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Posted Jan 25, 2015, 1:30 PM
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Loving SA 365 days a year
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Join Date: Feb 2007
Location: San Antonio
Posts: 3,891
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Pretty awesome Express-News column discussing development along the Museum Reach in both the River North and Pearl areas just north of downtown.
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By Benjamin Olivo
Newlyweds Marcus Leming and Lena Carpenter recently sidled up to the bar for after-work pints at GS 1221, an upscale beer bar on Broadway. The 30-something couple love the convenience. They live at 1221 Broadway — industrial-style apartments with retail space that includes the bar.
They also live a block from the Museum Reach — a 1.3-mile stretch of the San Antonio River between Lexington Avenue and Josephine Street — where Carpenter jogs regularly.
A few years ago, this stretch of the river was nothing more than a bleak trash-strewn ditch lined with old industrial buildings and gravel lots. In the mid-2000s, $72 million in public money was pumped into this segment of the river. It was transformed into a linear park of landscaped paths and public art, creating a more pleasant urban environment that city leaders hoped would spark construction of apartments and condos, coffee shops and bars — a River Walk for locals.
It took a couple of years after the Museum Reach’s completion in 2009, but development started to bud. Since 2011, nearly 1,000 residential units — mostly apartments — have sprung up in the area. Another 737 units are under construction and likely will be occupied by year’s end.
The total value so far: $254 million in private investment, with an assist of about $25 million in incentives.
“When you talk urban revitalization, this is what it is, and I think to do it so quickly (in this area) speaks a lot,” Carpenter said. “Obviously there is a big appetite for it.”
There's potential for even more development.
Twenty acres of vacant or semi-vacant land in the Museum Reach area is owned by developers with a history of building in the area, including big-hitters James Lifshutz and David Adelman. The area also has drawn interest from outside the city — Austin, Dallas, Indianapolis and Boston.
“I don’t even know who they are,” said Katie Luber, director of the San Antonio Museum of Art, which owns 7 acres of mostly vacant land along the stretch. “Realtors call and say 'I have a developer … I have a national developer who wants to come to San Antonio.’”
But as the area continues to blossom, some critics say the infrastructure isn’t keeping pace — the $72 million in river upgrades was a nice start, but what about streets and sidewalks?
Others, meanwhile, warn that the area is developing into a neighborhood accessible only by the upper class.
Most rents are as high as $2 a square foot (the downtown average is about $1.50) — yet occupancy rates hover in the mid-90 percent, indicating a strong demand for the booming area. City officials and developers say they want more diversity in housing, but there’s no signal yet that shows lower rents are coming from the private sector.
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CONSTRUCTION CONTINUES AT THE RIVERA, A 300-UNIT APARTMENT PROJECT AT
THE 1100 BLOCK OF BROADWAY NEAR THE MUSEUM REACH OF THE SAN ANTONIO
RIVER WALK.
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Blossoming neighborhood
Around the time the Museum Reach was completed in May 2009, this stretch of the river included some residents, but not many. A condo here, a motel there. At the Pearl, still in its inchoate state, about 20 residential units existed.
A ghost town of concrete slabs — a multifamily project started in 2003 by developer George Geis, but abandoned because of legal troubles — stood ruinous for five years on Broadway just south of Interstate 35. Developer Ed Cross took ownership of the eyesore in 2006 and, along with Adelman, later fleshed out the lattice with 307 apartments. The area’s first big development piece, 1221 Broadway opened in 2011.
Soon after, the Pearl started to take off, eventually adding another 300 units in 2012 along with a flurry of restaurants and shops. Along the river and Broadway came more apartments, a hotel, an office building, and the recycling of an old warehouse into office and restaurant space.
The ditch and dealership row started to look like a neighborhood.
Behind the scenes, the deal-making continues for even more apartments. Word has spread beyond the Texas border about the area’s fertility.
“There is momentum and people seem to like the area,” said Steve Bodner, president of SCB Bodner Co. Inc. of Indianapolis, which is close to purchasing property along the reach. “Pearl looks to be a great developer and (it is) creating some excitement in the community, far and wide.”
In the middle of the reach, Bodner, a third-generation developer, is close to signing a deal for a 1.7-acre riverside parcel once home to the Turner bowling alley. He wants to build 200 apartments there.
“We’re statistically motivated in the development of our projects,” Bodner said. “We looked at a bunch of analytical information that pointed us to San Antonio. We like the River Walk area; it has unfulfilled potential.”
It seems like every parcel — either vacant or not — in the area holds some potential.
“A lot of developers have offered to buy our property,” SAMA director Luber said. The museum’s board has been adamant about preserving its 7 acres, across Jones Avenue from the museum, as green space featuring a sculpture garden.
Dallas developer Alamo Manhattan has plans to build a six-level apartment building on 1.3 acres surrounded by SAMA’s properties. Lifshutz, owner the Blue Star Arts Complex south of downtown, also owns this property, but deflected questions about the project toward Alamo Manhattan, which did not return interview requests.
Lifshutz did confirm he wants to eventually build residential and commercial on 2.5 acres he owns a block east, the former dealership that faces Broadway between Jones and 10th Street.
Just west of the Turner site, Adelman said he wants to build 300 apartments on a 3-acre swath south of the river between Eighth and Ninth streets. On property on Avenue B, behind the KLRN studios, he’s closer to beginning construction on 107 “micro” apartments — smaller, more efficient units.
Without getting specific, Glenn Huddleston, a developer who specializes in commercial space in Alamo Heights, would like to build some kind of residential development on a square block he mostly owns across from the lock and dam.
“It’s been overlooked, the lock and dam,” Huddleston said. “I’d like to come up with a project that really takes advantage of that … it would be mixed-use project with a residential component.”
North of I-35, Pearl developer Silver Ventures owns all of the riverfront property west of the river — from Newell Avenue to West Grayson Street — and said in an email the group continues to explore development options, but has no concrete plans.
“All options are on the table right now,” Bill Shown, Silver Ventures’ managing director, said in an email.
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TREES ARE MARKED BEFORE DEVELOPMENT BEGINS AT AN EMPTY LOT AT
111 WEST JONES AVENUE ALONG THE MUSEUM REACH OF THE SAN ANTONIO RIVER WALK.
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Will incentives last?
Aside from the Museum Reach, the city’s incentives policy is credited with the area’s rebirth.
Most of the area’s developments received an Easter basket of incentives that at the time included cash. The downtown-wide policy was revamped in 2012 — partly because of criticism over the grants, partly to streamline the process — and the Center City Housing Incentive Policy was born.
The CCHIP doles out property tax reimbursement grants in 10-to-15-year increments, city and San Antonio Water System waivers, among other carrots.
When it was announced, city officials described the program as a kickstarter. Someday, they said, incentives will not be necessary because the market would reach a point where it’s less risky for banks and other investors to loan money.
Some developers, however, say “don’t stop at 1,700 units.” That number is a smidgen of the 10,000 units the Museum Reach needs to become a true neighborhood.
“We’re not there yet,” Adelman said. “Our community will get the development that you sort of push for, and a big component of what the incentive does is it redirects the interest from the sprawl that we’ve experienced into the inner city.”
The program expires in June 2016. In a couple of months, the city’s Center City Development Office will look at the market to determine whether to strengthen, leave as is, scale back or zap parts of program.
“Until we have a San Antonio study to show us the market rate and whether or not we hit the tipping point, we don’t want to make any major amendments,” CCDO director Lori Houston said.
Whether that means the incentives for the Museum Reach will be scaled back, because it’s doing far better than any other downtown district, will depend on the results of the study. Of the three projects in the works — by Alamo Manhattan, SCB Bodner and Adelman — none has yet applied for incentives, Houston said.
“The assessment will look at each target area and provide an analysis that shows the revised financial gap based on the rents, construction cost, land values, and other market conditions,” Houston said.
The river has plenty of vacant parcels left that could be developed. Beyond the river in all directions are even more parcels and older buildings that could be repurposed. Adelman said 10,000 units in the area will begin to draw the attention of a grocer, the sign of a real neighborhood. It’s an amenity the area’s current residents say is lacking.
It will be easier to drive to Central Market on Broadway, some residents say, than traverse downtown proper to get to the store H-E-B is in the process of planning on South Flores and East César E. Chávez Boulevard.
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VIEW OF THE MUSEUM REACH IN RIVER NORTH FROM A HILTON HOTEL
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Streets, sidewalks
What’s also lacking, developers say, is infrastructure. The $72 million spent on the Museum Reach was catalytic, but few public dollars have been spent on streets and sidewalks.
Broadway remains a race track, and the ancillary streets and sidewalks still flood.
Part of the city’s plan is to turn Broadway, from Third Street up to Cunningham Avenue, into a pedestrian-friendly street.
“You’re turning it into more of a neighborhood street as opposed to a major thoroughfare,” said Pat DiGiovanni, president and CEO of Centro San Antonio. “Not to be confused with a local street, like you’re in a single-family neighborhood. The right-of-way remains the same, but you’re introducing wider sidewalks, introducing trees, places for bikes, places for parking, for transit as well.”
DiGiovanni estimates that project alone could cost $15 to $20 million. Broadway should work in tandem with the Museum Reach in order for the area to reach its full potential, he said.
“If you go out and look, there’s a great deal of infill development,” DiGiovanni said. “There’s a lot of developable land there that could shatter the 10,000-unit goal. But public infrastructure has to keep pace with the private investment.”
One misstep in the area’s planning has been the execution of the tax increment reinvestment zone, DiGiovanni said.
In a TIRZ, revenue generated from the rise in property taxes is collected and put back into the area. Tax abatements, however, neuter this funding mechanism. Such is the case with the area’s residential projects, which produce no revenue because of the abatements.
DiGiovanni, a former deputy city manager, suggests the city float bonds to pay for the Broadway upgrades now. Such a move would amplify the rate of development, he said. When the tax abatements expire — many of which will in about 10 to 12 years — the revenue can be used to pay back the debt.
City officials say they aren’t investigating the strategy, at least for Broadway.
“We had looked at some of that a few years back and it didn’t seem to work at that point in time,” said Ben Gorzell, the city’s chief financial officer. “One of the challenges you have, particularly in that area — once they issue the debt on Day 1, we start incurring interest costs.”
Houston said other funding options include taking a slice from the 2017 bond program.
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MAP OF THE THREE AREAS IN QUESTION.
1. RIVER NORTH
2. THE PEARL
3. LOWER BROADWAY
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Costly rents
At 1221 Broadway, Marcus Leming and Lena Carpenter, who reverse commute to USAA where they both work, pay about $1,400 a month for a one-bedroom, 1,000-square-foot apartment. Carpenter said she probably could afford to live there alone, but would have to forgo some of the area’s restaurants and bars.
The same goes for Lori Martinez, 34, a Rackspace support technician who looked briefly at the Museum Reach before deciding on an apartment in Monte Vista.
“It's great, if you can afford it, definitely,” said Martinez, who says she visits the area about twice a month for festivals at the Pearl or to eat at a restaurant. “It has parking. Everything’s within walking distance. Nice neighbors. Everything is clean, brand new. Yeah, it’s awesome. It’s probably not something your average San Antonian would be able to afford.”
While there are gradations of rents in the area — there are some around $1.50 a square foot — the area still is unaffordable for most San Antonians. Developers say high construction costs play a huge part in determining rents. But they also agree that the area would be better served if there were rent options.
“I do agree that healthy neighborhoods over the long term have diversity of options,” Lifshutz said. “They have a diversity of building types, a diversity of when buildings were built. So they’re built over a long period of time and implicit in that is a range of rents … it is concerning to me a little bit.”
The area also is in high demand.
“These projects are 90- to 95-percent leased, so there’s clearly a market for the rents,” DiGiovanni said. “Having said that, I think there needs to be alternative housing options whether it’s workforce or transitional housing or even affordable housing. We want to be smart as a community that we keep that diversity of housing. It’s the best recipe for a successful neighborhood and that’s been proven time and time again throughout the country.”
Rehabilitating older buildings into dwellings is one option, DiGiovanni said.
Another is the San Antonio Housing Authority, which owns 2.5 acres just north of the river between Brooklyn Avenue and Eighth Street. The agency said it plans to build on the site some level of housing, but did not specify whether it would be subsidized or affordable.
For private developers, there are a wealth of noncity incentives out there than can reduce project costs and therefore make rents more affordable, but they’re often highly competitive, said Christine Drennon, Trinity University Professor of sociology and anthropology.
Just as developers get incentives to build, Drennon wonders if people who live in surrounding neighborhoods — whose property taxes may be effected in the coming years as development begins to push out to Tobin Hill to the west and Government Hill to the east, for example — should get incentives, too, to rehabilitate aging homes.
“Developers get incentives. Well, that’s terrific,” Drennon said. “So do I, as a home owner or someone buying a deteriorated house also get incentives then to fix up my house? It seems only fair.”
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MUSEUM REACH 
Last edited by sirkingwilliam; Jan 25, 2015 at 1:46 PM.
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