For sale: one Intel building, like new
Half-finished tower in downtown Austin may be hard to market
By Shonda Novak
AMERICAN-STATESMAN STAFF
Thursday, April 18, 2002
Now that Intel Corp. has decided to sell its downtown Austin building, who will buy it?
Facing pressure from the city to make a decision about what to do with the building, Intel Corp. broke the news in a private meeting Wednesday with Mayor Gus Garcia and other city officials that it is putting the half-finished building on the market.
Intel says it has received more than 100 inquiries about the building during the past year and it plans to sell the building as soon as possible. However, because the buyer will have to finish the building, it might be a tough sell.
Intel will get help from the city and the Greater Austin Chamber of Commerce.
Chamber officials said they'll include the building on a list of available properties when they travel early next month to Boston and the mid-Atlantic states to recruit new companies.
"We see this as an opportunity to use that parcel of land to try to lure other quality corporations here," said John Breier, the chamber's vice president for economic development.
The building, designed to house 1,000 to 1,300 employees, was Intel's first at a downtown site. It also was the last of 20 office buildings worldwide that the company put on hold to cut costs last year as the tech industry cratered.
Based on planned job growth in Austin, Intel said it would not need the $124 million chip design center until 2005 or 2006. The Santa Clara, Calif.-based company's 550 Austin employees will continue research and design projects in leased buildings around Austin.
Intel spokeswoman Jeanne Forbis said the company didn't decide what to do about the building sooner because it took time to evaluate the company's business worldwide.
"We didn't make the decision in a vacuum," she said. "We were looking at the entire global environment. We did hope that we would be able to continue with the project, but it looks at this point in time that selling is the best option for everybody."
Forbis said no one anticipated the downturn -- nor could anyone foresee when things would get better and how soon companies might start adding employees.
"It doesn't mean you automatically flip the switch and start hiring aggressively again," Forbis said. "I think everyone will be more cautious in the future about business growth strategies."
City leaders say they're pleased Intel finally made a decision.
"It's an amicable divorce," outgoing City Manager Jesus Garza said. "Certainly that's something we've looked forward to, having that building completed."
Garza doesn't think the city overplayed its hand in pressuring Intel to decide, and others agree.
"It was time for them to do something," said developer Perry Lorenz, a downtown landowner. "I think they would have gone on for some time hoping that eventually they could build it out."
However, opinions are mixed over how tough a sell Intel will face in a region with a glut of office space. Area office rents have dropped as vacancies have risen over the past year. Downtown's office vacancy rate is 15 percent, more than double what it was 18 months ago.
"It all depends on the price," Lorenz said. "If it's cheap, it will sell quickly."
Intel said it is having the building appraised. The company spent $15 million for the land and building before halting construction in March 2001. The building is listed on the tax rolls at about $19.8 million; Intel says property taxes for the site are about $500,000 a year.
Some observers of downtown development question whether Intel can recover its investment in the project. And one commercial broker says the building, while unfinished, might be difficult to alter for another user.
Mike Kennedy, president of Commercial Texas, a commercial real estate brokerage in Austin, likened it to buying a custom-designed house.
"It could offer some challenges," Kennedy said. "It just may not fit, or it may be too costly to make the changes. So unless you're another chip design company, the fundamental items in the building may or may not be attractive to you."
When the tech industry fell into a recession, Intel's plans, like those of many technology companies, changed suddenly and dramatically.
"When they broke ground in early 2000, literally that morning their stock declined 49 percent," recalls Sue Edwards, director of the city's redevelopment services office. "You could tell that there were some sad faces even though we were doing this ground breaking. You could feel a little bit of anxiety."
Edwards worked on the contract offer the city used to lure Intel downtown. The package of $10.6 million in incentives could be transferred if Intel finds another major employer to buy the site, city officials say. If not, Intel told the city that it will pay the $1 million in fees that have been waived so far.
The Intel project was part of then-Mayor Kirk Watson's vision for a "digital downtown," which included Computer Sciences Corp.'s office buildings and Vignette Corp.'s proposed headquarters. Vignette scrapped its plans last year when the economy turned.
Intel chief executive Craig Barrett acknowledged at the start of construction in 2000 that the downtown location was an oddity for the company, which always has located its engineering centers in suburban campuses. Company officials conceded then that the higher building costs downtown and heavier rush-hour traffic were negatives with which they would have to contend.
They said the company probably would use staggered work shifts and allow some workers to telecommute part of the day in order to miss the worst of traffic.
Downtown wasn't Intel's only option; the company also considered sites in other parts of town. "We took everyone's input as part of our decision-making process," Forbis said. "We made at the time what was the best decision for the corporation."
But city officials and environmental activists let the company know they would oppose a plan to build in an environmentally sensitive area. They offered the company the financial incentives to help offset the higher cost of building downtown.
Lorenz, the developer who owns or jointly controls most of the land where Vignette planned to locate downtown, says no one strong-armed Intel.
"They're all consenting adults and had the benefit of sophisticated legal counsel and strong leadership," he said. "And that's the decision that was mutually made. Sometimes things work out, and sometimes they don't." |
