By Richard Webner | @RWebner | Heron contributor
This article has been updated to reflect that the city has not awarded any incentives to the Lone Star project.
The $596 million project to transform the former Lone Star Brewery into a Pearl-like neighborhood, which local developer GrayStreet Partners and Houston mega-developer Midway unveiled last year to great excitement, now faces an uncertain future after their decision to offer the property for sale.
The two firms are “exploring an opportunity” to sell all or part of the 32-acre property, with numerous historic buildings comprising nearly 1.4 million square feet of space, according to a statement from Midway. It is listed for sale by the real estate firm JLL.
Midway’s statement, and JLL’s brochure for the property, suggest that the firms could stay involved and the project could proceed according to last year’s plan, which would have loaded the iconic brewery with 1,282 housing units, 186 hotel rooms and nearly 360,000 square feet of office space as well as plenty of retail—in a development branded as the Lone Star District.
Yet the brochure emphasizes that a new owner could “develop a completely new concept,” suggesting the partnership is no longer committed to last year’s plan.
And Midway’s statement, calling the brewery “first and foremost a land investment,” seems to denote a lack of enthusiasm for the project compared to what the company expressed last year.
“While we remain eager to work in San Antonio,” the statement says, “we constantly evaluate current market opportunities on our investment in order to maximize value for our investors.”
Compare that to an article the company published on its website on May 11 of last year, 10 days before the City Council approved tax incentives, gushing that “every city has a few dream sites… ones that deserve to be developed with utmost care. In San Antonio, the old Lone Star Brewery site definitely qualifies on all fronts.”
“This is part of the future of mixed-use developments,” the article says. “At least ones done by companies that care about doing something meaningful, doing something real. You will never mistake Lone Star District for another mixed-use development.”
The property brochure points out that $24 million in tax incentives has been awarded to the project through the Chapter 380 Economic Development Grant, which City Council approved last year—the largest incentive package for urban development the city has ever awarded. (The brochure incorrectly states that a tax increment reinvestment zone, or TIRZ, was created to aid the project’s construction; in fact, the incentives would be delivered through the Inner City TIRZ, created in 2000).
The package consists of rebates on city property taxes to reimburse infrastructure work, such as rebuilding streets and sidewalks. The city confirmed Friday morning that it has not awarded any incentives for the Lone Star project. “The city/TIRZ has yet to pay out any funding as the agreement is based on reimbursement of completed work and tied to an approved master plan,” Elizabeth Mercado, spokeswoman for the city’s Neighborhood and Housing Services Department, said in an email.
If the property is sold, transferring the incentive package to the new owner would require the consent of the city of San Antonio and the board of the TIRZ, according to the agreement which City Council approved last year.
“The agreement provides for an assignment of rights under very limited circumstances,” Mercado said in an email. “A sale of the property would most likely not fall into one of those circumstances.”
Kevin Covey, GrayStreet’s general partner, and Peter French, the firm’s director of development, did not respond to requests for comment. A spokesperson for Midway did not respond to further questions.
The partnership between GrayStreet and Midway has already begun demolition work. Last year, permits were issued for the demolition of least three buildings on the site—two 50,000 square-foot buildings, and a 15,000 square-foot one—according to the city’s website. It’s unclear how much of the site has been demolished.
The brewery has sat vacant since 1996. Since then, at least four attempts to redevelop it have been derailed by issues such as high costs and the presence of contaminants from its years of industrial use. The site has poor electrical infrastructure and has suffered from vandalism and numerous fires, most recently in April of last year.
Jeff Hunt, president of the Roosevelt Park Neighborhood Association, said residents are “extremely disappointed and frustrated” after hearing the brewery was for sale.
“It’s so disappointing for the Roosevelt and Lone Star neighborhoods, because we have been promised several times, by several investors, that this property was going to happen,” said Hunt, who has lived in the neighborhood for 14 years. “This last time was a big promise, and we had city backing.”
“We know that once the Lone Star project is completed, it’s going to completely revitalize our neighborhood in Southtown,” he said. “We are well on our way now, but the Lone Star Brewery is the final jewel in the crown, and we just need those investors to give us that final push.”
Some residents of the area have expressed concern that the brewery’s redevelopment could hike up home values and property taxes, much as the Pearl has done in Tobin Hill.
“These are folks on fixed incomes,” said Rebecca Flores, who lives near the brewery. “I’ve been concerned about all the developments, because it does have an effect on this neighborhood. And it’s not quitting anytime soon.”
Hunt said he would be happy to see retail and jobs brought to the site. “Nobody wants empty vacant buildings in their neighborhood, especially something as massive as the Lone Star Brewery complex. You can see it brings taggers, vagrants.”
As for the surge in property taxes, “That’s already happening,” he said. “It already exists.”
Shirley Gonzales witnessed several attempts to redevelop the old brewery during her eight years as councilwoman for District 5. She helped pass the incentive package for GrayStreet and Midway shortly before leaving the office last year.
“In my experience, in the eight years that I was there, the community was really very enthusiastic for almost every iteration,” Gonzales said. “By the third or fourth iteration, communities started to lose faith that something’s going to happen.”
At one point, there were calls for the city to purchase the site and redevelop it, like it did for the Red Berry Estate on the East Side, she said.
“I know that these projects are very difficult to complete,” she said. “Any type of adaptive reuse project is very complicated.”
Along with Broadway East, GrayStreet has struggled to finish several of its development projects, including for many of the historic buildings it purchased on Houston Street in 2015.
GrayStreet purchased the brewery in May 2020 for $14.45 million in a deal approved by U.S. Bankruptcy Judge Craig Cargotta, as the site’s former owner, a shell company named Lone Star Brewery Development Inc., faced bankruptcy, according to reporting by the Express-News.
GrayStreet then teamed up with Midway, a Houston developer known for tackling massive-scale redevelopment projects such as the 2 million square-foot CityCentre district in west central Houston, and the ongoing 150-acre East River development along the Buffalo Bayou east of Houston’s downtown.
The two firms had previously teamed up to build the Broadway East mixed-use development on the other side of the Pearl, but GrayStreet decided to sell its properties there after the pandemic had a “dramatic effect” on the plans, Covey told the Heron last year.
Midway then sued GrayStreet, saying the firm was contractually obliged to give it first refusal on the properties, according to the Express-News. It later dismissed the lawsuit “in an amicable fashion,” its attorney said.
Richard Webner is a freelance journalist covering Austin and San Antonio, and a former San Antonio Express-News business reporter. Follow him at @RWebner on Twitter
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Why does it feel like San Antonio is uniquely allergic to successful development? The failure of this is second in disappointment only to the Civic Park fiasco in my eyes.