Hotel, Office, Retail Development Coming to Hemisfair District

City Council unanimously approved a public-private partnership Thursday that will allow for a $200 million development on five acres at Hemisfair.

A Zachry Hospitality affiliate company will sublease the land from Hemisfair Park Area Redevelopment Corporation (HPARC) and build a hotel, office building, parking, and retail space on the northwest corner of what will become the nine-acre Civic Park. City Council also authorized a tax increment reinvestment zone for the Hemisfair district that will allow the nonprofit government corporation to collect increased taxes in the area for programming and maintenance for the second largest urban park in San Antonio.

“Additional revenues that come to Hemisfair will stay in Hemisfair,” said HPARC Director of Real Estate Omar Gonzalez, meeting the goal of making the area self-sustaining so it doesn’t become a burden to taxpayers.

“Improving downtown is part of that big picture to address workforce development and housing opportunities,” said Mayor Ivy Taylor before Council’s vote. “In order for us to be a competitive city, we have to have a competitive downtown and the Hemisfair project is an amazing opportunity for us to continue the momentum we have seen in our city.”

The NRP Group, a multifamily housing developer, also has plans for the park’s northwest corner, where it will build a 380-unit apartment building. According to an agreement with HPARC, 10% of those units will be relatively affordable, workforce housing. The other 163 residential-unit project in the southeast quadrant by AREA Real Estate will have 50% workforce housing.

“This is a great opportunity for affordable housing,” said Councilwoman Rebecca Viagran (D3). “This will be a place where people literally work and play in the area – affordable or market [price].”

Lease payments from Zachry and NRP Group as well as other tenants in the park will likely increase over time and will go directly towards Hemisfair staffing and programming. Zachry will pay $1.92 million for the first two years of the contract’s 50-year term. In the third year, that base payment will drop to $1.45 million, but Hemisfair will take an additional cut of revenues expected to total more than $500,000 and increase as the park’s popularity grows and retail becomes more established.

The five-to-six-story office building increases Zachry’s initial overall budget from $165 million to $200 million. The new addition is an answer to the increasing demand for more downtown office space, Hemisfair officials said.

The building will more than double the amount of office space in the entire project, bringing it to between 60,000-120,000 sq. ft. About 60,000 sq. ft. of office space had been included within the 200-room boutique hotel.

There will be approximately 50,000-70,000 sq. ft. of ground-floor retail space for restaurant and small-shop tenants.

“We will have local shops and restaurants built for locals,” Gonzalez said. “We designed this around what locals want, and this will be a place where they can stay all day. They can have breakfast, lunch, and dinner, go on dates, and play all day.”

While HPARC officials can make exceptions for chains they would like to see move in, Gonzalez told City Council during a presentation Wednesday, the focus will be on businesses that are “puro San Antonio.”

Many residents who spoke at City Council Thursday included small business owners, downtown residents, and local leaders such as Centro San Antonio CEO Pat Digiovanni, San Antonio Hispanic Chamber of Commerce CEO Ramiro Cavazos, and San Antonio Chamber of Commerce President Richard Perez.

The resounding sentiment was that Hemisfair has been largely vacant and underutilized since the 1968 World’s Fair and that the public-private partnership will bring more investment downtown, thereby bolstering economic development for San Antonio.

“This is possible because of bold vision and thorough planning under three administrations – Phil Hardberger, Julian Castro, and Ivy Taylor,” DiGiovanni said “… It’s also thanks to the private stakeholders willing to invest in San Antonio. This is the next story in turning around downtown.”

San Antonio Area Tourism Council Board Chair Tim Morrow and San Antonio Hotel and Lodging Association Executive Director Liza Barratachea said they welcome the investment, which will only improve San Antonio’s reputation as a destination city.

The City will pay up to $18 million for 600 public parking spaces that will be located underneath the buildings as part of an 800-space plan. Zachry will license the remaining 200 spots. The public lots will provide badly needed parking for the park itself and for visitors to the Alamo, La Villita, convention center, and other downtown destinations.

“This is the first major development since 1968,” Morrow said. “The new spaces, boutique hotel, garage, and gathering spaces will be welcomed by everyone.”

As part of the public-private partnership, Zachry has committed to pay entry-level employees at the hotel $11.80 per hour and include several benefits for full-time and part-time employees.

“I don’t think $11.80 is enough. It’s still poverty,” said Dana Schneider, organizing director for the Unite Here labor union. Before taxes the salary of someone working 40 hours per week at $11.80 hourly rate, is $24,544. The poverty level for a one-person household in San Antonio was $11,670 in 2014 and a four-person household was $23,850. The median household income for San Antonio was $46,744 in 2011-2015, according to U.S. census data. “It’s the developer that needs to commit to $11.80 an hour, not the affiliates. As a city – especially when the City is a landlord itself – we should strive for better.”

The boutique hotel was the most controversial part of the plan for those opposing the agreement. Many members of Unite Here and others were concerned that workers would not get appropriate compensation from service fees from hotel banquets and that housekeepers would be given more rooms to clean than they can handle.

If San Antonio is going have a city hotel in premier city park, Unite Here members argued, it should lead the way and be a good example for other hotels when it comes to wages and benefits.

“This highlights real needs in the community of workers who aren’t treated fairly,” said Zachry Corp. CEO David Zachary, in response to citizens’ concerns. “In our service charge [for banquets] we give 65% of that to [the worker] and it’s on our contract. We are doing our best. We care about our employees deeply.”

Councilman Ron Nirenberg (D8), Councilwoman Shirley Gonzales (D5), and Councilman Rey Saldaña (D4) expressed concern about the living-wage parameters in public-private partnership (P3) agreements and called for better scrutiny in the future.

“We need to come back and look at guidelines to anticipate in the future, have policy discussion about P3s, and have parameters around living wages for union groups, representatives, et cetera,” Saldaña said. “Let’s re-look at P3 guidelines.”

Saldaña acknowledged that San Antonio has unique challenges when it comes to funding to invest in large-scale projects, which is why a public-private partnership is a way to get things done.

“There is a lot more good in this deal than there is bad,” said Councilman Cris Medina (D7). “Hemisfair ’68 put the city on the map and we want Hemisfair to be recognized for more generations to come.”

Councilman Roberto Treviño (D1) said the urban design and pedestrian thoroughfares that connect to the park are incredibly important for connectivity as it provides “porosity” and makes the park easy to get to from multiple places.

Planned residential development will restore the pre-1968 population density to the area, activate the park and help sustain it financially. It also will add to the current 5,500 residential spaces in a downtown that already has more than 14,000 hotel rooms.

In 2013, state legislation allowed the City to re-designate 19.2 acres as parkland as part of the park’s master plan. That allowed for the partial demolition of the convention center, which nearly tripled the amount of usable park space. There are 17 acres of developable parcels in the park, Gonzalez said.

According to a community impact report presented by Hemisfair in September, nearly 500,000 people visited Yanaguana Garden in its first year, making it the second most-frequented park per acre in Texas after Klyde Warren Park in Dallas. This year, officials said, more than 500 events are planned for Yanaguana.

Once the three-phase Hemisfair district is complete, officials estimate a total economic impact of $880 million from construction, $400 million annual impact to the local economy, and $13 million in new tax dollars generated annually.

Civic Park is slated to receive $21 million from the 2017 Municipal Bond, $18 million from tenant leases, and $20 million in other funding sources such as private donations. The great lawn should be completed in time for the 2018 Tricentennial celebration. Construction around the park will pause during much of that year.

All projects in the northwest corner are expected to be complete by 2021.

Designs for the buildings will require approval from the Historic and Design Review Commission. Zachry told City Council during its meeting Wednesday that his company is committed to continuing the public process surrounding how the structures and uses will interact with the park.