The landmark Tower Life Building in San Antonio has been many things over the years.
In addition to housing a flagship department store and law offices, it has served as a mooring mast for a blimp and a performance site for a duo of accomplished aerialists, according to a registration form for the National Register of Historic Places.
It has been the headquarters of the Third U.S. Army and served as a transmission tower for a local television station.
Beginning in 2024, the 31-story building will be redeveloped into an apartment building.
Last year San Antonio businessman Red McCombs, of McCombs Enterprises, who died Sunday, partnered with real estate investor Jon Wiegand and developer Ed Cross to acquire the 1929 skyscraper at 310 S. St. Mary’s St. from descendants of the construction and engineering magnate H.B. Zachry.
Three months after closing the sale, the new owners’ plans came into focus when they entered into negotiations with Bexar County for tax incentives as they converted the office building into apartments with affordable housing units.
Office-to-apartment conversions in the U.S. are at an all-time high, according to apartment search site RentCafe. More than 11,000 units have been added through such redevelopment in the last two years.
The industry is making that pivot for good reason. Demand for office space has slowed since the pandemic as more people work from home and employers like USAA are taking flight for the suburbs.
Meanwhile, older Class B and C office buildings are “becoming functionally obsolete,” stated a report by the Urban Land Institute and the National Multifamily Housing Council. “Demand for office space is anticipated to grow more slowly post-pandemic than in the past and be more focused on newer stock.”
But the call for rental housing remains strong. In 2022, commercial real estate firm CBRE forecasted that multifamily occupancy levels will remain above 95% for the foreseeable future.
Speaking at a recent meeting of commercial real estate investors, Cross said he’s been curious about office-to-apartment conversions for about 20 years, he said. These days, “with what’s happened in downtown, what’s happened with the office building world, now it’s a big subject.”
When it comes to such conversions, downtown buildings tend to work better than suburban ones, he said, citing analysis by architecture firm Gensler, though the building’s leasable square footage on each floor must also be considered.
A building like the Tower Life, only 40% occupied by office tenants at the time it was acquired, came with some advantages and disadvantages for a conversion, Cross said.
Though the building is nearly a century old and outdated in terms of safety and lifestyle standards required for residential developments, it has been “immaculately taken care of,” he said.
“The best surprise is what good stewards [the Zachrys] have been of the building.”
Depression-era skyscraper
Designed by noted father-son architecture team Atlee and Robert Ayres, the 31-story neo-Gothic skyscraper was known as the Smith-Young Tower when it opened June 1, 1929, on land once called Bowen’s Island.
With its eight stone gargoyles and conical clay tile roof, the building was the tallest structure in San Antonio until the Tower of the Americas was built in 1968.
Home to a flagship Sears, Roebuck and Co. department store on the first six floors and office space on the upper floors, the tower also had a subterranean tunnel that ran under St. Mary’s Street, connecting it to a nearby hotel.
Five months after the landmark tower opened, the stock market crashed, driving the nation into the Great Depression. A percentage-only rent deal with Sears pushed the owners into foreclosure.
In the 1940s, the building became the Transit Tower, named for the forerunner to VIA Metropolitan Transit, which was housed there. H.B. Zachry purchased the building in 1943.
About two decades later, the Tower Life Insurance Company took up residence in the building and the name Tower Life has stayed with the building since. It was placed on the National Register of Historic Places in 1991.
In 2009, H.B. Zachry’s son Ben Zachry called developer Ed Cross to get his advice about how to convert the downtown skyscraper his family owned from office building to apartments.
Cross instead made an offer to buy the Tower Life Building, but a final agreement wasn’t reached. For the next five years, every 90 days, Cross made it a point to call Zachry just to talk.
In September 2021, it was Zachry who picked up the phone. He said, “Ed, it’s time.”
Eight months later, Cross held the keys to the Tower Life building — the result of persistence and aspiration.
“If you’re in the real estate business and you’re a frustrated architect like I am, you just dream of this building,” Cross said. “This is a legacy and you want to take care of it. I hope my family owns it for 70 years as well.”
Conversion to residential
Cross said recently that moving out the office tenants and working to convert the building to residential will start in 2024.
Apartments of varying sizes will be built on the second floor and continue up the building for a total of 234 units.
But turning office space into apartments calls for some creativity, Cross said. “The building’s incredibly well built, but the challenge is, how do we put units into these confined spaces?” he said.
The building entrance will be at street level, where there will also be a restaurant and leasing office. The river level, used as basement storage until now, will be restaurant and retail space.
During construction, one of the building’s elevator shafts will become a second set of stairs for fire safety access. Only one set was required in 1928. A chimney will become the trash chute.
Other changes to the building will be made to bring it up to modern-day standards and expectations.
Bricked-in windows at the river level will be opened to create a connection to the River Walk, Cross said, and where the tower block changes to an octagon shape, a seventh-floor roof deck will be turned into an amenity level with a pool.
Some parking can be made available to tenants in the building’s garage, and surface parking also will be offered within the vicinity of the tower.
Cost and credits
In addition to federal and state historic tax credits that the project qualifies for, the developer has entered into negotiations with the Public Facility Corporation (PFC) of Bexar County for tax incentives to include affordable housing units.
Under Texas law, a PFC allows developers to partner with a public entity to build multifamily “workforce” housing. Developers receive full property tax exemption for the duration of the 75-year lease in exchange for committing to rent half the units to people who make up to 80% of the area median income, or AMI, which for a family of four is $57,600.
The agreement will be similar to the county’s recent deal with Weston Urban to restore the former Continental Hotel, a county attorney said last year.
Cross, who in 2009 developed the Vistana apartments at 100 N. Santa Rosa St., said it’s difficult to speculate what the monthly rent will be for an apartment in the Tower Life Building.
He said it’s unknown what the rental market will bear in 2026 when the building is expected to be ready for lease, and there’s more work to be done to determine the overall cost of the redevelopment.
Remaking an office building into residential use ranges in cost widely depending on the quality of the finished units, city size and the building’s original use, states the ULI report.
That study, which looked at about two dozen such office-to-residential conversions, found that the median cost of conversion came to about $255,000 per unit, not counting the acquisition cost.
The McCombs Foundation and the Zachry Group are financial supporters of the San Antonio Report. For a full list of business members, click here.
