Marshall Davidson Jr. and his team at KMD Studley, a commercial real estate brokerage firm, have assembled some of the downtown River Walk's last vacant properties and adjacent parcels and are shopping them to a national audience of developers.
They've bundled a portfolio of six previously unavailable properties controlled by five different owners to create the kind of ground-up development opportunity that they say has been missing in San Antonio's downtown revitalization efforts. There are no prices attached to the parcels, and Davidson said the owners are open-minded.
Other developers have said in the past that owners of downtown parcels have unrealistic expectations of their value, and their unwillingness to sell at market rate has impeded downtown redevelopment. The KMD Studley package should prove to be a good test of what buyers are willing to pay to develop in the most affordable downtown of any major Texas city.
Most of the buildings are vacant or underutilized, though some are occupied by tenants with multi-year leases. The City's passage in June of a Vacant Building Ordinance that goes into effect on Jan. 1, 2015 could serve as a catalyst for absentee property owners to sell now rather than face costly building upgrades or fines.
The KMD Studley team sent out an email to the real estate and development community earlier this month with a provocative subject line: "Six River Walk Blocks, Six Acres, in San Antonio's Business, Arts & Entertainment District."
The properties are within easy walking distance of the Tobin Center for the Performing Arts to the east and the Southwest School of Art to the west, the Central Library to the north and the Central Business District's Class A office towers, Bank of America Plaza, the Weston Centre and One Riverwalk Place, to the south.
"The most incredible thing is they are six River Walk blocks, totaling six acres in downtown San Antonio, in the same stretch of river, and all of it looks like it can be developed from the ground up. This includes a site tested for a 500,000 sq. ft. headquarters tower and parking structures," Davidson said. "Now you have six blocks on the river where you can build brand new, efficient and modern buildings and park them. I don't know of another city in the U.S. where you can do this on this scale."
Davidson was referring to site testing that was conducted in 2006 on behalf of AT&T Corp. when the Fortune 500 company was still based in San Antonio and executives were considering construction of an office tower downtown to serve as a new corporate headquarters. The company that moved here from St. Louis in 1993 decided instead to relocate to Dallas in 2008.
National developers, Davidson said, will take a closer look when they learn that AT&T seriously vetted the site for its own use.
The opening of the Tobin Center, the evolution of the former Southwest Crafts Center into the accredited, four-year Southwest School of Art, and the proximity of Artpace and the Central Library, Davidson said, could serve as anchor institutions in an emerging arts and entertainment district.
The portfolio includes the downtown's most-cited example of a vacant, blighted building, the 10-story Hedrick Building, which has sat unused for more than two decades on 1.4 acres of property on the northwest corner of North St. Mary's and East Martin Streets. The prime riverfront property includes parking and a smaller attached building.
That parcel could be protected by the City's Historic Design and Review Commission if a buyer is found who wants to demolish it, though Davidson maintains that all appropriate procedures will be followed with the City if such a situation arises.
"This is an exciting opportunity to build new product downtown, and there is an absence of that here in my hometown," Davidson said, who hopes all the buildings in the portfolio can be cleared to make way for new construction. "Companies considering a relocation to downtown San Antonio fly in on their planes, look at what little existing product there is available, then get back on their planes and fly to Dallas. We can change that."
KMD Studley's move comes on the heels of Weston Urban's ambitious proposal to build downtown San Antonio's first new office tower in more than 25 years to serve as a new corporate headquarters for Frost Bank, while also acquiring a number of other properties from the bank and the City of San Antonio in a complex swap. That proposal and a competing proposal from Primera Properties are under review by the City.
The Weston Urban proposal and KMD Studley's marketing effort, if successful, could set off multi-block redevelopment efforts downtown that would attract more jobs, create more residential units and expand the tax base.
Parcel #1 (see map above) is the Paramount Plaza block with small leased buildings and a large surface parking lot. Parcel #2 is another large surface parking lot immeadiately south of the Central Library's parking garage. Davidson said a national developer's architect previously test fit an office tower on #2 with a structured parking lot on #1.
Parcel #3 also has small buildings on it with tenants, while parcel #4, across the river is primarily a surface parking lot including the Hedrick Building and the smaller, possibly historic building. Davidson said the same developer’s architects previously test fit #3 for high-rise residential, while #4 was envisioned for hospitality, entertainment, and retail.
Davidson said the availability of parcel #6, a square block of parking and small buildings with no known historical value, means a residential tower could be built on the former WOAI-TV site on the river across from the Hotel Havana and Ocho. A convenient parking structure could be constructed across the street, one that might have ground floor space for use by the Southwest School of Art, the owner of property #5.
"We understand that site #2 is the only block in downtown San Antonio on the river with no height restriction, which has to do with the City's shade rule for the river; luckily, this one happens to be on the correct side of the river relative to the sun. Blocks #2, #3, and #4 also can be served by walk-up pedestrian traffic on the River Walk as we understand the floodplain is at river level in this section," Davidson said.
"The other key factor here is the proximity of parking to the headquarters site as well as the residential site," Davidson added. "We understand construction costs have escalated 15% or more, so building on top of structured parking has become very expensive. We are basically removing an obstacle by separating the parking block from the development block. We are taking the 'no' out of the venture. A developer could build sky bridges over Soledad and N. St. Mary's Streets for people moving from the buildings to the parking structures and back.
"For years it has been harder rather than easier to get bigger national developers to come to downtown San Antonio, because there was often not enough there to interest them," Davidson said. "This could change that. National developers have access to the institutional capital that drives these kinds of big developments and apparently institutional capital is here for a variety of product types."
Other members of the KMD Studley team in San Antonio include senior advisor Marshall Davidson Sr. and advisors Tate Hinkelman and Travis Wright.
"It takes a strong team to make something like this work," Davidson said. "It's incredible that we have five different ownership groups that would like to see something terrific happen. They all realize the sum is greater than the individual properties and the timing is right."
*Featured/top image: *Featured/top image: Despite what the advertisement on the Hedrick Building displays, there are six properties included in the KMD Studley River Walk commercial real estate package. Photo by Iris Dimmick.
This story was originally published on Thursday, Nov. 13, 2014.