The first phase of the Broadway East master-planned community across from the Pearl is on track to receive a city incentive package worth up to $7 million, giving the project crucial momentum after GrayStreet Partners’ withdrawal left it in turmoil.
The board of the Midtown Tax Increment Reinvestment Zone (TIRZ) voted 7-1 Tuesday to approve an agreement awarding 10 years of property tax reimbursements to Dallas firm Encore Multifamily to build a $90 million apartment complex with 386 market-rate units at the northwest corner of Carson and Austin streets, in Government Hill. The agreement is subject to City Council approval.
In a TIRZ, revenue from the rise in property taxes is captured and put back into the zone in the form of public upgrades and affordable housing initiatives.
The package would help offset the cost of expanding water and sewer lines to service the complex and future additions to Broadway East, which GrayStreet had once planned to develop with 1.6 million square feet of mixed-use space at a cost of $560 million. Encore plans to start construction in the next month or two, its attorney James Griffin said.
The reimbursements will likely end up below the $7 million cap, amounting to an estimated $4.9 million, according to an analysis by the city—but that would still make it one of the largest incentive packages the city has ever awarded.
In recent years, Mayor Ron Nirenberg and other elected officials have responded to concerns about rising housing costs in the urban core by drawing back incentives for market-rate housing. In December, the city retired its Center City Housing Incentive Policy, through which Encore had received a $6 million package to build its last project in San Antonio, the Encore SoFlo complex in south downtown.
In July, GrayStreet sold nearly all its property in Broadway East—14.6 acres in all—to local firm Fulcrum Development, known for building master-planned communities in the Medical Center district and the area around Interstate 10 and Loop 1604.
At the TIRZ meeting on Tuesday, Griffin and Ian Benavidez, an assistant director with the city’s Neighborhood and Housing Services Department, said the incentive package would help lay the infrastructure for future phases of Broadway East—though no one seems to know whether Fulcrum will follow GrayStreet’s development plan. Fulcrum executives did not respond to requests for comment.
[ Related: Midtown TIRZ board delays $4.8M incentive package for Broadway East apartments (July 14, 2021) ]
In a phone interview after the meeting, Griffin said that Encore would be working with Fulcrum, but that he didn’t know what Fulcrum intended to do. The two city departments that focus on urban development—Center City Development and Operations, and Neighborhood and Housing Services—have not been in communication with Fulcrum, city spokeswoman Michelle Vigil said.
Encore’s complex is “a project independent” of the Broadway East master plan, Encore spokeswoman Amy Dunaway said in an email, when asked whether Encore was working with Fulcrum. “We look forward to working with our neighbors in a collective way towards building fantastic future growth and prosperity,” she said.
Fulcrum has lately shown interest in the urban core. Last year, the firm was planning to partner with local company Lynd to build the 259-unit 210 Josephine Apartments in Tobin Hill, though it is unclear whether it’s still involved in the project.
The incentive package that the TIRZ approved on Tuesday is unusual in that it would grant Encore $1 million next year and another $1 million in 2023. In the following years, Encore would receive a 75 percent reimbursement based on the site’s tax increment—in other words, the amount that its property taxes increase due to it being developed. The deal was structured that way so that Encore could get money quickly to use to build infrastructure, and because the TIRZ is set to expire in 2031, after which the reimbursements will stop, Griffin said.
Board member Jake Jopling, who’s the director of asset management at AREA Real Estate, was the only one to vote against the package, saying that he wanted to see the project’s financials to determine whether it really needed incentives.
“It’s tough for me to wrap my head around why we would provide $7 million for this project,” he said, noting that the successful 1800 Broadway apartment complex was across the street.
Each year, a quarter of the complex’s tax increment, or the other 25 percent, will go into an affordable housing fund administered by the city. According to the city’s analysis, this will amount to a total of about $954,000 by 2031.
“We really need affordable housing in the area,” board member Lynn Knapik said at the meeting. “That doesn’t necessarily put it in the area, when it goes into the fund.”
Griffin said that Encore hadn’t been able to find a way to include affordable units in the complex. The rising costs of lumber, sheet rock and labor have driven up the development’s price tag, he said in a phone interview.
“We need every penny of this TIRZ funding to make this project work, considering the sheer cost of it,” he told the board members.
The complex will include a pool, a rooftop deck, a fitness center and an outdoor fountain packing homage to an acequia that once ran on the site, according to a presentation Griffin gave at the meeting. Seventy percent of its units will be one-bedroom, and 30 percent two-bedroom, he said.
GrayStreet had earlier hoped to build Broadway East in partnership with Midway, a development juggernaut from Houston. Around the beginning of this year, GrayStreet put the site back on the market after the pandemic derailed the project, leading Midway to sue the firm and obtain a restraining order in an effort to stop the sale. Midway later dismissed the lawsuit, according to the San Antonio Express-News, and the two firms appear to remain partners in a $596 million project to rehabilitate the Lone Star Brewery.
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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