Developer weighs options after final Plaza Saltillo OK

Ben Wear |
Source: My Statesman

Thursday was about to turn into Friday, and the Plaza Saltillo development was in trouble.

Austin City Council members were groggy and, in some cases, genuinely angry. Endeavor Real Estate Group executives were quietly frantic, looking at their huge costs in pursuing and planning the 11-acre East Austin project potentially flushed by an amendment from Council Member Kathie Tovo that would require about a dozen more two-bedroom units in the development’s design.

And Capital Metro officials were watching their years of effort to germinate a project on the former rail yard, owned by the transit agency since the 1990s, suddenly in trouble.

The neighborhood opponents of Endeavor — who contend the development plan for the area just east of Interstate 35 has too few affordable, family-friendly two-bedroom apartments, and too much height in a proposed 125-foot office building — were seeing their advocacy possibly pay off. Capital Metro, it appeared, might have to start over and find another developer and another design.

Michele Hausman, a lobbyist for Endeavor, walked to the lectern and was recognized by Mayor Steve Adler.

“With the amendment that just passed, the project cannot be built,” she said bluntly, then returned to her seat.

After a few minutes of the council scrambling rhetorically as the import of the situation sunk in, Hausman returned to suggest another amendment reducing Tovo’s requirement for added two-bedroom units. That amendment passed narrowly — 6-5 — and minutes later the council voted 7-4 to approve the zoning changes sought by Endeavor and Capital Metro.

Council Members Alison Alter, Ora Houston, Leslie Pool and Tovo dissented.

The practical effect of the negotiations and the complex deal: Endeavor will be able to build a 125-foot-high office building, rather than just 70 feet, or four stories, as approved in an earlier vote. Endeavor, Capital Metro and the city would each kick in $540,000 for a fund to subsidize affordable housing in the general Plaza Saltillo area.

Endeavor would also pay about $600,000 toward an affordable housing fund based on the size of the taller office building.

But officials with the developer noted Friday that they still have the option to go with the shorter, 70-foot office building and forgo most of the affordability housing payments. And the economics of the situation could push the company in that direction.

“The council approved the project with four stories but granted Endeavor an option to increase the height of the office building to eight stories (or 125 feet) provided we make additional contributions exceeding $1 million toward enhancing affordability in the neighborhoods surrounding the project,” said Jason Thumlert, a principal with Endeavor, in a statement Friday afternoon. “In the coming months, we will be making the determination to build either a four- or eight-story building.”

Either way, the 800 apartments planned for the Capital Metro site would include 141 units with below-market rents reserved for people making 50 percent or less of median family income in Austin.

“I don’t think any of us are excited by any of these options,” Council Member Delia Garza, who also serves on the Capital Metro board, said at the meeting Thursday night. “I would have preferred that Endeavor contribute more. I wasn’t a big fan of Capital Metro having to put more skin in the game.”

Endeavor, under a 99-year lease with Capital Metro, will build the development’s ground-floor retail and that office building, while Columbus Realty Partners will build the apartments in a trio of four- and five-story mixed-use buildings. Diana McIver & Associates will build a separate 100-unit apartment building near the Plaza Saltillo MetroRail station, with lower, more affordable rents for almost all of the units.

Endeavor officials last month said construction could begin as soon as two months after the zoning matter is resolved. But it was unclear Friday if the potential changes approved early Friday would delay that construction.

Building the development should take about two years, said officials with Endeavor, which is separately involved with the American-Statesman’s owners to redevelop the site where the newspaper operates.

The council, because of its power over zoning, found itself as the final arbiter in a dispute that began almost three years ago when the Capital Metro board chose Endeavor and its partners over a competing development group favored by longtime neighborhood activists.

Both developers offered mixed-use developments for the parcel, and both said publicly that 25 percent of the apartment units would have affordable rents.

The losing bidder, headed by Central Austin developers Perry Lorenz and Larry War-shaw, proposed a 125-foot-high hotel. Endeavor’s tallest building was to be 60 feet high, and its proposal offered a full-size grocery store. Capital Metro board members, in approving Endeavor, said they wanted to maximize Capital Metro’s financial return from the property.

Endeavor, through the zoning before the city, sought permission to build most of the development at 68 to 70 feet high, with the taller office building a block from the highway, rather than the 60-foot maximum available under the site’s existing zoning status.

The grocery store, meanwhile, has fallen out of the plan because, officials have said, no grocery chain was interested in locating one there.

Endeavor and Capital Metro officials say that in underlying documents from the 2014 bid process, the developer pledged to make just 15 percent of the units affordable, going to 25 percent only if the city of Austin subsidized those lower rates.

Capital Metro has declined to release those bids and the draft contract, which, the agency says, would bring it more than $200 million over the 99-year life of the agreement.