Hotel, multifamily developers sought for convention center reconstruction project

Leaders at the Austin Convention Center have set their sights on building a new hotel or a multifamily residential project as part of the forthcoming reconstruction of the downtown site.

The timeline for the solicitation of developers was among the details shared during Tuesday’s City Council work session, with convention center representatives sharing their 40-year financial projections and other details of the public-private partnership.

In collaboration with consulting firm Hayat Brown, the convention center team plans to release a request for qualification in March. That process is expected to conclude at the July 18 Council meeting with the selection of a developer for a potential master agreement that would be completed by late 2024.

Rolando Fernandez, deputy director of the convention center, said the development effort would take into consideration Council’s priorities and recent community feedback sessions, which have emphasized more activation of the ground-floor areas of the center, opportunities for local businesses and artists to use the convention center spaces, and incorporating workforce housing or affordable housing as much as possible.

“As you embark on a journey to the convention center today, you would see that it’s activated through events days and where there are no events going on it’s a pretty quiet space,” he said. “We want to look at changing that scenario around and making it a place for all folks to come in, regardless of whether or not there’s an event in the convention center.”

Jenifer Boss, senior director for Hayat Brown, said the market analysis that began last year has found hotels and multifamily residential projects would be the most financially stable uses for the public-private portion of the redevelopment, which is expected to cost more than $1.2 billion for just the convention center space. Boss said workforce housing would be possible on the site, though the lower sale price or rent for those units would absorb some of the other revenue generated from ground leases as a de facto subsidy that would reduce some of the tax revenue generated for the city.

The analysis found that the market for office space is too soft to make that use feasible on the site, while deeply affordable housing would require too much of a subsidy because of the high building costs associated with the project.

Over 40 years, the development of a hotel and multifamily units with some ground-floor retail is projected to generate more than $200 million in city property taxes, plus $18 million in sales tax and $315 million in Hotel Occupancy Tax.

Boss said the public-private development will need to be planned to align with the construction schedule for the larger convention center space, which is expected to be closed for four years beginning in 2026.

“The alignment of the design and construction of the potential development opportunity, the commercial development opportunity, has to be closely worked together with the convention center project schedule,” she said. “What we don’t want to have is any sort of misalignment that would negatively impact the convention center’s delivery because there is too much riding on that project for that to happen.”

Council members generally supported the plan for selecting a developer, with Natasha Harper-Madison noting, “While I can appreciate that we are attempting to accommodate and make comfortable our visitors, I hope very much that our convention center is also a destination space for locals. And so visitors and locals alike can experience what they may not otherwise experience.”

Council Member Ryan Alter asked about how reliant the convention center reconstruction would be on revenue from the hotel and multifamily projects, with the public largely expecting that the construction would be paid for separately from the public-private portion of the site.

Fernandez said some of the revenue from the new development effort could be used to pay off construction debt ahead of schedule.

“We envision utilizing some of that revenue produced by the (public-private partnership) to support paying off the debt a little earlier or just being able to work through … increases in the market conditions regarding construction work in that nature,” he said. “The second area is looking at supporting some of that commercial development in the first floor as well. And so if you can imagine a rainfall of how we would like to use that income produced by the development is trying to support convention center paying off the debt, supporting the implementation of the Council priorities for that first floor, community priorities for that first floor, and then that residual income will be a conversation down the road in terms of how can that be utilized for the benefit of the city.”

Photo by Non-dropframe made available through a Creative Commons license.

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Posted In: Austin, District 9