Stream Realty Ready To Move On Schulz Triangle Office Tower
Stream Realty is ready to kick off the first tower in the South Central Waterfront Initiative, but the city appears to be months away from taking the driver’s seat on a large-scale development that lies somewhere between Rainey Street and Mueller in terms of challenge and complexity.
Stream Realty is proposing a 195-foot office tower on the Schulz triangle, which is essentially an asphalt parking lot and a Hooters on West Riverside. The parcel, bounded by the three major arteries through South Central, will play a key role in the area's character and connectivity. Armbrust Brown attorney Richard Suttle, who represents Stream, said the Schulz triangle and the Statesman property are the bookends to what will be Austin's next major area of redevelopment.
Developer David Blackbird of Stream Realty saw the potential of the property early, and the challenges he might face selling the project to neighbors. Blackbird served on the committee that drafted the South Central waterfront plan in 2014. He moved to buy the property in 2016, as that plan was approved by City Council. And then he waited, as Austin developers do.
Suttle, who has carried many of the big-name projects in Austin through the development process, said it is time to act on the Stream Realty proposal. If all goes well, the zoning change could be before city council members by December.
"We're ready to move forward, and we're meeting the South Central Plan," Suttle said, although he said the project still has a distance to travel before groundbreaking. "Once we have the zoning in place, there's a whole other level of design and finance we have to conclude."
But Blackbird’s deal is complicated by a number of factors: the lack of a regulating zoning plan under CodeNEXT; the need to sell multiple commissions on another 140 feet of height; and, last but not least, participation in a yet-to-be-created tax increment finance district.
The Schulz triangle is in its third round of negotiations with city departments. Alan Holt, the long-term planner on South Central Waterfront, told the newly constituted South Central Waterfront Advisory Board on Monday night the project would hit City Council for approval in December, but the South Central Waterfront Initiative is not even close to launching.
The South Central Waterfront Initiative is three years in the making, but City Council has yet to set out a tax-increment financing district to fund it. The vision document approved by council in 2016 suggested the funding mechanism as the first priority; it is now left to the new board to push it to council. Hundreds of millions of dollars in new value — from The Catherine to 300 Riverside to the Hyatt expansion — should have gone (but did not) into funding the district, and it is likely the Schulz triangle also is on a trajectory to dodge inclusion.
Suttle sees no problem with missing the deadline for the tax-increment financing. Stream Realty will be paying taxes to the city either way. It will be up to city leaders to divert tax increases into an improvement fund, he said.
The initiative is an acknowledgement the city’s zoning ordinance would be inadequate to deliver on key city goals for Austin’s waterfront: enhanced public access to the shore, a pedestrian-oriented hub connecting downtown to Auditorium Shore and Zilker Park, and a cohesive district with quality design standards and open space.
The vision plan suggested pumping $100M into the district by upzoning the properties in exchange for underwriting direct community benefits and participating in a tax-increment finance tool. Every high-density project south of Lady Bird Lake has gone through the upzoning to a planned unit development.
Essentially, the PUD zoning is an exchange: Developers pay into a fund for community benefits and then are allowed excess height.
Goals for South Central also included $65M in gap financing to underwrite the vision plan’s intention to scatter 500 units of affordable housing across the district.
The initial tally for the Schulz property contribution, based on development assumptions for the South Central Waterfront, is $3.1M. In exchange, Stream Realty would be able to upzone the property from 60 feet to a mixed-use office tower of 195 feet. That would be roughly equivalent to the height of The Catherine, which opened in 2014.
The expectation would be for Stream Realty to put much of that money toward necessary public improvements, such as streetscape and roadway work. That means the city could end up with far less in its coffers for additional amenities to the South Central Waterfront District.
“They’re going from an entitlement of 60 feet to almost 200 feet,” South Central Waterfront Advisory Board Chair Brooke Bailey said. “I’m having a little difficulty with them getting almost another 140 feet, and the best they can do is $3.1M. And yet they want to include their on-site improvements in that $3.1M.”
The total Stream Realty contribution, and how it was calculated, appeared to vex a number of advisory board members. Bailey created a working group to review the project before it returns to the commission in mid-October. That will likely include a conference call with ECONorthwest's Abe Farkas, who drafted the original spreadsheet on the district contributions.
Wendy Price Todd, a Travis Heights resident who also was active in the original vision effort, suggested city staff bring the board two three-dimensional versions of the project: one with the current entitlements of 60 feet and one of the proposed project.
“So we can visually place that,” Todd said. “And if they want to include The Catherine and other projects prior to the South Central Waterfront, it would be very helpful to see.”
The contribution for each piece of property is intended to make sense for the developer while meeting the goals of the regulating plan, Holt said. The Schulz property may only need to pay $3.1M, while the 19-acre Cox Enterprise-owned Statesman property is expected to kick in tens of millions toward South Central's overall goals.
The incentive for the South Central Waterfront is different from the city’s density bonus, Holt said. The density bonus was based upon additional square footage, above and beyond current entitlements. A developer would pay $10/SF in bonus space. The South Central Waterfront incentive plan, on the other hand, was based on the entire square footage, incentivizing as much density as possible.
“What’s the point of encouraging that?” Holt asked. “The point of encouraging that is in order to fill the $100M public realm, we have to fuel the system with $100M of investments that we’re not bonding for or paying for through capital improvements. And to get the 20% affordable housing, we’re going to have to fuel the system with more robust development. So the system actually incentivizes going to a more robust end of the bonus.”
The South Central Waterfront was not codified and not enforceable by the city, Todd said. At best, it was a plan that engendered some goodwill among developers.
Suttle agreed this is a key issue in the zoning negotiations: whether a public improvement district will be on top of the community benefits offered. It also raises the question of whether this expands the Downtown Austin Alliance's scope or spins off with a new localized public improvement district, funded and focused on South Central.
If council does bless the Stream Realty tower in December, the city likely would have to create some alternative funding vehicle for any funds set aside for community benefits, Holt said.