Last week, the Austin City Council postponed for the fourth time a crucial vote to allow the redevelopment of the Austin-American Statesman headquarters — yet the developer’s lawyer insists “progress is being made.”
On September 29, the council opted to delay until October 13 a vote on whether to greenlight the planned unit development — or PUD — which would allow developer Endeavor Real Estate Groupto build taller and denser than typically allowed on the 19-acre tract just south of Lady Bird Lake, according to the Austin Business Journal.
At full buildout, 305 South Congress Avenue is set to have 1.5 million square feet of office space, more than 1.6 million square feet of residential space, 220,000 square feet of hotel space and 150,000 square feet of retail space across six towers. The development would also integrate into Austin’s South Central Waterfront Initiative, the city’s long-term vision to bring dense, mixed-use development to the south side of Lady Bird Lake.
A longtime sticking point has been the proportion of affordable housing to be included in the mixed use project. Endeavor has offered 4 percent — or 55 units — of below-market-rate housing, while some council members are demanding 10 percent or even 20 percent.
Endeavor’s attorney, Richard Suttle of Armbrust & Brown PLLC, told the council that a 4 percent commitment would cost the developer $23.2 million, but if that were increased to 10 percent, it would cost about $50 million — and, he said, would render the whole project unprofitable.
But at last Friday’s council meeting, an outside expert the city hired to examine the economics of the project raised the prospect that the ambitious project is already unprofitable.
While arguing that Endeavor could not afford the additional $27 million for 10 percent affordability, Darin Smith, managing principal with Economic and Planning Systems Inc., told the council that, as of 2022, Smith estimated the $2.47 billion cost of the project outweighs the project’s expected $2.16 billion value.
The $318 million funding gap Smith cited is more than twice the $117.5 million that Endeavor had committed to all of the community benefits it has already agreed to — which includes the 4 percent affordable component, $70 million for nearly 4,000 parking spaces, $12 million a hiking trail extension, $1.8 million to subsidize below-market-rate retail space, and $1.7 million for parkland easements.
So even if all of those benefits were scrapped, the project would still cost Endeavor more than $200 million more than it’s worth, according to Smith.
Nonetheless, Endeavor still seems keen to get started on the ostensibly unprofitable project.
“We were very pleased that the City Council deliberated on so many of the issues surrounding the project,” Suttle said after the council voted to punt yet again. “Council members were able to express their interests and the feedback was constructive. And many issues were resolved. It appears progress is being made.”
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— Maddy Sperling