Updated 3:30pm April 11, 2022, to include the total costs of preparing 850 E. Anderson Lane to accommodate TCAD staff and ARB hearings, to include demolition, renovation, IT, and architectural work.
Updated 11:00am April 11, 2022, to include details about and a copy of TCAD’s listing agreement with CBRE Commercial Real Estate Services for sale of these properties.
Updated 9:35am April 2, 2022, to include statement from listing agent CBRE.
Updated 3:50pm March 31, 2022, to include TCAD’s response to correct information about how proceeds of the sale will be used, once the property is sold.
The Travis Central Appraisal District approved, then killed, a cash offer of $5.5 million and now asks an additional $2.15 million
By December 2020 the entire TCAD staff had moved into its newly renovated offices at 850 E. Anderson Lane, as the Bulldog reported. Its multi-million-dollar assets—the old office building at 8314 Cross Park Drive and an adjacent lot at 2304 Forbes Drive—have sat idle for the past 15 months.
TCAD had made no effort to market these properties when it received an unsolicited offer of $5 million on December 22, 2021.
TCAD countered at $5.5 million and provided the buyer with a draft commercial contract for that figure. The buyer agreed to the higher price January 24th. The $5.5 million offer exceeds by $21,115 the combined value of these two properties that TCAD assigned in 2021: $5,478,885.
The buyer was Mitch Kralis, cofounder and managing member of Crest Park Ventures LLC.
Crest Park Ventures, through another business, Austin 8317 Cross Park LLC, has ownership interests in a parking lot at 8306 Cross Park Drive, adjacent to TCAD’s former offices, as well as a building across the street at 8317 Cross Park Drive. Those two properties have a combined market value of $11,048,863, according to TCAD’s appraisal records for 2021.
At its February 17th meeting the TCAD board of directors voted unanimously to approve the sale for $5.5 million.
Then the deal went south.
TCAD Communications Officer Cynthia Martinez said in a March 29th email that the board’s vote to approve the sale was “contingent on certain conditions” that “Crest Park Ventures did not agree to meet. As a result, we notified them that the deal was not going to move forward….”
Those conditions were not publicly stated in the February 17th board meeting. Item 6d of the agenda stated, “Discussion and possible action on conveyance of real property.” The motion was to approve “as discussed in executive session.”
Martinez declined to disclose the “certain conditions,” saying only that “The conditions set by the board to pursue the agreement were discussed in executive session.” She said that “Crest Park Ventures did not agree to those conditions.”
The buyer’s perspective
Kralis told The Austin Bulldog after the TCAD board approved the sale his lawyer reviewed the contract and discovered an inconsistency as to which party would pay for a title insurance policy.
“That wasn’t a sticking point, per se,” Kralis said. “It’s not that much money but I couldn’t sign a contract” until that was corrected.
Kralis told the Bulldog that on February 25th he “went to (TCAD Deputy Chief Appraiser) Leana Mann and asked her to fix it.” He said he told Mann, ‘I’ll do whatever you want and pay the whole thing.’”
Later—much to his surprise—instead of curing the inconsistency, TCAD killed the deal. A copy of a March 24th email that Mann sent to Kralis states, “Mitch, We’ve decided to move in a different direction and list the property.”
TCAD now plans to list the properties for sale through CBRE Realty Austin. “The listing price will be $7.65 million,” Martinez said.
That is $2.15 million more than the cash offer TCAD declined. It is also is that much more than TCAD’s own valuation for the two properties in its 2021 appraisal. The Notices of Appraised Values for 2022 are supposed to be mailed in mid- and late-April.
A statement released by CBRE the day after this story was published said, “We are pleased to be awarded the assignment to market this great site in northeast Austin. Demand for Austin real estate from all parts of the world continue to flow here,” said Brad Bailey. “We expect many offers from qualified buyers for this unique opportunity.”
A copy of the Exclusive Sales Listing Agreement dated March 21, 2022, obtained April 11, 2022, through a public information request, states that CBRE will charge a flat fee of $2,500 to market these properties and will be paid a commission of 4 percent of the gross sales price at closing. Thus, if these properties sell for the listed price of $7.65 million, CBRE will be paid a commission of $306,000. The exclusive listing is for a term of six months.
TCAD’s bargain with taxing entities
TCAD’s budget is entirely funded by payments from the 136 taxing jurisdictions for which it annually certifies appraisal rolls. These jurisdictions, for example, include Travis County, cities, school districts, Central Health, and other entities. The appraisal rolls establish the total value of each jurisdiction’s tax base. Those values are used as a basis for preparation of annual budgets and setting tax rates.
As funders, taxing jurisdictions have a degree of control over TCAD’s finances and must be consulted in some decision-making.
In April 2019 the Travis Central Appraisal District needed, and got, an okay in the form of resolutions from each taxing jurisdiction to buy and renovate a vacant building at 850 E. Anderson Lane. TCAD’s letters requesting approval stated the bigger building was needed to provide space for a larger number of Appraisal Review Board panels that would conduct formal protest hearings concerning the values TCAD assigns to the properties it appraises.
TCAD’s request for those approvals included a couple of stipulations:
No additional funds—The letters requesting approval stated—In underlined and bold print—“The District will not request any additional funds from the taxing units for this real estate purchase.” That pledge was possible, the letters stated, because TCAD had funds in dedicated reserves and in its annually budgeted reserves to buy and renovate the building.
Use of proceeds—“Additionally, the District requests that any funds from the sale or lease of its current facility be placed into its reserve accounts. The District will hold the proceeds from the sale or lease in reserve and will use the proceeds to make payments or payoff down (sic) the loan.”
TCAD initially leased the building at 850 E. Anderson Lane January 31, 2019, for $35,000 a month.
With approvals in hand from taxing jurisdictions, TCAD, through its nonprofit 850 EAL Holding Corporation, bought the 72,720-square-foot building June 7, 2019 for $8.53 million. This despite the fact that an appraisal on the property performed by CBRE Valuation and Advisory Services concluded the value was $7.5 million as of January 1, 2018, the date TCAD had requested.
The purchase was financed by a $10 million loan from the Government Capital Corporation. The loan was to be repaid with 4.3 percent interest over a period of 20 years. Quarterly payments are $187,298 and change and total $14,983,873 over the life of the contract.
850 E. Anderson costs exceeded estimates
The Request for Construction Proposal for the new property estimated that interior renovations would cost $3.5 million and constructing an adjacent parking garage on the 2.947-acre site would cost $4.3 million.
The estimated cost of $3.5 million for renovations proved to be grossly inadequate.
850 EAL Holding Corporation executed a contract with Balfour Beatty Construction for $5,836,878 for the renovation work. As work progressed various change orders were approved that as of March 23, 2020, raised the contract’s total cost to $6,040,006. Even then, work was not completely finished. Critical work remaining included procurement of electrical equipment, elevator equipment, and installation of two new elevator cars, according to Balfour Beatty Construction’s timeline report of March 18 , 2020.
The Bulldog’s public information request for final renovation costs obtained April 11, 2022, indicates that $421,611 in change orders bumped up the Balfour Beatty total cost to $6,258,489. (See 850 EAL Holding Corp. Construction Budget-to-Actual.)
In addition, there were significant other costs involved in renovating 850 E. Anderson Lane, as follows:
Demolition—The original budget was $410,000. Approved change orders brought that to $426,329.
IT Network—The original budget was for $1,130,000. Approved change orders brought that cost to $1,134,333.
Architectural—The original budget was for $550,000. Change orders brought that cost down to $537,400.
TCAD’s original budget for all these costs totaled $8,350,000. To cover the costs, TCAD amended its budget to total totaling $8,356,550.
That the parking garage was sorely needed was abundantly evident when the Appraisal Review Board hearings were conducted at 850 E. Anderson Lane in 2019. The Bulldog reported August 16, 2019, that parking was nearly impossible and hearings were running hours behind schedule. As retired CPA Mark Young told the Bulldog for that story, “Parking was ugly.”
The disappointed buyer of TCAD’s properties, Mitch Kralis, told the Bulldog that TCAD was planning to use proceeds of those sales to build the parking garage that would cost $5.5 million. The Bulldog’s public information request to confirm that figure is pending.
“That is untrue,” Martinez said. “Proceeds from the sale will go towards paying down the loan at 850 E. Anderson Lane.”
Even if TCAD had the money to start building the parking garage it wouldn’t be ready for the 2022 value protest hearings that will start in June. A saving grace this year for parking, however, is that many of the ARB hearings may be conducted remotely.
Trust indicators: Ken Martin has been covering local government and politics in the Austin area since 1981 and investigating and reporting on Travis Central Appraisal District since 2011. See more on Ken on the About page. [email protected].
Who funds this work? This report was made possible by contributions to The Austin Bulldog, which operates as a 501(c)(3) nonprofit for investigative reporting in the public interest. You can help support this independent coverage by making a tax-deductible contribution.
850 EAL Holding Corp. Construction Budget-to-Actual, April 8, 2022 (1 page)
Balfour Beatty Construction’s timeline report, March 18, 2020 (2 pages) 20200318 Timeline
CBRE Valuation and Advisory Services market value appraisal of 850 E. Anderson Lane, January 31, 2018 (93 pages) 20180131 CBRE Appraisal
TCAD Board of Directors meeting agenda, February 17, 2022 (2 pages) 20220217 Agenda
TCAD Deputy Director Leana Mann’s email to Mitch Kralis, March 11, 2022 (1 page) 20200311 Mann
TCAD Exclusive Sales Listing Agreement with CBRE Commercial Real Estate Services, March 21, 2022 (8 pages)
TCAD letter to City of Austin requesting resolution to approve purchase of 850 E. Anderson Lane, May 1, 2019 (12 pages) City of Austin
TCAD Request for Proposal, Construction Manager-At-Risk for Renovations at 850 E. Anderson Lane, due July 26, 2019 (19 pages) RFP Construction
Texas Realtors Commercial Contract, involving seller Travis Central Appraisal District and buyer Crest Park Ventures LLC, undated (15 pages) 20200318 Info
Related Bulldog coverage:
Appraisal district finally has a deputy chief, February 28, 2022
Appraisal district looks to avoid rocky 2022, December 17, 2021
TCAD pares back budget hike to 12.5 percent, June 10, 2021
TCAD asking for 24 percent budget jump, May 26, 2021
Appraisal Review Board gets new leader, finally, April 9, 2021
Appraisal Review Board chair resigns, March 18, 2021
Appraisal Review Board member rebuts criticisms, January 7, 2021
TCAD board hammers ARB chair over costs, delay, December 15, 2020
TCAD 2021 budget approved for $20.2 million, September 8, 2020
COVID-19 plans for appraisal review board hearings, June 1, 2020s
Deadline for property value protests this Friday, May 11, 2020
Protesting property values during COVID-19 emergency, April 15, 2020
Chief appraiser on a losing streak, March 17, 2020
TCAD board still debating 2020 protest process, January 14, 2020
TCAD board rewards chief appraiser, December 19, 2019
TCAD 2020 to resume face-to-face informal protests, December 11, 2019
By every measure TCAD is having a bad year, December 1, 2019
TCAD board gets earful about impact of barring face-to-face appeals, November 18, 2019
TCAD alone in barring face-to-face informal protests, November 12, 2019
TCAD board member had dual homestead tax exemptions, October 20, 2019
Property value protest hearings harshly criticized, August 29, 2019
TCAD flubs public notice for hearing on Proposed 2020 Budget, August 9, 2019
TCAD loses landfill lawsuit at cost of nearly $1 million, July 16, 2019
New offices for Travis Central Appraisal District, July 15, 2019
Deputy chief appraiser abruptly resigns, July 10, 2019
Appraisal Review Board heads off lawsuit, June 12, 2019
New procedures undermine appraisal process, June 6, 2019
Lawsuit Seeks Property Tax Hearings, December 17, 2018
Homestead Exemptions a Tax Loophole,” February 26, 2014
Homestead Exemptions Rife With Abuse, December 20, 2013
Chris Riley Nailed for Back Taxes, August 20, 2014
Appraisal District to End Records Suppression, November 22, 2011
Appraisal Records Hidden from Public View, November 18, 2011