Endeavor Real Estate Group will develop the $150 million Domain project in North Austin with the help of mall giant Simon Property Group -- Central Texas' dominant retail landlord and the Domain's chief rival.
Bringing on Simon, the world's largest mall developer, virtually ensures that the Domain, an upscale retail and residential project, will be built. There were questions whether Austin-based Endeavor could have accomplished that on its own, especially once Simon announced plans for a similar project on land just south of the Domain site.
Officials with Endeavor said Wednesday that they have signed an agreement to bring on Indianapolis-based Simon as a joint venture partner to help design, lease and develop the project. Simon owns all three of the area's regional malls as well as The Arborteum shopping center near the Domain site.
The Domain will be on 57 acres roughly bounded by MoPac Boulevard (Loop 1), Braker Lane and Burnet Road.
Bryce Miller, a principal with Endeavor, said Simon's dominance in Central Texas, its financial strength and strong connections with retailers were key factors in the decision. Endeavor had been in discussions with other possible partners, including General Growth Properties Inc., Simon's closest rival.
"Unlike many other potential joint venture candidates, (Simon) had the unusual ability to impede or prevent us from achieving our goal . . . and greatly diminish the uniqueness of our project," Miller said.
With Simon on board, "there's an opportunity in Austin to create a retail environment that doesn't exist today."
Although no leases have been signed, Miller said Endeavor is seeking anchor tenants including NeimanMarcus, Dillard's, Foley's, Saks and Nordstrom as well as specialty retailers.
Endeavor plans up to 780,000-square-feet of shops, restaurants and entertainment facilities, including a movie theater, plus 300 apartments at the Domain, which is part of a larger tract that once was planned as offices for dot-com companies, hence the name. Endeavor hopes to break ground in late 2004 or early 2005 and open in 2006.
A Simon spokesman declined to comment on the Domain.
"We're not ready to comment one way or another, and we have our reasons," said Michael McCarty, senior vice president of corporate communications for Simon."We're not prepared to say anything one way or another."
McCarty said Simon's plans to develop its own center south of the Domain, on 46 acres leased from the University of Texas, are unchanged. Simon outbid five rivals for the land and has agreed to pay the university $130 million over 52 years for the land. UT expects to receive a signed lease by the end of the week.
The Domain is by far the biggest project Endeavor has tackled, but Miller said the firm had generated interest from an impressive list of possible tenants and from top financial partners.
But it took a go-between to bring the rivals together.
Miller said the catalyst was Mark Gibson, executive managing director of Holliday Fenoglio Fowler LP, a Dallas-based real estate investment banking and brokerage firm of which Endeavor and Simon are longtime clients. Earlier this year, Gibson suggested a meeting, Miller said.
"(Gibson) said, 'I see a potential win-win here. If nothing else, you ought to meet each other and see if there is merit to doing something together,' " Miller said
But after the meeting, the companies went their separate ways. "I don't think either party felt a compelling reason to follow up," Miller said.
Until last week. That's when news reports said that Endeavor was talking to General Growth, and when "Simon expressed an interest in discussing opportunities to participate in our project."
"There was a phone call Friday -- I won't say from whom -- to see if there was an interest in getting together," Miller said. "We both agreed to do it, and it happened very quickly after that."
Endeavor has been working on the Domain for nearly two years. The company went public with the project in February. In May, the Austin City Council approved a $37 million, 20-year incentive package -- the first time the city had granted tax breaks to a retail project.
City officials said they thought the concept was so unique it merited tax breaks, especially with the economic downturn and the flight of sales tax dollars to the suburbs.
The council approved the incentives on May 15 within weeks of being briefed on the project. Endeavor pushed for speedy action because the company wanted to pitch the project at the International Council of Shopping Centers convention in Las Vegas later that month. The event is the top showcase for retail projects, and an enormous factor in retailers' decisions about where to put stores in the coming year.
The next month, Endeavor found itself on the political hot seat over another project -- a proposed Wal-Mart Supercenter in Southwest Austin on environmentally sensitive land over the Edwards Aquifer. After weeks of City Council debate and fierce neighborhood opposition, Wal-Mart pulled out of the project.
Daryl Slusher, the only City Council member to oppose the Domain incentives, said Wednesday he thought the May 15 deadline had less to do with the retail conference and more to do with the simmering Wal-Mart controversy and the threat the Simon project would represent.
"It looks like they pulled (the Domain) off without going to Las Vegas," Slusher said.
But Mayor Will Wynn said that however the Domain rises, it will add density and mixed-use development, strengthen the tax base and create new jobs.
"My vote to create economic incentives for the Domain project was based on what will be built, and not who will do the building," Wynn said.
Miller said the incentives were needed for exactly the reasons Endeavor stated at the time: "So we could tell prospective tenants that we were going to be meeting with that we had a viable project."
Without that certainty, Miller said, it would have been a waste of time and irresponsible to meet with prospective tenants.
"Without them, it wouldn't be built. With them, there's a chance we have a special project."