Aspen Heights out of downtown Austin deal

Austin officials are taking matters into their own hands to redevelop an old hospital downtown after its deal with Aspen Heights Partners expired.

Austin City Council will discuss the future of the city-owned HealthSouth rehabilitation hospital  site at 1215 Red River and 606 East 12th streets during a July 20 meeting, and council members could vote on a resolution to nail down a development plan, Austin Business Journal reported. 

The proposed resolution would give city staffers roughly 60 days to create a “comprehensive report” regarding the feasibility of the downtown project. The city would need to lock down the next steps, possibly letting the Austin Economic Development Corp. or Austin Housing Finance Corp. lead the redevelopment.

Aspen Heights, an Austin-based firm led by Greg Henry, was poised to take over the site, but its negotiating agreement with the city expired at the end of June, and officials were ready to move on.

Aspen’s proposal included two apartment towers totalling 921 units, with about 25 percent of them reserved as low-income housing. The affordable units were later reduced to 7 percent as market conditions worsened. 

Aspen was trying to keep the project financially feasible, but its proposal was hurt by the sudden increase in projected costs, according to Hexah CEO Fayez Kazi, whose firm worked with Aspen Heights on the HealthSouth financial model.

“Changing financial markets pushed the strained model over the edge into non-viability,”  Kazi told the outlet. “Aspen Heights tried to make it work under much worse capital markets than existed during the original proposal, but ultimately not in a way or a timeframe that worked for the city.”

—Quinn Donoghue 

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