East Riverside Drive is about to take the next leap forward in its evolution, with the imminent opening of a new wave of development that will add more than 800 upscale apartments to the area, including the first units in Grayco Partners’ South Shore project.
Grayco’s $200 million development, off East Riverside and Arena Drive just east of downtown, will welcome its first tenants in August. Construction is expected to wrap up in early 2014 on all 506 units that make up the first three phases.
The project by Houston-based Grayco joins several others that are open or under construction in an area that is gradually gentrifying, as new higher-end housing replaces hundreds of older apartments with lower rents.
West of Grayco’s project, the four towers in the Riverview high-rise apartment project at Interstate 35 and East Riverside will open in July, bringing 302 units to market. A stone’s throw from Grayco’s project, Austin-based Cypress Real Estate Advisors is planning another phase of its newly opened Lakeshore Pearl apartment project that will bring another 295 units when it debuts in late 2014.
The new housing is changing the character of a corridor that serves as a main entry point into downtown from Austin-Bergstrom International Airport. The city recently approved a new zoning plan for the stretch of East Riverside that runs from Interstate 35 to Texas 71. The revised zoning will govern the type and density of residential and commercial development that occurs along the busy corridor, where the city hopes voters eventually will approve light rail.
City planners have said they hope to keep a mix of housing for different income levels in the Riverside area as it gentrifies, though some question to what extent that will be possible.
Erica Leak, a city planner heading up the East Riverside plan, said the new projects in the area “have been designed to better accommodate pedestrians with wider sidewalks, street trees, and buildings that are located near sidewalks” instead of behind seas of asphalt parking lots.
Jeff Gray, president of Grayco Partners, said he thinks the South Shore project will be a catalyst that will spur development farther east on Riverside, continuing its inevitable transformation.
“The east side has a bright future,” Gray said, noting that the addition of rail “could have a profound impact.”
Grayco’s South Shore project meshes with the city’s vision to transform East Riverside — an area dotted with strip malls, drive-throughs and decades-old housing — into a more pedestrian-friendly area with a better planned mix of commercial and residential uses.
With its units stacked above ground-floor retail, the South Shore project has the feel of a distinct village or mini-city. The three buildings nearing completion are four, five and six stories, all with brick and stone finishes.
A wide boulevard, dotted with lampposts, runs down the middle of the project. The development will have yet-to-be announced restaurants and shops on the ground floor, along with a 5,000-square-foot fitness club.
In addition, Grayco this fall will start building a retail center on the south side of the project. Walgreens, Starbucks and AT&T will be among the retailers in the 42,000-square-foot center. Subsequent phases of the project will bring about 700 more residences, for a total of 1,200 units in six buildings, Gray said.
To date, Grayco has invested “well over $100 million” of the project’s estimated $200 million total cost, Gray said.
“I don’t know another project of that scale and scope in Austin by a single developer,” Gray said. “It will have a catapulting effect further to the east.”
For Gray, South Shore’s debut has required the patience of a developer who plans to be in the market for the long haul.
The project’s origins date to late 2006, when Grayco purchased the initial parcel for its first apartment community in Austin. Grayco bought the last parcel in 2011.
The project faced delays due to everything from the economic downturn to zoning issues and a dispute over the height initially proposed for some of the buildings — up to 120 feet.
Gray said his daughter Lauren, who will start at the University of Texas this fall, was a sixth-grader when the project began. Last year, he said, she asked, “Daddy, is it going to be finished by the time I graduate?”
Building up, pricing out?
Grayco’s project is among several upscale apartment projects rising in the area that are replacing older units whose tenants have been forced to find housing elsewhere.
One of the newly opened projects, Lakeshore Pearl, has topped the leasing expectations of the developer, Austin-based Cypress Real Estate Advisors. With 230 units, the project is almost fully leased.
Rents average $1,200 a month for one-bedroom units, $1,800 a month for two bedrooms and $2,100 a month for three bedrooms, said Shelley Watson, managing director with Greystar Real Estate Partners, which is managing and leasing the complex.
Just north of Lakeshore Pearl, Cypress is preparing to break ground in October on a new phase with 295 units that is expected to open in late 2014.
Grayco tore down 682 aging units to make way for its project. It will charge rents ranging from about $1,200 a month for a unit with 600 square feet to $3,600 a month for a unit with 1,800 square feet.
Housing advocates, and some of the tenants themselves whom the American-Statesman has interviewed both recently and in the past few years, say the new rents are out of reach for the displaced renters. The median family income in the area, which is about 64 percent Hispanic, is $29,442, according to U.S. Census Bureau figures.
Lynn Ross, executive director of the Terwilliger Center for Housing at the Washington-based Urban Land Institute, said Austin is among many cities that have faced similar questions from gentrification.
“It’s the classic clash between the old and the new,” Ross said. “It’s a tough challenge, and there’s no magic bullet.”
A number of cities have put policies and programs in place to address the issue, she said, with varying degrees of success.
“You don’t want to stagnate,” Ross said. “Change is going to come either way. It’s about being proactive or reactive, and it’s a lot easier to be proactive.”
In Grayco’s case, the city made a trade-off. It allowed Grayco to build a project bigger and taller than the zoning allowed in exchange for providing relocation help for the existing tenants.
Grayco ended up paying $90,000 — $485 per household — along with $20,000 to local real estate firm Casa Blanca Realty to help tenants find other housing. Blanca Garcia, owner of Casa Blanca Realty, said most of the tenants moved to other complexes in the area.
Garcia said the nonprofit Foundation Communities and other agencies also assisted. And the city helped by waiving the transfer fees for electric utilities, which she said was “a huge help.”
Garcia said that in recent years, Austin has become a much more costly city to live in. She said a moving stipend of $900, versus the $485 per household the residents displaced by Grayco’s project were paid, would have been a more realistic amount.
“What I learned is that $485 in the city of Austin is not enough for anyone to move, because Austin is really expensive,” she said.
Gray, South Shore’s developer, said the apartments Grayco razed were built in the late 1960s and early 1970s, when UT was absorbing the front end of the baby boom bulge. The original quality of many of those apartments, he said, was “pretty shabby.”
“If this was (the city’s) answer to affordable housing, it wasn’t a very good solution,” Gray said. “It’s almost predictable what happened.”
While planning the South Shore project, Gray said, he encountered a mentality by “a few very vocal opponents” to “just leave what’s there there.”
“I found it hard to rationalize that position,” Gray said. “If cities don’t reinvest in infrastructure, they become Cleveland or Detroit.”