Just about any night of the week, if you follow the scent of cigarette smoke and the sound of bad karaoke on South Congress Avenue, you’ll end up at Ego’s Bar. It’s a grungy neighborhood dive that appears to be nearing the end. Developers have eyed it for years, as it is one of the few remaining development sites in Austin’s red-hot South Congress neighborhood.
Ego’s is a development diamond-in-the-rough, and developers have fought over it for years. But finally, one appears ready to actually redevelop it.
Earlier this week, the Jeff Blau-led Related Companies revealed preliminary plans to build a two-tower project at its assemblage that includes the Ego’s property at the intersection of South Congress Avenue and West Riverside Drive. The development is the culmination of years of scrapping for the property by some of Austin’s highest-profile developers.
In all, Related plans around 800 apartments, 200,000 square feet of office space, a 225-key hotel and 150,000 square feet of retail. It’s an ambitious move at a time of great uncertainty in the city’s office and residential markets, and the realization of years of preparation by Related to build a colossal property portfolio south of Lady Bird Lake.
Primetime
While Ego’s is the most colorful piece of the assemblage, Related’s project will span at least four properties, with potential to add a fifth down the line. At the heart of the site are two aging office buildings and a 115-unit apartment complex. The offices, 510 South Congress Avenue and 105 West Riverside Drive, total 70,200 square feet.
They are Class B buildings in Class A locations. The shores of Lady Bird Lake and downtown Austin sit just a couple blocks north. To the south, there’s South Congress’ shopping district, a high-end stretch of shops and businesses including Soho House, Equinox and Hermes.
The six-acre spread is also within the city’s South Central Waterfront District, a 118-acre area in which the city hopes to spur some serious building with goodies like a density bonus program and supercharged 24-to-1 floor-area ratio.
The assemblage includes 407 1/2 Haywood Avenue, and may grow to include a neighboring gas station, according to the Austin Business Journal.
A World Class mess
Like many of Austin’s greatest foreclosure battles, the fight for the Ego’s development site starts with Nate Paul.
Paul, the founder of World Class Holdings, bought 500 and 510 Congress and 105 West Riverside Drive from Webster Interests in Dec. 2017. At the time, he was on a hot streak, amassing one of the city’s biggest property portfolios and promising big redevelopments. None of those came to fruition, though.
The next year, Paul began defaulting on hundreds of millions of dollars in loans. In 2019, the FBI raided World Class’s offices and Paul’s home, scaring off many lenders and leading to a barrelful of lawsuits and foreclosures.
Last June, a grand jury indicted Paul on eight counts of lying to financial institutions. One such alleged lie occurred at 105 West Riverside Drive.
Around the same time Paul was acquiring the properties that now make up the heart of Related’s development site, he allegedly sent fraudulent bank account information to LoanCore Capital in order to score a $33.6 million loan for financing related to his acquisition of the old office building.
According to prosecutors, Paul sent LoanCore an account summary purporting to have $18.57 million, while the account only actually held around $12,000.
In Oct. 2020, the lender sued Paul for allegedly defaulting on the properties’ debt. Soon after, he put the ownership LLC into bankruptcy. But in August 2021, Paul refinanced the properties with a $42 million loan, according to a post from Traded.
Nonetheless, the project went to foreclosure, even as Paul mounted an eleventh-hour bid to sell it before auction.
Two bids appeared to beat out Related’s offer of $65 million dollars. First, there was Paul himself, who bid $95.1 million through a shell company, Rising Tide Investment. He won, but backed out of the deal in Aug. 2022.
Another entity, whose true identity is unknown, bid $95 million for the properties. However, it tried to push the closing back, and as a result, the bankruptcy trustee expressed skepticism about the acquisition. In Sept. 2022, he approved Related’s bid, which gave the New York developer the prized parcels at a 30 percent discount.
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A bevy of buildings
While the properties are some of Related’s most significant holdings in Austin, the company has bought up a string of development sites south of Lady Bird Lake. Other projects include One Lady Bird Lake, which has become a symbol for the city’s larger office woes. Initially, Related planned to develop a 15-story, high-end office building at the site, which is currently a hotel parking lot on the water.
In filings from July, the company revealed that it no longer planned to build offices on the site. Instead, it proposed a 293-unit residential project with a mix of condominiums and rentals.
Austin’s downtown residential market faces its own issues, with an unprecedented burst of supply coming online in the next 18 months, but if any developer has the capital to wait out the short-term bumps and play the long game, it’s Related.
The firm also plans a mass-timber office project at 901 South Congress Avenue. Originally, it was going to be five stories and 107,000 square feet, but in April, the company filed plans showing the building rising seven stories and spanning 260,000 square feet.
Large-scale development requires patience. While residential and office developers slow down in Austin, at the Ego’s karaoke bar site, Related is singing a different tune.