The Rivard Report first published a story July 13 about the Robert E. Lee Apartments and the City’s decision to renegotiate a 20-year loan agreement made to the building’s owners in 1995 and now technically in default. The City holds a lien against the property, but that doesn’t mean foreclosure proceedings are on the horizon. Assistant City Manager Lori Houston said in a Rivard Report interview that it is in the best interests of the City and the building’s residents for the historic building to be renovated and repayment terms to be extended.

The 10-story building was originally constructed as the Hotel Robert E. Lee in 1922 and is now on the National Register of Historic Places. The hotel ceased operations in 1974, and after sitting vacant and boarded up for more than 20 years, it was converted to low-income housing in the mid-1990s. The ownership has shifted on paper, but the recently formed RELEE Preservation Associates LLC is controlled by Todd and John McClutchy, principals and officers at the Connecticut development partnership JHM Group. They are undertaking the renovation, applying for historic tax credits, and will be the beneficiaries of a renegotiated loan with the City.

The planned renovation comes at a time when San Antonio is seeing a renewed interest in downtown historic properties that are being bought and then converted to mixed use office, retail, and residential facilities. Affordable and low-income housing is in short supply, and Houston said the City wants to protect the residents of the Robert E. Lee Apartments and see the building continue to serve as low-income residential housing downtown. Were the City to foreclose and bring the building to auction, Houston noted, there would be little to no chance of preserving the low-income housing units downtown.

The new Frost Bank Tower will break ground in late 2016 or early 2017. Tech companies are multiplying along East Houston Street with the growth of the co-working space Geekdom, the tech-advocacy organization Tech Bloc, and the technology education program Open Cloud Academy. CAST, a new tech high school in the San Antonio Independent School District, will open for the 2017-18 academic year. Vacant and underutilized buildings are changing hands, undergoing renovations, and winning new tenants as developers such as Weston Urban and GrayStreet Partners find news uses for historic buildings.

Amid the downtown redevelopment, questions arose about the City’s decision to renegotiate the terms of the loan default, so the Rivard Report asked Houston for clarification.

Rivard Report: Would the standard practice be for the City to foreclose on a property with a lien?

Lori Houston, Director of the Center City Development Office, outlined plans for the future of Alamo Plaza. Photo courtesy City of San Antonio.
Assistant City Manager Lori Houston.  Photo courtesy City of San Antonio

Lori Houston: Yes, in most circumstances, including here, if the City did not see a more appropriate approach with a cooperating property owner. While the City’s contribution to this project was structured as a loan in 1995, the City’s primary goal was to have the program objectives met, which are affordable housing for low-income seniors. The City’s lien was an enforcement tool to ensure that result. The 1995 loan was structured with principal repayments (without interest); however, it was not uncommon for City support for these projects to be structured with repayment to the City only from available cash flow.

RR: Why would the City agree to extend the loan repayment? Are there no other viable options for the City?

LH: The City’s funding in 1995 was to facilitate the program objectives of affordable housing for low-income seniors. Those objectives were and continue to be achieved by the building owner. At loan maturity, which only recently occurred, the City did have the option of foreclosing, but the foreclosure process would require the property to go to public auction and there was a risk of possibly having a new owner evict low-income seniors. We also had the option to sell its loan, with the same likely result. Those options remain if the building owner is unable to obtain the necessary financing for its efforts to renovate the building and continue to provide affordable housing to low-income tenants for the next 15 years. The City views these program objectives as highly beneficial.

RR: What is the timeline for the loan’s repayment?

LH: The proposal is that the City’s modified loan would be repaid only from available cash flow, if the program objectives are again achieved and maintained for the required time period. Otherwise, the property owner would be in default and the City could foreclose its lien.

RR: Wouldn’t the City be able to market the property to responsible buyers?

LH: Like any lender that holds a deed of trust lien on real property, the City would have to conduct a public foreclosure sale that complies with the Texas Property Code. Texas statutes require a public auction sale, and the City could not select the buyer or enter into any agreements that would restrict or limit the public nature of the foreclosure sale.

RR: Delaying the loan payback if certain terms are met seems to set a precedent for future circumstances in which the City could be at a disadvantage. What would you say to that?

LH: The proposal is that the City will modify and extend its existing loan if the property owner is able to achieve project rehabilitation and continue to provide affording housing for low-income tenants. That is the only precedent being set, i.e. if the borrower can deliver tangible results, which are beneficial to the City, the City will cooperate in helping the borrower achieve those results.

Top image: The Hotel Robert E. Lee building commonly known as Robert E. Lee Apartments at 111 W. Travis St.  Photo by Scott Ball. 


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Sarah Talaat

Former Rivard Report intern Sarah Talaat graduated from The University of Texas at Austin in May 2016. You can find her in Beijing, China where she is pursuing a business journalism master's at Tsinghua...