The proposed development featured mixed use amenities such as living and street level shopping.
The proposed development at Flores and Dolorosa streets was to feature mixed-use amenities such as street-level shops and residential living spaces. Credit: Courtesy / Teeple Partners

Developers have turned down a multimillion-dollar incentive package granted by the City of San Antonio last summer and canceled plans to build an $83 million, mixed-use tower on a busy downtown intersection.

Teeple Partners requested in March that the City withdraw the Center City Housing Incentive Policy (CCHIP) agreement worth $8 million, according to a Center City Development and Operations (CCDO) department spokeswoman, after determining the Kallison Square tower project was not financially feasible.

In its request, which the City also approved in March, the developer cited a growing gap between high-rise construction costs and downtown San Antonio rental rates as the reason the project was no longer feasible. The Austin-based developer retains ownership of the site, and the spokeswoman said CCDO has invited Teeple to continue to work with the department on assistance with a future residential project.

The company did not respond to requests from the Rivard Report for comment.

Teeple had planned to build twin apartment towers with shops and offices at the southwest corner of Flores and Dolorosa streets. The two-acre site across from City Hall gets its name from the 1899 buildings there that were once occupied by Kallison’s Western Wear. The store’s iconic statue of a cowboy, saddle in hand, still presides over Flores Street.

Other multifamily housing projects Teeple has completed in San Antonio – developments known as Verdant, Bulverde Oaks, and Westover Oaks – are situated outside of downtown.

The developer cited the increased cost of high-rise residential construction and current rental market rates in downtown San Antonio as the reason for cancelling the project.

“What we tend to hear from developers is that the rental rates they can get in the downtown area, even though they are sometimes higher than in other parts, there’s still a gap between what they can achieve in rental rates and the high cost of developing in the downtown area,” said Veronica Garcia, interim assistant director at CCDO, on Friday. “That’s why we give incentives. But even with the incentive, the gap was still too high. … But that doesn’t mean nothing is going to happen.”

Garcia said the Kallison Square site is a key location and that the City is ready to work with Teeple on future potential project incentives.

The CCHIP program, initiated in 2012 to encourage housing development through tax reimbursements and rebates, offered financial incentives for eligible multifamily housing projects in the downtown area.

CCHIP projects have included the mixed-use and residential Steel House Lofts on South Flores Street, completed in 2012, and the Casa Blanca Lofts on North Alamo Street, which opened in 2014.

Teeple was awarded the incentive package for Kallison Square in August 2017. The deal included a $5.9 million tax reimbursement, $1.1 million in fee waivers, and a $1 million development loan that could be forgiven if the developer met certain conditions, according to the agreement.

City Council passed a moratorium on CCHIP projects in January, with Mayor Ron Nirenberg saying at the time that while the program succeeded in adding more housing stock downtown, it created some unintended affordability issues.

Garcia said the CCDO hopes to present to City Council next month a plan to renew the incentive program. “It’s something we’re looking at right now, at our CCHIP program as a whole,” she said.

Shari Biediger

Shari Biediger

Shari Biediger is the business beat reporter at the San Antonio Report.