The long-delayed development of Hemisfair is ready for a reboot. Here are the details.


Last year, Zachry Hospitality was supposed to put the finishing touches on a $200 million mix of apartments, shops, offices and a hotel in Hemisfair aimed at helping revitalize the downtown site of the World’s Fair of 1968.

But the San Antonio company has yet to begin building or pay rent owed to Hemisfair Park Area Redevelopment Corp. and is now looking to change its agreements with the nonprofit and revise the scope of the project.

The Market and Alamo Street development consists of partially enclosing Civic Park, a public space with an expansive lawn for events, a shaded promenade, and water features adjacent to the Henry B. González Convention Center.

Officials attributed the heist in part to negotiations over proposed revisions. They also cited the Tricentenary and Final Four events in 2018, developer NRP Group ending its involvement, a search for new property developers and the effects of the coronavirus pandemic on funding and demand for office space. .

“We knew there had to be changes,” Deputy City Manager Lori Houston said. “There was no problem with the project…it had to be fine-tuned according to the market. Anyone bidding on the project would have the same problems.

The city council was informed of the changes on Wednesday and will vote on them in the coming months.

Zachry beat 10 other bidders with his proposal in 2017. His location included a 200-room hotel, 385 housing units, 50,000 to 75,000 square feet of retail, 60,000 to 110,000 square feet of office space, and up to 800 parking spaces. Based on the winning plan, council members approved leasing the land to the company for up to 97 years.

Initial agreement, new agreement

Zachry agreed to pay HPARC approximately $1.9 million in rent per year for the first two years and $1.45 million per year thereafter, plus a portion of retail tenant revenue. Rent was due either when certificates of occupancy were issued for part or all of the development or on August 1, 2021.

But Zachry made no payment. The proceeds were to be used to help repay the city of the $18 million debt in certificates of bond it had issued for the first phase of Civic Park and to help make Hemisfair self-sustaining.

Under the proposed new deal, Zachry would instead pay $1.15 million in rent per year and the city would defer HPARC’s payment until 2029, when it would reimburse the city with interest.

Andres Andujar, CEO of HPARC, said the nonprofit was paying its bills and hadn’t received money from the city’s general fund last year, but needed income from Zachry’s development and other projects to be financially solvent in the long term.

Also under the proposed revisions, Zachry would increase the number of units to 525 in two complexes, increase the number of parking spaces to 1,100 and omit offices as the pandemic has affected demand, at least for now.

Area Real Estate, the local firm run by David Adelman that built the ’68 apartments in Hemisfair, and an Austin firm would develop the units. It would include 87 “labor” units for residents earning up to 60% and up to 80% of the region’s median income.

The Area Real Estate project would be built in partnership with Hemisfair Park Public Facilities Corp. The participation of the company offers a total exemption from property tax. But the developer would pay HPARC what it owed in property taxes if it weren’t for the PFC, which is $200,000.

The hotel, part of Hilton’s Curio Collection, would remain the same and there would be 65,000 square feet of retail and dining space.

Another change: Under state law, the hotel is entitled to a refund of state hotel occupancy and sales taxes and those funds would be used to reimburse Zachry for parking fees. and public improvements. The rebate would last for 10 years and the city would continue to collect its hotel and sales taxes.

The total private investment would increase to $340 million due to inflation and Zachry picking up parking development costs, which the city previously had to pay.

This is expected to boost the Hemisfair Tax Increase Reinvestment Zone, which uses increases in property tax revenue from land within the zone to repay public improvements. TIRZ revenue would rise from $687,000 to nearly $1.2 million, according to city staff.

The city would pay for $8 million in utility infrastructure through TIRZ, which Zachry had to pay as part of the original deal.

HPARC would receive a credit of $150,000 per year to rent space at the hotel and money if it does not use the full credit. He could also rent the Schultze hardware store, which is currently rented by Zachry, and raise $150,000 a year in rent.

The development was previously slated to receive about $1.5 million in fee waivers from the city and San Antonio’s water system, but that would be reduced to $450,000 just for the workforce housing units. artwork.

New deadline: 2025

The new deadline is 2025, when the Civic Park and Zachry development will be used for NCAA Men’s Final Four Tournament programming. Construction is expected to start in March 2023.

Council members spent less than half an hour asking questions during Wednesday’s briefing and some backed the development, saying it would help rejuvenate the World Expo site.

“The effort to bring it back to public use…was remarkable. But it was also important to rectify some of that history and bring one of San Antonio’s most important real estate assets back to life,” said Mayor Ron Nirenberg, referring to the demolition of neighborhoods to make way for the fair.

Councilman John Courage asked why the city is not issuing a request for proposals under the current terms. Houston said the goal is to ensure development is completed in time for the Final Four tournament.

“Zachry is still aligned with why we selected them and we’re doing better with this deal,” Houston added.

Andujar said he doesn’t blame Zachry for the delays and missed rent payments.

“During a negotiation, there are always different views and opinions, but the proof is in the pudding. We are presenting an agreement that has the unanimous agreement of the development team, HPARC and the city,” he said. “There were some tough days of course, but that’s my biggest flaw: I’m optimistic. Even on bad days, I think we’ll get through it.

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