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Developer: $22.5M offer intended to open McKalla Place for alternative proposals

Monday, June 11, 2018 by Chad Swiatecki

A local development partnership has offered $22.5 million to purchase the North Austin property that is currently being considered as the site for a professional soccer stadium.

The offer letter from developers John Chen and Marcus Whitfield was submitted on Friday to City Manager Spencer Cronk and Alex Gale, assistant director of the city’s Office of Real Estate Services. It includes offers to purchase the property for cash outright or enter into an 80-year lease for the roughly 24-acre parcel for $2.2 million per year, with an annual increase of 1.5 percent.

The offer for the parcel known as McKalla Place includes a general description of their plans for the property, which mirror those given at a Tuesday meeting of the Gracywoods Neighborhood Association: a mixed-use development anchored by a grocery store with residential including 12 percent of units with three or more bedrooms, office and live/work spaces, parks, and additional retail use.

A second proposal from Capella Capital Partners was more detailed: 800,000 square feet of office space, 120,000 square feet of retail, 1,500 residential units with approximately 25 percent set at affordable rates, flex space for local creatives, 6 acres of park space and a relocated rail line.

At that meeting it was also disclosed that city staff had spent much of 2016 and into 2017 working with Capella on the possible redevelopment of McKalla Place to address affordable housing needs. An RFP document was prepared for the site, but that effort lost momentum following the departure of former City Manager Marc Ott.

Chen told the Austin Monitor his group’s purchase offer is intended to provoke a formal request for proposal process for the property in the midst of a push for Precourt Sports Ventures – owners of the Columbus Crew SC – to come to an agreement before July on a deal to build a stadium there.

“We felt we should make an offer to let the city and all those involved know that the property does have value, and our number is informed by real diligence,” he said. “We know that realistically (the offer) would only be the beginning to spark discussion on the best use of the site.”

PSV’s proposal would have the group lease McKalla Place for $1 a year, with the privately funded 20,000-seat stadium given to the city upon its completion. That move would remove a property tax burden from the team, which projects the Austin area would see $326 million in economic benefits if the relocation takes place.

The third-party analysis completed for the city by Brailsford & Dunlavey found more diffuse economic benefits: $54.2 million in construction activity, $25.6 million in recurring impacts, $11.4 million in tax revenue over a 20-year lease, and $5.4 million in tax revenue for the Capital Metropolitan Transportation Authority.

City Council Member Leslie Pool, whose District 7 includes the McKalla Place property, has said she plans to introduce a resolution for the June 28 Council meeting that would open an RFP process that would have the city receive development proposals for the site from any interested business partnerships.

Pool has also called into question the city’s recent property valuation of McKalla place at $8 million for soccer use compared to the $29.5 million estimated value that Capella found in its previous analysis of the site.

Chen said he and Whitfield will need access to all the data typically provided in a municipal RFP process before they can determine square footage and other details for their proposal. He said that information will also let them recruit potential partners to the project.

“Marcus and his family have a strong history of grocery-anchored centers, and this is an excellent location for that, but figuring out everything else involves things like getting soil samples and other information,” he said. “We can’t do anything much more than back-of-the-envelope calculations, so we want a chance to do the full diligence that comes with an RFP process.”

Council Member Ora Houston said Council’s recent focus on CodeNEXT and preparation for next year’s budget have left her with little time to evaluate the PSV proposal.

“There’s no time to review anything or ask questions, and I heard (Chen and Whitfield) put an offer, but there’s so much out there we have to think about,” she said. “It’s all about property taxes, do we put a stadium there or put a mixed-use project there that would give more property taxes? It’s just a lot to try to digest in a short amount of time.”

Council Member Alison Alter cast doubt on the urgency attached to PSV’s late-June deadline and said she wants to see more proposals for how to use McKalla Place.

“I don’t see how we can make a decision that is rational and fiscally responsible by the end of June,” she said. “We need to create a process where we can see the different options on the table. We can have a short timetable for that. I think the developers who have been working on ideas are ready to move forward with basic proposals, and we need to see what the alternative proposals are. I’m not against soccer, but we need to look at it responsibly.”

Map via the city of Austin.

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