Primera Properties has made an 11th hour offer to sell its 20-story Riverview Towers building at 111 Soledad St. to the City of San Antonio, barely beating the close of a 60-day period to respond to the Weston Urban/Frost Bank public-private proposal.
City officials said the offer came in a letter from Primera received at 3:35 p.m. Friday, just before the 5 p.m. deadline.
The Weston Urban proposal would add the first new Class A office tower to the city’s skyline since the opening of the Weston Centre in 1988, as well as 300 or more residential units and new retail space, and involve a complex transfer of City and Frost Bank properties to Weston Urban. The existing Frost Bank Tower would become City property, with Weston Urban developing a new tower as corporate headquarters for the pioneer San Antonio-based bank.
“It’s really not a competing offer, they are two very different proposals,” said Chuck Brown, Primera’s general partner. “The City currently occupies more than 50% of our building, so we’re just proposing an outright sale of the building. There’s a very good business case to be made for the City to just buy the building outright. The rent alone from other tenants over the next five years would support the bonds to own the building for the next 22 years.”
Riverview Towers is Class B commercial space and 85% leased. Brown said the City leases 116,000 of the building’s 248,000 sq. ft., with law firms and other tenants occupying 90,000 sq. ft. That leaves 42,000 sq. ft. available, Brown suggested, for the City to bring in other employees.
Brown did not disclose Primera’s proposed sale price, but said if the City purchases Riverview Towers it would offset the debt it incurs by saving $1.99 million in annual rent it is now paying, and receiving $1.46 million in annual rent revenue that non-City tenants currently pay. Primera acquired the building in 2003. It is currently valued at $14.5 million on the Bexar County tax rolls.
“This is an alternative for the City to consider, and of course, they could decide to do both deals,” Brown said. “We’d be happy to work together — the City, Weston Urban and us. We’re going to be friendly business people and work together.”
Both Brown and Randy Smith, CEO of Weston urban, spoke highly of one another.
“We did receive a competing proposal on Friday at 3:53 p.m., very last-minute,” said Debbie Racca-Sittre, the City’s assistant director of the Transportation and Capital Improvements Department. “So far, all I’ve done is schedule a meeting with the committee.”
The City’s so-called P3 Committee, which is made up of representatives from the offices of the City Manager, City Attorney, the Finance Department, Department of Center City Development and others will now meet to review Primera’s proposal and decide whether it merits serious consideration or should be rejected. If it does receive committee approval, the next step will include financial analysis, a building appraisal and other due diligence that could take up to 30 days.
“That’s going to take some time to do our due diligence,” Racca-Sittre said. “If the committee rejects the proposal outright, there’s not a lot to do, but if the committee wants to do financial analysis and wants a building appraisal, it’s open ended. The committee could decide to accept both proposals, just one proposal, or neither proposal.”
The City already has expressed serious interest in the Weston Urban-Frost Bank Tower proposal, which was unveiled at a hastily called press conference in the waning days of the administration of Mayor Julián Castro in late June that was attended by Mayor Castro, senior City staff members, City Council members, and representatives of Weston Urban andFrost Bank.
This is San Antonio’s first experience with an unsolicited P3 proposal. The P3 process has only existed since the 2011 Texas Legislature passed a law encouraging public-private partnership development deals as a means to spur urban core redevelopment. City Council passed its own Resolution in 2012 enabling P3 deals in the city, and since then there have been three solicited P3s.
Under the P3 rules, the City posted the Weston Urban/Frost Bank proposal on its website on Aug. 18 at the same time a 60-day period for counter-bids was started. Primera made its offer to sell Riverview Towers just as that time period was about to expire.
(Read more: City Releases Weston Urban-Frost Bank Tower Proposal.)
The Weston-Urban/Frost Bank Tower proposal, if adopted by the City in its entirety, would generate a breathtaking wave of downtown development north of Main Plaza in western downtown.
Here are the key elements of the Weston Urban proposal:
- The City would convey to Weston Urban, the real estate development business owned by Graham Weston, non-executive Chairman of Rackspace, several historic properties for redevelopment, including the Municipal Plaza Building, the Continental Hotel now occupied 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 existing Frost Bank Tower and 732-space Garage to the City and its other downtown properties, including undeveloped land and the Frost Motor Bank, 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 new tower would include a new parking garage. Riverview Towers does not have a parking garage, which could prove to be an impediment in its proposed sale of the building to the City. The lack of Class A office space and parking is often cited as a major hindrance to attracting more companies and professional jobs to the urban core.
“We deal with the downtown parking issue just as people do in every city,” Brown said. “Everyone who works in Riverview Towers has parking. We lease 150 spaces from the Rand and other spaces in multiple other venues. Parking is an issue in downtowns everywhere, but we make it work for everyone just fine.”
For the City, acquisition of the Frost Bank Tower would allow for consolidation of city workers now dispersed in five different buildings, and saving of $3.4 million in annual rental leases. The Weston Urban deal would place 1,100 city workers in three buildings: historic City Hall, Plaza de Armas, and the Frost Tower.
City officials have said that any P3 proposal involving its properties will have to be revenue neutral for the City, meaning it does not want to contribute cash to the deal.
Correction: An earlier version of this story stated that the Weston Urban proposal was the first P3 in San Antonio. In fact, it is the first unsolicited P3. There have been three solicited P3s in the city.
*Featured/top image: The 20-story Riverview Towers at 111 Soledad St. is owned by Primera Partners. Photo by Iris Dimmick.