Making The Numbers Work In San Antonio's Urban Core
Downtown development in San Antonio would be almost impossible without the current cocktail of local incentives and federal loans, developers agreed at Bisnow's State of the San Antonio Market in September.
That is because the income expectations are different from other Texas markets. Almost every multifamily project must be aimed at the reality of the Alamo City income levels: $10K Downtown and between $50K and $75K in the suburbs. The sweet spot for affordable Downtown housing must stay under $2,500 per month.
NRP Group puts about half of its units aside for what might be considered affordable housing, Vice President Tim Cone said. About half the units in the Cevallos Lofts are accessible to people making $50K or less. Cone said most residents would be hard-pressed to identify a neighbor living in one of the more affordable units. But building that way is not easy.
"It is almost impossible to come up with affordable units Downtown without the help of the city and county, when you think about development economics," Cone said. "You see in San Antonio that land prices have skyrocketed and the only way to achieve responsible development is with government incentives, either through HUD or the State of Texas."
Even Downtown high-rises need the help to counter development costs. JMJ Development's tower at the corner of Villita Street and Jack White Way, for instance, is secured by a HUD loan. That made a residential tower — and not just another hotel — feasible.
CEO Tim Barton has seen development transform Dallas so he understands San Antonio's potential. And he has confidence that a 28-story tower on the Riverwalk is going to find its footing in a market that has not seen a residential high-rise in decades.
"Once we started studying the market, we saw the demand in the CBD to have more units in the urban core," Barton said. "It caused us to change a very tight site on the end of the river into something residential."
The project, yet unnamed but currently nicknamed the Villita Tower, is secured with a multifamily HUD loan, locking in the interest rate at 3.7% over 40 years with a 40-year amortization rate. That program is intended to guarantee quality multifamily housing is being built in underserved markets, Barton said.
Demolition of the Hood Building could begin as early as this week. Barton likes that head start, putting him ahead of the Kallison Square, the 21-story residential tower expected to break ground next year.
The ability to own, rather than rent, means many who are living Downtown are putting only 20% of their income toward housing, Greystar Real Estate Partners Managing Director Jill Welborn said.
Greystar manages 45 properties in the greater San Antonio area, including 1800 Broadway, River House and Agave. Welborn made a number of observations: pre-leasing is still strong in the Downtown market, more empty nesters than expected jumped on Downtown living and a shadow housing market still exists in San Antonio.
And new parts of town are opening up for multifamily, Cone said.
"I think the stigma of the East Side and Near East Side is going away, especially if you're going to develop a nice enough product that is true enough to the area," Cone said.
Apartments in St. Paul Square are a 10-minute walk from Downtown, compared to a 45-minute walk to Downtown for anyone living at The Pearl, which is drawing developers to the area.