Mayor Castro Unveils Downtown Megadeal

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The Rand Building and the Frost Bank Tower. Photo by Robert Rivard.

Mayor Julián Castro, flanked by a majority of City Council at a hastily called Thursday afternoon press conference at City Hall, announced a proposed downtown real estate megadeal put forward by Weston Urban and Frost Bank that would give the city’s skyline its first new Class A tower in more than 25 years and generate a breathtaking wave of  downtown development north of Main Plaza.

Castro said the City received what he called the first unsolicited public-private partnership proposal since new guidelines designed to foster major redevelopment projects were put in place by the council in November 2012.

“This is a major development that literally has the opportunity to change the landscape of downtown,” Castro said. “It has been more than quarter century since our downtown skyline has had a new office tower.” He later said the project would add 300 new residential units to the downtown market.

Here are the key elements of the broad proposal that did not include financial and timeline details:

  • The City would convey to Weston Urban, the real estate development business owned by Graham Weston, CEO and Chairman of Rackspace, several historic properties for redevelopment, including the Municipal Plaza Building, the Continental Hotel, now used by Metro Health, and its parking lots; 319 W. Travis St. (the former San Fernando Gym); and a strip of property on 22 N. Main Avenue.
  • Frost Bank would convey the Frost Bank Tower and Garage to the City and its other downtown properties to Weston Urban.
  • Weston Urban would construct a new office tower to serve as Frost Bank’s new corporate headquarters on the current site of the Frost Motor Bank and its surface parking lot located on the northwest corner of North Flores and Houston Streets. Frost Bank would lease the office space from Weston Urban.
The Frost Motor Bank, site of the proposed new tower, with the Frost Bank in the background.

The Frost Motor Bank, site of the proposed new tower, with the Frost Bank Tower in the background. Photo by Robert Rivard

The new tower would add 732 new parking spaces to the downtown inventory, and equally important, put the first new Class A office space into the market since the Weston Centre opened in 1988. The lack of Class A office space is often cited as the major hindrance to attracting more companies and professional jobs to the urban core.

For the City, acquisition of the Frost Bank Tower would allow for consolidation of city workers now dispersed in five different buildings, and saving $3.4 million in annual rental leases. The deal would place 1,100 city workers in three buildings: historic City Hall, the Plaza de Armas, and the Frost Tower.

A similar consolidation of more than 3,000 uniformed personnel occurred in 2012 when San Antonio police and firefighters moved into the newly constructed  Public Safety Headquarters at 315 S. Santa Rosa St., a six-story, 243,000 sq. ft.  tower with a 657-space controlled access garage.

The San Fernando Gymnasium. Photo by Robert Rivard.

The San Fernando Gymnasium. Photo by Robert Rivard.

For Mayor Castro,  who came to office declaring this time the “Decade of Downtown,” Thursday’s announcement serves as a major milestone in the waning days of his five years in office. Taken together with the Convention Center expansion and redevelopment of Hemisfair Park now underway, Castro can assume his position next month in President Obama’s Cabinet as new Secretary of Housing & Urban Development  with a strong claim on the revitalization of San Antonio’s urban core. At the press conference, Castro noted that 3,300 residential units have been added or are in the works for the center city, with the ultimate goal of reaching 7,500 new units by 2020. This deal alone boosts the number  of units completed or on the drawing board by another 10%.

On Friday morning, Castro will realize another milestone when he joins H-E-B officials for a ceremony “kicking off” construction of traffic and pedestrian and bike path improvements along South Flores Street between César E. Chávez Boulevard and Arsenal Street during an announcement at the historic Commander’s House, a prelude to the coming culinary center and school and grocery store. The H-E-B corporate campus expansion and grocery store  represent another major initiative that developed during Castro’s mayoral term. A downtown grocery store was high on his list of downtown objectives when he first took office.

There has been much speculation in the wake of Castro’s decision to accept a Cabinet post that San Antonio and redevelopment of its urban core would lose some of the momentum  built over the last decade amid uncertainty over who will succeed him as mayor. With the Weston Urban proposal, the H-E-B downtown expansion, and the September opening of the Tobin Center for the Performing Arts, a loss of momentum seems less inevitable.

For Frost Bank, the project keeps one of San Antonio’s oldest and most respected names and businesses downtown. Many in the downtown development community have long feared Frost might depart the urban core. With its proposed commitment to lease new tower space from Weston Urban, Frost will continue to have a major footprint in downtown Dallas, Austin, and its hometown San Antonio.

For Graham Weston, who served as one of the tri-chairs for Castro’s SA2020 initiative and whose family owns the Weston Centre and multiple downtown properties, including the historic Rand Building, which was acquired from Frost Bank last year and now houses his Geekdom tech incubator and co-working space, city acceptance of the project would represent a major downtown development breakthrough. Weston has long sought to catalyze significant new development near the Weston Centre to compete with and complement the Pearl Brewery redevelopment by Silver Ventures and the major wave of Midtown development triggered by the Pearl and the  opening of the Museum Reach of the San Antonio River.

Taken together with the City’s recently approved Vacant Building Ordinance, the Weston Urban-Frost Bank deal could spark a new level of excitement and interest in San Antonio’s downtown just as Castro prepares for Senate approval of his nomination and the City Council readies to elect one its own to serve out the final year of his third mayoral term.  

The Continental Hotel, now the site of the City of San Antonio's Metro Health Department. Photo by Robert Rivard.

The Continental Hotel, now the site of the City of San Antonio’s Metro Health Department. Photo by Robert Rivard.

Lori Houston, director of the Center City Development Office, said the City has responded to the Weston Urban-Frost Bank proffer with its own letter requesting additional detailed information within 45 days. The City, she and Mayor Castro said, want a deal that represents a net gain or break even point for taxpayers. The developer’s response, she said, will be posted on the city’s website for the public to review. The City will invite alternative proposals from other interested developers over a 60-day period, and could enter into negotiations at any point with Weston Urban to further shape and refine the terms of the deal.

“We’ve arrived at the midpoint of the Decade of Downtown,” said Randy Smith, Weston Urban’s CEO, who said his firm intends to develop an “iconic” tower for Frost Bank to make its new downtown headquarters. He said the height, scale and design of the new tower remained to be determined, and that all the historic buildings involved in the project would be protected.

“Frost has been in the downtown…all the way back to 1868,” said Phillip D. Green, Frost Bank’s group executive vice president and chief financial officer. “In fact, the original Frost Bank tower built in 1922 serves as the Municipal Plaza Building where the City Council now meets.” Green called the proposed deal a “win-win-win” for the City, Frost Bank and Weston Urban, and for citizens.

The Municipal Plaza Building on Main Plaza, with San Fernando Cathedral to the left. Photo by Robert Rivard.

The Municipal Plaza Building on Main Plaza, with San Fernando Cathedral to the left. Photo by Robert Rivard.

“This means hundreds of new residents moving downtown and…new retail and shopping on Commerce and Houston Streets,” said District One City Councilman Diego Bernal, who also noted that a 500-space parking garage would normally cost $12-15 million to build and that the addition of 732 new parking spaces will be a significant asset for attracting more people to visit downtown.

If the downtown commercial real estate market can be likened to a long inactive chess board, Thursday’s announcement equates to rooks and bishops breaking through the ranks and files and giving new value to surrounding pieces on the downtown chess board. Thursday’s press conference could be the big opening of a whole new downtown game with many additional moves to come in time as other building and land owners and developers assess the deal and what it means to their positions.

*Featured/top image: The Rand Building and the Frost Bank Tower. Photo by Robert Rivard.

 Related stories:

No Corner Offices at The New Geekdom

Bernal Targets Vacant Buildings, Sets Sights on Alamo Plaza

Downtown San Antonio: Good, But Not Yet Great

Hemisfair’s Yanaguana Garden is in Playful Hands

Vacant Building Ordinance Could Be Game Changer

 

26 thoughts on “Mayor Castro Unveils Downtown Megadeal

    • It’s brutalist architecture from what I understand. I like it because it conveys the feelings of a bygone era of San Antonio that this city shares with lots of other cities that have similar brutalist structures.

  1. Are there regulations in San Antonio that prohibit rectangular sky scrapers? I’ve always appreciated that most tall buildings echo the shape of the Alamo or the Tower life building. There also seems to be a guideline against glass buildings. I’m glad we don’t look like Houston or Dallas.

    • Mitzi Moore —
      We know of no city restrictions on tower design or scale. The size of the proposed new Weston Urban tower has not yet been determined, but one would assume it will be in scale to the nearby Weston Centre, probably taller, I’m betting (with zero evidence to back up my hunch). –RR

  2. Angie Hwang Cronin: We got word about it internally, today. Honestly, I don’t know, but probably not. It’s very likely I’ll be headed to One Frost out by my old office sometime next year or the year after, when it’s complete. The plan for this new building is pretty interesting though.

  3. As one of the current Class-A building leasing agents downtown, I’ll be interested to see how they can make rental rates work for new space and non-Frost Bank tenants. Parking, not availability, has always been the major hindrance to downtown relocations, though the market has tightened up

  4. Great Article.

    As one of the current Class-A building leasing agents downtown, I’ll be interested to see how they can make rental rates work for new space and non-Frost Bank tenants. Parking, not availability, has always been the major hindrance to downtown relocations, though the market has tightened up

  5. RR,
    and the sea will part also… ;).

    At face value, a net positive. However, does very little, if any, to solve 25%+ vacancy rate…

    I welcome a pretty skyline! I don’t believe class A will be a de-facto cause for change. A lot of money thrown. Obviously, Weston wanted guaranteed occupancy. Of course. But, the idea will attract millennials and be a c-change. unlikely. Now, 5 or 6 deals like this one – YES.

    gobs of money sloshing around for downtown. Definitely one of those ‘build it and they will come’ moments for San Antonio. Let’s hope, err pray, they come!

  6. “…Randy Smith, Weston Urban’s CEO, who said his firm intends to develop an “iconic” tower for Frost Bank to make its new downtown headquarters.”

    Let’s not underestimate the possibilities. Take a look at the iconic, beaming Frost building in downtown Austin (resembling an owl, supposedly because the architect is a Rice alum) which really sets the city apart visually. Something similar and unique here, not to mention the addition of height (which for some reason is a socially constructed association with a thriving downtown-and I’m guilty of sharing this view) would be a huge step in the right direction for how San Antonio envisions itself in the future.

  7. I think what people are overlooking is that the city plans to convey 5 properties to Weston Urban in the deal, so that’s lots of room for development beyond tower.

    The end goal is not a bank tower—it’s to create a new district. All of these properties are located on or around where the San Pedro Creek improvements will happen.

    I’m more excited about what will happen at ground level than I am about the skyline. This has potential to be transformative.

  8. What about the people that already lives downtown on a fixed income like some that are blue colored city workers where are they to live since the most they make in a month would be rent and nothing else with the changes going to happen.

  9. I like most parts of the deal including adding class A real estate. However, I do hope the new building is not tall and standard looking. One of the things I appreciate are the nature initiatives undertaken in San Antonio over the past several years most notably the river restoration and recreation work. I believe one of the goals in San Antonio is to attract young professionals to live downtown. I believe the younger generation has a better appreciation for nature and the need to live and work in a way that is harmonious with the natural environment. In my opinion building a traditional high tower that blocks the view of the sky does not add up with the future. However, if the new building attempted to achieve a similar end to something like the Borland headquarters in California (http://www.krjda.com/Sites/BorlandInfo1.html) then I think we are headed in the right direction. I’m a native San Antonio software developer. I remember spending a few nights in downtown Houston several years ago for a concert. A couple of days being around all the concrete and tall buildings made me feel disgusted. I recall driving back into downtown San Antonio with its more humble skyline and charm feeling thankful I called this place home. There’s no need for us to pretend or try to be Austin or Houston or Dallas. We know who we are here in San Antonio and our buildings should reflect our particular strengths not simply conform to what people are used to seeing in the movies about Wall Street and what makes an economically “powerful” city.

    • You got to be kidding, right? We’re bigger than Dallas and way bigger than Austin! It’s time for Downtown S.A. to reflect our large size.

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