EXCLUSIVE: Contract reveals final terms for Plaza Saltillo deal
Capital Metro would receive almost $19 million in rent over the first decade of what will be a century-long lease of the Plaza Saltillo tract in East Austin, according to a 400-page agreement the agency released to the American-Statesman this week under an open records request.
The transit agency, which has owned the former rail yard just east of Interstate 35 since 1995, would then receive about $2.2 million in annual rent in 2029 from Endeavor Real Estate Group and Columbus Realty Partners, its primary collaborators on the 9.17-acre, mixed-use development. That rent figure, which could be somewhat higher if the development is larger than now envisioned or draws higher-than-projected rents, would grow each year over the next 90 years by a percentage tied to growth in the project’s net income.
Endeavor, after further negotiations with Capital Metro growing from an Austin City Council zoning decision in early March, has decided to build an eight-story, 125-foot-high office building on the Plaza Saltillo block closest to I-35 and East Fifth Street.
The council had granted permission for a taller building than the 70-foot height normally allowed if Endeavor paid $600,000 into an affordable housing fund, but it had been unclear whether Endeavor would go that route or stick with the shorter building.
Capital Metro officials wanted the taller building, saying the added stories could bring more ridership to MetroRail. In return for Endeavor’s promise to build the taller building, the transit agency agreed that Endeavor’s first rent payment of $1.63 million, originally due about now, won’t be due until September 2019.
That would more or less coincide with the completion of construction on the development’s Phase I, which will stretch four blocks from I-35 and include 700 apartments, 110,000 square feet of ground floor retail space and 120,000 square feet of office space. At least 41 of those apartments, or about 6 percent, would be priced at affordable rents and available only to those with family income at or below 50 percent of the median level in Austin.
The ground lease contemplates construction of this main portion of the development, stretching from I-35 to Attayac Street, would be complete by June 2020.
An additional 100 affordable apartments would be built in a second phase on the block just west of the Plaza Saltillo MetroRail station, bringing the overall portion of affordable units to 17.6 percent. Those apartments, to be built by a third developer under the auspices of the Endeavor agreement, would be reserved for senior citizens. The ground lease stipulates that construction of that second phase would begin within a year of construction starting on Phase I.
After the March 2 zoning decision required the Endeavor group to pay an additional $540,000 into a city affordable housing fund beyond the $600,000 payment for the taller office building, Capital Metro also agreed to let Endeavor obtain a $3.25 million letter of credit rather than paying that same amount in cash to Capital Metro as a rent deposit.
Capital Metro will also pay $540,000 into the city housing fund, under a deal reached with the city.
The affordable housing fund, city officials said, will also get 100 percent of the new city property tax revenue generated by the tract, which has been off the tax rolls as public property for the past 22 years. That amount over time will easily exceed what Capital Metro and the Endeavor partnership are contributing.
Capital Metro Chief Executive Officer Linda Watson called the agreement “a tremendous milestone.” The development, she said in a statement, “will allow more people to live and work in a place that gives them true transportation alternatives, and allow Capital Metro to fund more transit service across its network.
Capital Metro plans to hold a groundbreaking ceremony on the project Wednesday. But construction fencing and other barriers already line the site, and grading on sections of the tract nearest East Fifth began this week, said a spokesman for Endeavor, a company that is separately involved in a plan to redevelop the site where the Statesman operates.
Capital Metro has already spent considerable money on the site to get to this point. The one-block-wide stretch was bisected by the MetroRail track, which would have rendered it impossible to develop. So the agency, using a $4.3 million federal grant, earlier this decade moved most of the track’s run from I-35 to a point much closer to East Fourth Street. Capital Metro spent an additional $2.2 million remediating past environmental damage to the site, which for a century was home to multiple railroad tracks.
The agency also paid about $540,000 to DuBois Bryant and Campbell, an outside law firm that over the past few years advised Capital Metro on the Plaza Saltillo lease and then negotiated the agreement with Endeavor and its partners.
The agreement, which took almost three years to hammer out after the Capital Metro board in June 2014 picked Endeavor over three competing developers, culminates a two-decade-long process of deciding what to do about the prime real estate. Activists in what historically had been a Hispanic neighborhood of modest single-family homes — and more than a few industrial properties — had pushed Capital Metro to nurture low-rise development they deemed compatible with the area, and to provide room in it for people increasingly pushed out of their homes by escalating property values.
It is debatable whether what resulted will fulfill that neighborhood aim. About 90 percent of the units built by Columbus Reality will have just one bedroom, and thus be ill-suited for families with children. Endeavor will be building the ground-floor retail space.
The Austin City Council, in its March decision, stipulated that at least 25 percent of the 41 affordable units in the Columbus piece of the development — 11, in other words — have two bedrooms.
However, the 100-unit building coming near the train station could serve some of the longtime, aging neighborhood residents.
Capital Metro’s release of the ground lease and an accompanying 117-page “master development agreement” likewise comes after a long process. The agency beginning in 2014 had resisted disclosing financial details of development bids, although it did release some details in March 2016 when the agency’s board of directors approved the bones of the Endeavor deal.
But the two sides went back to the negotiating table after that, given the uncertainty over how much affordable housing the development would have and the height of the office building. The two sides agreed on the final details in April.