The developers of the high-profile Seaholm project in downtown Austin are seeking a buyer for the hub of office, retail and restaurant space — a move that has reawakened debate over what the public benefit has been from the redevelopment project.
The commercial space on the 7.8-acre mixed-use site is being marketed by real estate brokerage CBRE. The sale would include a 99-year lease on the 100,000-plus square feet of office space in the renovated 1950s power plant building.
A potential sale of the nearly completed project has sparked criticism from some observers who say that what was built doesn’t live up to the community’s desire — and a former Austin City Council’s vision — for a significant civic use for the former power plant building.
The city, critics say, gave away too much for too little public benefit at the landmark site.
“I think the city gave away the crown jewels,” said Paul Robbins, a longtime Austin environmentalist, referring to Seaholm and other former city-owned properties nearby. “We gave away most of that land to private development and didn’t get a whole lot in return.”
The developer and city officials dispute that, saying Seaholm’s transformation is a success.
“We’re incredibly proud of the way we’ve redeveloped the entire site, and in particular the Seaholm Power Plant,” said John Rosato, lead developer for the project. “It’s been restored and redeveloped in a way that honors the past while ensuring its future.
Greg Kiloh, the city’s project manager for Seaholm, said the project achieved its main goal: to preserve the structure, which is on the National Register of Historic Places.
“That was the purpose of the project,” Kiloh said. “It wasn’t to make a lot of money. It was an expensive historical preservation project that used economic development (financing mechanisms) as a means of doing the project.”
The former Seaholm turbine building is occupied by Athenahealth, a medical software firm, and Umbel, a software firm. Other office and retail space, in a separate building that also is part of the sale, is occupied by such tenants as Under Armour and Trader Joe’s.
Also for sale is the office and retail space on the first two floors of the new 30-story Seaholm Residences condo tower.
The city would have to consent to any sale of the Seaholm project, per its agreement with the developer, Kiloh said.
In 2005, the city selected the Seaholm Power LLC development team to transform the site into a mixed-use development that would include public and cultural uses. City documents in May 2012 estimated the overall redevelopment project’s cost at $136 million.
Seaholm’s transformation was part of the city’s plans for an integrated redevelopment of all the city-owned land along Lady Bird Lake, which in the Seaholm area included a “desolate swath of surface parking lots and city-owned industrial infrastructure,” said Brewster McCracken, a City Council member from 2003 to 2009.
Now, there’s a thriving retail district nearby along Second Street, a new central library and a mixed-use development underway at the former Thomas C. Green Water Treatment Plant east of Seaholm.
“Government-owned land has been transformed into billions of dollars of new tax base,” McCracken said. “The sales proceeds of these properties have added significant sums to the community’s affordable housing trust fund. Restoring the Seaholm power plant and converting it from an abandoned power plant to a place people could occupy was complex, hugely expensive and financially risky for the developer. The easiest and most profitable thing to have done with the power plant building was to tear it down.”
With the city’s consent, the developer has the right to sell its interest in Seaholm one year after all the space in the power plant building and office building are 75 percent leased and occupied — criteria that Kiloh said the project meets.
At Seaholm, the developer has a 99-year lease on the former turbine building, paying $1 a year. The developer paid the city just over $2 million for the parcel where the condo tower sits, and paid $915,000 to lease the tract with the low-rise building. Once the leasing and occupation targets are met, the developer can transfer the lease into ownership.
“We believe those criteria have been satisfied, but the transfer process has not been initiated,” Kiloh said.
A sale of Seaholm would trigger a repayment of some of the city incentives the project received, with the amount to be based on the developers’ overall return on the project, Kiloh said.
The city has paid $13.3 million of the total $17.7 million in incentives the project was awarded, Kiloh said. The incentives included reimbursed development fees, money for street and utility infrastructure and partial costs associated with renovating the power plant building and building an outdoor public plaza on the site, Kiloh said.
If the development team makes less than a 13 percent profit on the sale, it wouldn’t have to repay any city incentives, Kiloh said. If the profit is between 13 percent and 15 percent, the city gets 25 percent and the developer nets 75 percent. If the profit exceeds 15 percent, the city and developer split the profit evenly. In all instances, the city’s maximum share is capped at $17.7 million.
“The more (the developers) get for it, the more they get to keep,” Kiloh said. “There’s not much of a benefit to them to keep the return low, just so they don’t have to repay incentives. They make more money if they maximize the profit.”
Critics, however, say the city didn’t make good on the promise that the redevelopment of Seaholm’s main building would include a public use.
Austin resident Ken Altes, a founder of the Friends of Seaholm preservation group, had a key role in pushing for Seaholm’s redevelopment in 1989. He says he spent “perhaps 3,000 hours of my time alone, and lots of others’ too,” on what he now calls “a huge failure.”
“At every stage, there was a loss of public uses” and commercial uses crept in, Altes said.
“Now, sadly, the magnificent turbine room” is office space, he said. “Such a waste.”
Rosato said the development team realized from the outset that Seaholm “would be a juggling act between cost, public amenities and community wishes.”
“All of those issues were deliberated carefully and vetted publicly, repeatedly in many cases – with this final iteration receiving a majority of support civically and governmentally,” Rosato said. “The vast majority of feedback we receive is that we succeeded not only at the primary goal of saving the power plant, but in a great number of other ways as well.”