ABOVE: A rendering with an aerial perspective of Urban East. Courtesy of River City Capital Partners
Proposed Urban East mixed-use project moving ahead quickly thanks, in part, to new Opportunity Zone incentives; meet the team at River City Capital Partners
One of the best aspects of real estate reporting is discovering the next successful locally-based development company. The barrier to entry in this sector is formidable in any market, but here especially.
Think of all the challenging variables — cost of land, cost of labor, understanding local development regulations, accessing large amounts of capital to get going. You get the point.
That’s why my hat’s off to companies like Cielo Property Group and PSW Homes, which started slowly with two or three partners and now have evolved into impressive enterprises. Of course Endeavor Real Estate Group is the poster pin-up for Austin development success.
So which company is next? Perhaps River City Capital Partners. I met with the principals this week — Peter Kehle and Cory Older — to find out more about them and their upcoming project: Urban Eastat 6400 E. Riverside Drive. There’s a nifty bit of business intelligence toward the end of this story that explains why investors are particularly keen on this particular development, which will include about 350 apartments; 90,000 square feet of office space and 20,000 square feet of retail and restaurant space.
“The retail and restaurant is really important,” Older said.
Kehle and Older said they are well aware that many new apartment projects with auxiliary retail have struggled to fill commercial spaces, so they researched the matter in-depth.
“Two issues surfaced over and over,” Older said. “Not enough parking and no back-of-house service area.”
As such the Urban East project will include a stand-alone retail building and a design that facilitates behind-the-counter needs — plus plenty of adjacent surface parking.
Here is the development team River City Capital Partners has assembled:
Multifamily architects: Davies Collaborative
Retail/commercial architect: Urban Foundry
Landscape architect: Blu Fish Collaborative
Civil engineer: Prossner & Associates and Jamison Civil Engineering
Mechanical, electrical and plumbing engineering: Nichols Engineering
Structural engineer: Leap Structures
Commercial brokerage team: St. Croix Capital Advisors
Negotiations are underway with a general contractor, but that tidbit will have to wait for a future update.
The project has been in the works since River City Capital bought the 7.4-acre parcel near Riverside and Montopolis in August 2016.
Kehle said they expect site plan approval by the end of the month with groundbreaking in the second quarter. Construction will take about two years.
Kehle and Older met in their neighborhood and over time realized they had complementary skills and similar goals.
Kehle, an Austin native, built several firms in the 1990s while in his 20s after graduating from the University of Texas. He ran a general contracting firm for years, building numerous projects for the city of Austin, Austin Independent School District, Travis County, Texas Department of Transportation and other public entities.
Older, who hails from Phoenix, moved to Austin after graduating from the University of Arizona. He has a bachelors and master’s degree in accounting from the Acton School of Business. He began his career with Deloitte & Touche, first in Arizona and then in Austin. He was a controller at Keller Williams Realty Internationalfor nine years.
The duo has been working on several projects since they formed River City Capital Partners in 2014 — multifamily renovations and repositionings, for example. Urban East is the first major development to come to fruition with others planned in the near future.
“We’ve been having a lot of fun working together and looking at land for the last five years,” Older said.
The East Riverside Corridor attracted their attention because of the significant vacant expanses just minutes from downtown on a major route to Austin-Bergstrom International Airport. Before the extreme run-up of prices during the past couple of years, River City Capital was able to secure a couple of parcels from long-time landholders at relatively affordable prices.
The second parcel at 7400 E. Riverside Drive at the entrance of the re-imagined Austin Commerce Center — now a growing collection of hotels — was sold in July 2017 to Sabot Development headed by Austin broker and developer Jim Young. River City Capital determined the 6400 E. Riverside Drive site best suited its purposes, and welcomed the opportunity to sell the other site to Young’s company.
As an aside, I discovered that Sabot sold that 7.2-acre parcel at 7400 E. Riverside Drive in the past month — on Dec. 13 to Broadstone Riverside, an affiliate of Alliance Residential. That Phoenix-based company has built thousands of apartments in the Austin market during the past decade and is likely to do the same thing at this site near ABIA.
No buildout value for Urban East has been disclosed yet. The River City partners said they have raised funds from private investors and have established a robust pipeline of interest. Momentum was launched forward dramatically last year when it was discovered that 6400 E. Riverside Drive was designated in an Opportunity Zone, which was created by the federal Tax Cuts and Job Act of 2017 and passed by Congress in December 2017.
That particular rider to the bill allows states to designate certain low-income census tracts as Opportunity Zones to encourage investment. Urban East investors will be able to take advantage of several major tax incentives. Without going into the minutiae, Older said the designation has created strong interest in the Urban East development. It wasn’t something the principals knew about until after the fact, but it’s proven to be powerful instance of serendipity.
“I think we’ll be the first major Opportunity Zone project to break ground in Austin and potentially in the whole county,” Older said.