At Tuesday’s work session, the Fort Worth City Council was given a presentation on a proposed economic development program agreement with MWG Enterprises for construction of a high-rise residential tower to be located at 1000 Weatherford St.
What is being proposed is a 19-story, 310-unit residential development with potential additional commercial component in the future. The location is two blocks in northwest downtown between Weatherford Street and Belknap Street near the Pier 1 Tower and the newly constructed Broadstone Apartments.
Michael Hennig, of the city’s economic development department, said this would be Fort Worth’s first new high-rise residential development in nearly 30 years. The only other similar residential projects in recent past have been remodels or senior living, which he said have certain state-provided cost advantages.
“While we have seen tremendous growth in our residential market, especially within key urban districts, Fort Worth has been unable to break into the more valuable high-rise segment of the market,” Hennig said.
“It not only makes strategic sense for the city, it also makes financial sense. The added value of this high-rise development will bring in an estimated half-million dollars more in new tax revenue to the city over the mid-rise alternative, even after accounting for the incentives.”
Developer commitments include:
*Invest a minimum of $75 million for minimum 17-story, 300-unit residential tower by June 30, 2022.
*Prepare and submit plans by Dec. 31, 2020 for adjacent commercial component (subject to successful property acquisition).
*Minimum 15% of development costs to go to Certified Minority/Women Business Enterprise firms (failing to achieve this commitment results in a reduction of the incentives).
*Minimum 20% of units to qualify as affordable as defined by HUD (failing to achieve this commitment results in a reduction of the incentives).
*Minimum six full-time employees associated with the project beginning Dec. 31, 2022.
The proposed city incentive agreement includes a 10-year Chapter 380 agreement reimbursing up to 80% of any additional city property taxes generated by the development, up to a maximum total value of $4.5 million. There will be an additional $2.8 million in TIF support approved by Downtown TIF Board for a combined $7.3 million total incentives (14:1 private-to-public ratio).
The 10-year projection for new taxes to the city are about $1.5 million.
“The agreement is specifically designed to address concerns over the perceived riskiness of building high-rise residential in downtown Fort Worth, a perception that ultimately results from the current lack of suitable comps in in the area,” Hennig said.
“The agreement is structured such that if the proposed project performs in-line with expectations, the city incentives go away and the project stands on its own. However, if during the term of the agreement rental rates or occupancy levels fall short of projections, the incentives would kick-in and absorb some of the downside risk. This is designed to reduce the overall risk and uncertainty that have prevented Fort Worth from taking that next big step in the growth and redevelopment of downtown.”
The alternative to the proposed high-rise is a five-story, 240-unit building which has been the focus of the developer in recent months. This alternative project would involve approximately half as much private investment, but is less risky to the developer given the strength of rental rates in the Downtown Fort Worth market, Hennig said.
Hennig added the impact of bringing new high-rise residential projects to downtown also has important implications for corporate attraction efforts. He said office owners and brokers increasingly stress the value of these types of living options to the businesses and professional workforce they are targeting.
Hennig said there has been a lot of interest in downtown Fort Worth for several years by some very capable developers. But the fact that Fort Worth does not have any recent examples of successful high-rise projects means that developers – and, as important, their investors and lenders – do not have anything to go off that proves the market.
“So, what we have been left with for the time being are interested developers who are all looking around and waiting for someone else to take the risk of being the first one through the door, and a low-to-mid-rise market that is performing very well and gobbling up valuable downtown sites three acres at a time,” Hennig said. “The proposed agreement is designed specifically to reduce the risk to a high-rise residential project in downtown that can serve as the comp for future projects.”
The city council is expected to have this project as an agenda item at the Aug. 27 meeting.
Several other proposed high-rise developments in or near downtown have yet to get off the ground.