After two years of negotiation, a deal to the redevelop a prime property in Austin's designated Innovation District has stalled out.
Assistant City Manager Veronica Briseño on June 29 issued a memo to Austin Mayor Kirk Watson and the City Council, stating that the city would not be renewing its negotiating agreement with Aspen Heights Partners to redevelop the former site of the HealthSouth facility at 1215 Red River Street and an adjacent garage at 606 East 12th Street.
The HealthSouth property and its buildings have been vacant for nearly six years. Aspen Heights' proposal for the 1.7-acre, city-owned site in northeast downtown included two 37-story residential apartment towers with 921 units and about 772,000 square feet of living space, 28,000 square feet of retail space including a gourmet food hall and indoor live music venue with below-market rental rates, onsite affordable child care, a business incubator, and a 30,000-square-foot, elevated outdoor plaza connecting the two buildings.
The amount and level of affordable housing planned for the project has became a major point of contention in the years since the initial agreement, signed in spring 2021 and extended six times.
"The developer has recently indicated that the Council approved term sheet is no longer financially feasible due to market conditions," according to Briseño's memo. "For example, the most recent offer from the developer reduces the affordable housing onsite from 25% to 7%."
The term sheet in question was part of Aspen Heights' response to a final development agreement the city submitted for its review in March. Revisions and negotiations were made in June, but the two parties were unable to agree on a new term sheet.
City staff will return to the council with a recommendation for proceeding with the redevelopment process within 60 days, after conducting additional market analysis, according to the memo. It will also make plans to demolish existing structures.