$29.5M appraisal backs claims city eyed McKalla for commercial use
Thursday, June 14, 2018 by Chad Swiatecki
A 2016 appraisal of the city-owned property commonly known as McKalla Place found that it had a market value of $29.5 million if used for “commercial development, including retail, office and multifamily development.”
The appraisal, performed by Paul Hornsby & Co. of Austin, was requested by the city’s Office of Real Estate Services and was a product of research by city staff into how the long-idle former industrial parcel of 24 acres could be put to best use. It also recommended a yearly lease rate starting at $1.9 million with 2 percent annual increases if the city wished to retain ownership in a commercial development agreement.
That effort was started after the Capella Capital Partners development company purchased an adjacent 3-acre parcel and inquired about possibly submitting a development proposal for the entire property. That process appears to have stalled in mid-2017, though a very preliminary request for proposal document for the property was created, according to the city’s Public Information Office.
McKalla Place was selected by city staff earlier this year as the most suitable piece of city land for construction of a 20,000-seat stadium that would be used by a Major League Soccer franchise whose owners are attempting to relocate from Columbus, Ohio. The team’s proposal would have its owners – Precourt Sports Ventures – finance construction of the roughly $200 million stadium, which would then be turned over to the city, with the city receiving a $1 annual lease payment from the team for use of the land.
“It got to the point where we were told an RFP was being worked on, and it was one of those ‘hurry up and wait’ situations where things kind of lost steam,” Scott Moxham, chief financial officer for Capella, told the Austin Monitor. “When he was still city manager, Marc Ott directed Lauraine Rizer (former officer of Real Estate Services) to look into a ground lease, and they said they could do 50 years, which isn’t really attractive for any developer. When we started talking about a 99-year lease or a fee simple sale, we were always understanding that it would go out to bid for proposal and we’d throw our hats in the ring.”
Moxham said Capella received a copy of the Hornsby appraisal during its talks with the city. He said he and his partners viewed the appraised value as a fair price based on comparable sales and developments in the Austin area at the time. The appraisal also finds the land has a value of just over $9 million in its current unimproved state.
Capella is one of two development companies that recently presented its plans to build mixed-use projects at McKalla Place. The Capella development would be focused around office space and residential units, approximately 25 percent of which would be at affordable rent levels. The other concept is from a partnership between Austin developers John Chen and Marcus Whitfield, and it would be anchored by a grocery store and include artist and creative spaces in addition to residential use.
Chen said the appraisal’s discovery brings up questions about the city’s recent evaluation of McKalla’s usefulness as a potential soccer stadium location. Last week Chen’s group offered the city $22.5 million to buy the property outright, or to lease it for $2.2 million per year.
“We only learned at a recent community meeting that the City’s $29.5 million appraisal of McKalla Place might exist, but it was never disclosed in any public report and was never provided in response to any open records request,” he said in an email to the Monitor. “The appraisal was only released to an undisclosed party after our offer to purchase McKalla Place for $22.5 million cash. The fact that the City Manager’s report on McKalla Place stated that the property’s value was only $9 million – not the actual $29.5 million – calls into question the credibility of the entire report, and especially the economic impact report by the City’s outside consultant, who appears to be a pro-stadium industry player. Our city’s taxpayers deserve better, and we believe that our fellow Austinites deserve a fair, equal, and transparent process before our Council Members decide to just give away public land to a private party.”
At Tuesday’s work session, City Council members expressed a variety of views on the stadium issue, with Council Member Leslie Pool, whose district includes McKalla Place, trying to convince other members to pull away from any negotiations for a soccer stadium. Most other members were of the viewpoint that the city should seek concessions from Precourt that could make a stadium and the team’s presence a community asset.
Pool has said she plans to introduce a resolution for the June 28 Council meeting that, if approved, would open McKalla Place up to an RFP process.
Representatives from Precourt Sports Ventures have said they are willing to have the stadium proposal weighed against other development concepts, but they are sticking to a late-June deadline for reaching an agreement with the city so they can move forward with relocating the team in time for the 2019 season.
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Photo by Gordon Flood (originally posted to Flickr as Man Utd V Arsenal) [CC BY 2.0], via Wikimedia Commons.
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