Photo by Ben Olivo | Heron
The circa-1920s Travis Building, 405 N. St. Mary’s St., is the first real estate project in San Antonio to take advantage of the Texas Property Assessed Clean Energy (PACE) program, an incentive that allows developers to repay a loan over a longer period of time than usual, while saving money on operating costs from energy efficient upgrades.
Harris Bay, a California real estate firm with a growing presence in San Antonio, is converting the former office building into 63 luxury apartments.
The remodel of the 10-story, 76,448-square-foot Travis Building started in mid-2021, and is expected to be completed by summer 2022, Jake Harris, managing partner of Harris Bay, said in an email. The project also includes the adjacent six-story, 52,420-square-foot parking garage, which houses The Original Blanco Cafe.
The Travis Building renovation is expected to cost $5 million. The structure is a San Antonio landmark, and was first built in 1924, and restored in 1983, according to a plaque on the building’s facade. Harris Bay purchased the building in late 2020.
In an email exchange this week, Harris declined to disclose the project’s lender or investors. Currently, Harris said his firm has not applied for any incentives from the city, which the Travis Building project could receive give its location in the core of downtown—but such a package would require City Council approval. Even after San Antonio’s downtown housing incentive policy expired at the end of 2020, the city continues to incentivize downtown-area housing—even if that housing is considered luxury. Building more places for people to live downtown has been the city’s No. 1 strategy for reactivating what has been a largely comatose downtown for decades.
[ Related: “Olivo: How McKee-Rodriguez’s support for a luxury housing project helps shape the Decade of Downtown” | Dec. 2, 2021 ]
While housing advocates have criticized tax rebates for market-rate apartment developments, such as this one, the city has attempted to strike a balance by pushing for a $150 million housing bond—the city’s first—on the May ballot, while approving a “strategic housing implementation plan” a few weeks ago.
[ Related: San Antonio’s City Council approves 10-year affordable housing plan” | Dec. 17, 2021 ]
In a 2020 interview with the San Antonio Express-News, Harris said his firm plans to pursue the federal “opportunity zone” incentive, a 2017 Trump-era tax break on capital gains. He also told the newspaper that Harris Bay plans to pursue historic tax credits, presumably at the state and federal level.
“This building created the unique opportunity to add more residential units to the downtown core along the River Walk and create some synergies with the hotel project we are developing next door,” Harris told the Express-News, referring to a boutique hotel the company plans to build on a small patch of land along East Travis Street , which also faces the river.
“We are planning on using all of those programs to make this project financially viable,” he also told the newspaper.
The Travis Building was appraised at $6.3 million in 2021 by the Bexar Appraisal District.
In an email to the Heron, Harris said the retail space totals approximately 10,000 square feet, which includes both the Travis Building and the parking garage.
“We don’t have any special plans, but would like to try and continue to improve the retail vibrancy of downtown San Antonio and work with tenants in all the ways in which we can,” Harris said in an email.
Photo by Ben Olivo | Heron
In the email, Harris said incorporating energy-efficient measures into a historic building in some cases are “contradictory.”
For example, new dual-pane windows for the Travis Building will reduce energy consumption, “but require very specific historic guidelines that aren’t very energy conscientious,” he said.
Harris said the Travis Building will be equip with a variable refrigerant flow HVAC system, “which allows more efficient utilization of refrigerant and better long-term quality of air and sound.”
Other upgrades include a reflective roof, LED lighting, and “more conservative water usage via plumbing fixtures,” he said.
The PACE incentive is not a grant nor a tax credit, said Diane Rath, executive director of the Alamo Area Council of Governments (AACOG), the local entity that administers the statewide program locally.
Instead, the PACE program is an agreement between the property owner and lender, one in which the repayment of the loan is spread over the life of the upgrades. The loan covers 100 percent of the cost of energy- and water-saving upgrades.
As Rath explained, if you were to put a new roof on a building, for example, and borrowed $1 million from a bank, most banks would give the borrower 3-5 years to repay the loan. “You have no cash, because you’re paying your loan,” she said.
“PACE spreads the loan over the life of the roof, or HVAC system,” Rath said of the hypothetical scenario. “Now, instead of paying back 3-5 years, you’re paying back 20 years. You still have your cash coming in, and you have a much smaller payment.”
Photo by Ben Olivo | Heron
According to a press release, one of the PACE program’s conditions is that the total savings in upgrades must exceed the amount of the loan.
For the Travis Building, the estimated energy costs is $8.4 million over the lifespan of the loan, which runs through November 2043, according to AACOG.
The PACE program was adopted in San Antonio in 2020, and was listed as a key strategy in the city’s SA Climate Ready, Action and Adaption Plan, which was adopted by City Council in 2019.
The Travis Building joins other historic buildings that are being converted from office into apartments.
Weston Urban is renovating the former Continental Hotel building on West Commerce Street, last used by the Metropolitan Health District, into apartments after the city sold the building in 2020. The Hedrick Building, 601 N. St. Mary’s St., is being converted into a mixed-use building to include 36 apartments by developer Craig Glendenning, the Express-News reported, but the project appears to have stalled for much of 2021.
Harris Bay is also the firm behind Essex Modern City, an envisioned mixed-use development in Denver Heights, east of downtown, which has been held up, in part, by the designation of a railroad quiet zone, the Express-News reported last year.
[ Related: Boutique hotel on the River Walk set to open in 2023, with luxury apartment redevelopment next door | July 29, 2021, Express-News ]
Heron Editor Ben Olivo can be reached at 210-421-3932 | ben@saheron.com | @rbolivo on Twitter