There’s no more valuable property in Waco’s inheritance than the 16 acres of riverfront land known as the Brazos Commons. The land, granted to the city by its founders in 1849, offers a unique combination of scenic riverfront, visibility to Interstate 35 and accessibility to Baylor and its grand new stadium.
And no one is saying that Rick Sheldon and Joe Beard, the sole bidders to develop the site, lack the ambition to match the land’s potential.
The reviews so far of the $180 million Brazos Riverfront plan from local developers, real estate and community leaders strike a tone of qualified enthusiasm, as well as questions of whether Waco can absorb a development of this scale.
Those with knowledge of the local housing market say there appears to be enough demand for the residential offerings in the plan, which would include between 640 and 800 units of condos and apartments built over several years. The entire project would be built in five to seven years, with public spaces, more than half of the housing and several restaurants in the first three years.
But can Waco also support five new major restaurants, upscale retail shops, high-end offices, a grocery store and a major entertainment venue, such as a movie theater? And can they be successful in a downtown that’s still rebuilding from years of decline?
The answer, some observers say, depends on whether Beard and Sheldon’s Brazos River Partnership can create such a distinctive and appealing destination that it creates its own market.
“I’m sure not going to go out there and say it’s not going to work,” said Brad Davis, a commercial real estate broker for Jim Stewart Coldwell Banker. “Nothing like this has been tried in Waco. It looks like a heck of a well-thought-through project.”
Davis said no one in Waco has ever offered this kind of combination of upscale urban
housing, shopping and entertainment in one development, tied together with public spaces such as a riverwalk, pier, parkland and a market plaza.
“I think it’s a bold statement for Waco,” he said. “These are some people making a nice-size bet, and you don’t know how it will turn out. I will say the market, the economy and the positive vibes about Waco have never been aligned like they are.”
The Downtown Development Corp. board this week recommended the project to the city council, based on how well it fit with the community’s Imagine Waco Plan for Greater Downtown.
“I have to say that as a concept, this has really exceeded expectations,” said Megan Henderson, the DDC’s executive director. “I was afraid we would get a proposal that’s just glorified student housing with a couple of places to eat and shop. . . . What I really like about it is that it’s not just using the space to make the project better, but using the project to make the space better.”
She cited as an example the developers’ plan to preserve and enhance the oak grove that houses the popular downtown farmers market, which would continue there.
Number of issues
City leaders, including Mayor Malcolm Duncan Jr. and City Manager Larry Groth, also are enthusiastic about the project’s vision but say many issues have to be worked out to make the public-private development a reality.
The city is expected to give the developers a long-term lease on the property at a nominal rate and contribute incentives to help build the public spaces and infrastructure. Under current guidelines from the downtown Tax Increment Financing Zone, the project could be eligible for up to $27 million in TIF incentives.
This isn’t the first time the city has tried to get the property developed. In 1984, the city worked with developers from La Jolla, Calif., to build a $120 million retail, office and hotel complex. The group abandoned the project in the mid-’80s real estate bust after building only the riverwalk section.
Groth said the difference this time is that Sheldon and Beard aren’t just speculating on the potential of downtown and the riverfront.
“The La Jolla group would have truly been pioneers,” he said. “You look at what’s happened since then in downtown and Baylor, and it’s a completely different picture.”
In the past few years, downtown has emerged as a place to live, not just work and shop.
Before 2007, downtown Waco had 205 units of housing, said Chris McGowan, Greater Waco Chamber of Commerce urban development director. Now it has 531 units, and occupancy is around 95 percent, he said.
Housing ranges from the income-restricted Lofts at Old Waco High to student housing complexes to upscale lofts on Austin Avenue that sell for up to $500,000.
McGowan said about 380 units of housing are in some stage of planning or development. He noted that a market study done for the Imagine Waco Plan four years ago showed demand for 200 new housing units a year, so there should be no problem accommodating 600 to 800 more.
“I would expect, just anecdotally, that these new units would be absorbed pretty quickly,” he said.
The new apartments would rent for $1.25 to $1.50 per square foot per month, the developers told the DDC board this week. Henderson estimated the apartment rents would be around $1,200 to $1,500 per month.
The developers said high-end apartments in Waco now rent for about $1.25 per square foot, and the average rent in Waco is around $1 per square foot. The Texas A&M Real Estate Center gives lower estimates of 75 cents per square foot in the Waco market.
Russell Trippet, president of Brothers Management, a leading Baylor- area rental company, said the housing component could work if the rents are realistic and it’s phased in during a few years.
He said the Brazos Riverfront developers are venturing into “uncharted territory” with their project, but he said the developers have the experience to know the risks they’re taking.
“Waco hasn’t seen anything like this almost in its history,” he said. “It’s an exciting project for the city of Waco. At the same time, it’s a very aggressive project. But nothing ventured, nothing gained.”
Shane Turner, a leading developer of housing and retail in downtown, said he doesn’t think the Brazos Riverfront property would steal demand away from his developments. Those include the 120-unit Tinsley Place project under construction on Seventh Street.
“There’s still a shortage of housing downtown,” he said. “I don’t think downtown housing is going to suffer.”
Turner, who until recently lived in an Austin Avenue loft, said the development may actually take away demand for suburban housing.
“Everybody my age would prefer to live downtown,” said Turner, 34.
Downtowns around America are beginning to reap the benefit of a generational shift in housing preferences, said Harold Hunt, a commercial real estate researcher at the Texas A&M Real Estate Center.
“Every meeting I go to is about urbanization, about how young people want to be in an urban core, how they like dense residential developments where they don’t have to drive a car,” he said. “If you want to appeal to young people today, you’ve got to have a modern, dense urban vibe.”
Hunt said condos are especially popular now, though financing them can be difficult.
Hunt hasn’t seen the Brazos Riverfront plan, but he said Baylor’s proximity and Waco’s healthy economy are good omens for it.
Mike Anderson, a real estate broker who works for the Brazos River Partnership, agreed that the project is aimed at a new generation, such as his own children.
“I’ve got two daughters in their mid-20s who grew up watching ‘Friends,’ about people living in apartments, while I grew up watching ‘Leave it to Beaver,’ ” he said. “This is what they grew up on and what they want.”
The development isn’t just aimed at the young. The condos could appeal to empty-nesters ready to ditch lawn care, or alumni who want a second home near Baylor and the stadium, project officials said.
Reagan Ramsower, Baylor’s vice president for finance and administration and past president of the DDC board, said he knows several alumni who would like to buy a condo on the river.
“It’s an outstanding plan,” he said. “It’s exactly the kind of development we would hope to come into fruition when donors and the community invested in the stadium and events center.”
Ramsower said university officials would like to see the kind of student-friendly retail atmosphere that surrounds many universities.
“While Waco has a fledgling part of that, this is a quantum leap forward in having a university gathering place that makes the university and community much more vibrant and attractive.”
But some observers say the retail-entertainment component will be a harder nut to crack.
Turner, the downtown developer, said he expects the retail space at Brazos Riverfront would require high rents to pay off the construction, and that would likely mean national brands rather than the kind of mom-and-pop businesses that might come to Austin Avenue.
Anderson, the Brazos River Partnership spokesman, said he expects most of the retail and restaurants to be nationally or regionally known brands, but there’s also room for a smaller fine-dining restaurant with local ownership.
Anderson said the grocery store component may be the biggest challenge because grocery companies rely on demographic formulas to decide store locations. But an opportunity may open as the Baylor-area H-E-B on Speight Avenue closes this summer.
That store is 24,000 square feet, about the same size as the grocery the partnership plans on University Parks Drive. An H-E-B spokeswoman has said the company would be willing to talk with the developers about a store there.
The public spaces would be crucial to making the Brazos Riverfront project work as a community destination, developers said.
An expanded riverwalk, pier, marinas and a river amphitheater are included in the proposal’s $23.6 million worth of “horizontal costs,” as distinguished from the “vertical costs” of the building. Other horizontal costs include relocating electric lines, building extensions of Clay and Webster avenues and expanding University Parks Drive.
Some of those costs could be covered by a grant from the TIF Zone, which collects taxes from new property in the downtown zone and reinvests it in new projects. Baylor Stadium got a record $35 million in TIF funding.
Based on new criteria formulated by the DDC and Tax Increment Finance board, the project could be eligible for $27 million in TIF funds, or 15 percent of the $180 million cost.
The actual amount is up to the city council, and Henderson said it’s too early to tell whether $27 million would be the request. But she said the TIF board might be able to afford a contribution of that size without forfeiting its ability to fund other important downtown improvements.
She said the TIF Zone could bond the project based strictly on future tax revenues the project itself would spin off, which is estimated to be nearly $2 million a year at build-out.
The TIF Zone currently generates about $6.6 million a year based on taxable property of about $185 million. The TIF fund has about $6 million in uncommitted reserves.
Henderson said the community would be making a huge commitment to this project, and she wants assurance that the developers are taking their share of the risk.
“What are they looking at that tells them this is going to make money, and what is the personal commitment of the principals?” she said. “I don’t think anyone questions that they love this town, but how badly is it going to hurt them if this goes badly?
“This is the best property we have, and we don’t want something started that isn’t going to get finished and that embarrasses us on I-35. It would damage the community for this to go badly. We need to know these guys are in it at the level we are.”
Anderson said Sheldon and Beard have already spent $11 million on the project during the past six years, assembling private land next to the Brazos Commons and doing studies and preliminary planning.
He pointed to Sheldon’s past success in developing huge projects in San Antonio and Kyle, and Beard’s success as founder of the giant Westdale Real Estate Investment and Management Co.
This project is special to both of them because it’s their hometown, Anderson said.
“I want to make it very clear, they both have personal commitments to this project,” he said. “They’ve done projects this big and bigger. . . . This project is foremost on their minds.”