream Realty Partners, Sallis headed up the team to transform a frumpy downtown city block from conventional offices and parking garages into a mixed-use hub with contemporary updates.
Stream acquired the block at the southeast corner of Sixth Street and Congress Avenue in April 2013. It’s been an arduous, complex process predating the formal acquisition of the property from Austin-based T. Stacy & Associates and its partners. In fact, Stream had its sights set on the downtown block for some time — long before the property ever hit the market. Tom Stacy of Austin-based T. Stacy & Associates had long entertained plans to build a highrise tower there — about 1 million square feet of commercial space, but those ambitious plans never came to fruition.
Stacy’s financial partner — Walton Street Capital in Chicago — had a limited investment time frame. That detail was something Sallis was closely monitoring. Based on that background knowledge, Stream made an unsolicited offer on the property 2010 and hoped to snag it in an off-market deal.
Ultimately, however, the owners decided to take the property to market and see what investors were willing to pay. Despite the uncertainty, Stream continued to explore design possibilities for the block, which included the Bank of America office tower, the so-called bank annex at Fifth Street and Congress Avenue, a valet parking garage at Fifth Street and Brazos and the Littlefield Mall and Garage across the street from The Driskill hotel. Another parcel — a surface parking lot on the east side of Brazos — also was part of the package.
A trip to Chicago inspired Sallis to consider the possibilities for the annex, which had been a retail banking facility but vacated for some time. “I said, ‘Let’s do a high design boutique office building with great service and new materials,’” Sallis recalled telling his partners.
He envisioned a higher level of property management services for tenants, along with amenities for pets and common areas that would reflect a more upbeat hotel lobby vibe.
Sallis also took a closer look at the potential uses for the other parts of the block and put together a budget. By then it was 2012, the recession had receded dramatically and downtown suddenly was alive with trendy tech firms.
He hooked up with Austin-based Sixthriver Architects to flesh out concepts and designs, including the idea to cut a hole into the roof of the annex to create an atrium within the drab concrete fortress. “I was totally re-engaged,” Sallis said.
Despite interest from other investors Stream prevailed in its bid and had the block and a half under contract by Thanksgiving 2012. Still, it was anything but a done deal.
Stream needed more capital to close. Eventually Heitman — a Chicago-based investor with ownership history in Austin — provided debt. But who would provide equity? The clock was ticking and Stream needed not only a contract extension, but another investor.
At the last minute, Diversified Real Estate Capital, another Chicago company, entered the picture. The deal closed April 22, 2013. Sallis and team hit the ground running. Prior to closing, Sallis had negotiated with Bank of America to terminate its lease on the property east of Brazos St. where the bank operated a drive-through facility. Finalizing that and quickly selling the land to Magellan Development Group, yet another Chicago-based real estate company, was essential to making everything else work.
In the meantime, Sallis reached out to noted Austin architect Michael Hsu to formalize plans for the annex. Hsu took the lead and Sixthriver completed the drawings. “For years I’ve wanted to do something with Michael. I think he’s the best designer in the country,” Sallis said.
While Hsu finished the clean, airy designs, the dirty work of demolition and asbestos abatement began. There was no saving the valet garage at Fifth and Brazos, so it removed to make way for a new garage. The interior of the annex was gutted — a difficult job that included working around two massive bank vaults. “By then was summer. It was hot and it was just awful in there,” Sallis said.
Trying to find a tenant who would buy into a new concept sight unseen based on a few drawings was an unnerving challenge. Fast forward to April 2015, and the annex is open. Sallis didn’t have to wait too long agonizing about who would lease the space.
California-based tech company Dropbox Inc. signed on — and Sallis said that company’s head of real estate is an architect by training, so he got the concept of their vision for the property. Dropbox's 60,000 square feet of space is being finished out. Meanwhile, Charles Schwab Co. and Allen Edmonds shoe store secured the retail space and have moved in.
The new nine-floor, 300-space garage is open next door. The former Littlefield Mall and Garage is being transformed into trendy short-term rentals and a flagship downtown location for Gold’s Gym. Just as everything has come together, Stream and its partners have put the block on the market. That was always the plan, Sallis said, based upon the investment partners' requirements.
It’s been a great run, he noted, as well as an immense challenge. Now Sallis is ready for the next big thing.