PRESENTER: Presenter
Jordan Matney, Deputy City Manager
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SUBJECT: Title
Discuss and consider approval of a recommendation by the New Braunfels Economic Development Corporation (NBEDC) approving an expenditure, of up to $2,200,000, to The Neue, LLC., for a mixed-use development project and public infrastructure improvements, pursuant to Section 501.103 of the Texas Local Government Code.
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DEPARTMENT: Economic and Community Development
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COUNCIL DISTRICTS IMPACTED: 5
BACKGROUND INFORMATION:
The Neue is a proposed mixed-use project at the corner of Guenther Avenue and W. San Antonio Street. The proposed site was acquired by a related entity in early 2020 and the project has been through several design iterations with public engagement in the last five years. The project proposed is a four-story building that includes at least 40 (forty) for-sale residences (1BR, 2BR, 3BR, and Penthouse units), three professional office spaces and two retail spaces totaling approximately 5,000 gross square feet, fully gated parking, indoor/outdoor flex space, electric vehicle charging stations, indoor mailroom with secure package delivery and other resident amenities. The estimated total development budget (included city requested right of way improvements) is approximately $28,200,000. The Neue project includes approximately $2,200,000 of on-site infrastructure improvements and off-site public right of way improvements. The planned public infrastructure improvements include relocation of overhead utilities, water and wastewater infrastructure construction and expansion at the site, and pedestrian improvements on Guenther and W. San Antonio streets.
During initial planning of the project, staff requested the developer engage an engineer to develop a plan and cost estimates for improvement of the Guenther Street right of way to include undergrounding of utilities, sidewalk improvements and street rehabilitation. Of the proposed amount, approximately $700,000 is allocated for engineering, design and construction of Guenther Street improvements from San Antonio to Cross Street. The remaining balance of $1,500,000 is a project grant to offset development costs associated with required street improvements, utility and drainage upgrades and construction, landscaping improvements as well as a rebate of impact fees assessed for the project’s retail and office components and city property taxes during construction.
The draft contract requires the company to advance the design and engineering costs for the Guenther Street improvements. Upon acceptance of the design by the City, the Company will receive up to $100,000 in reimbursement. If the NBEDC and its designees elect to proceed with construction of the improvements, payments will be reimbursed monthly for the completed work and is capped at $600,000. The Company is responsible for securing financing for construction of the $27,500,000 development project. It will be eligible for reimbursement of up to $1,500,000 for construction of the eligible project improvements (Exhibit B) after it receives a Certificate of Occupancy not later than January 1, 2028.
The project still needs to undergo final underwriting required by its selected financial institution.
One of the biggest barriers for the project is cost-revenue realities and market uncertainty. The project’s total development costs exceed the revenues anticipated, which affects the amount of capital the project can attract. Condominiums face unique financing challenges because they generate only one-time sales revenue as the primary benefit. Since they are not owned and held by the developer, investors look to proposed sale revenues as opposed to the benefits created by traditional commercial real estate investments such as cash flow, tax savings and appreciation. Additionally, downtown New Braunfels has almost no comparable condominium developments of this scale. The Neue is the first of its kind and, as such, lenders treat it as a high-risk product. This challenges project economics with higher equity requirements, stricter pre-sale mandates, and more conservative revenue assumptions. Additionally, there is effectively no secondary market for construction loans, which makes financing challenges even more pronounced.
The proposed incentive would be an amount, not to exceed $2,200,000. This amount accomplishes two significant items: first, it absorbs enough development related costs to make the project more attractive to the final equity and lending partners. Secondly, it continues the program of desired improvements in the downtown such as pedestrian enhancements and aesthetic improvements tied to the conversion of overhead to underground utilities. An initial presentation on this proposed project was provided at the NBEDC meeting on September 30, 2025.
ISSUE:
Several studies conducted by the city including the Downtown Implementation Plan, Envision New Braunfels, and Strategic Plan identified the need for increased residential in downtown, targeted infrastructure improvements, and mixed-use developments that include housing. Realizing such projects, however, requires economic development incentives. Staff has determined that the project does not advance but for the public participation in a portion of the proposed improvements.
Texas Local Government Code 501.103 allows EDCs to allocate sales tax funds to public infrastructure improvements that are publicly owned and controlled and found by the board of directors to promote new or expanded business enterprise. In this instance, the NBEDC finds that the public infrastructure enables, supports and is reasonably necessary for the development of a mixed use project that will generate beneficial economic development outcomes.
STRATEGIC PLAN REFERENCE:
☒Economic Mobility ☒Enhanced Connectivity ☐Community Identity
☐Organizational Excellence ☐Community Well-Being ☐N/A
FISCAL IMPACT:
On and off-site improvements are estimated at approximately $2.2 million. The project will generate approximately $25 million in new incremental value in the Downtown TIRZ, as well as additional sales in the retail and office spaces. The project’s net benefit over 10 years is approximately $1.58 million to the City of New Braunfels and NBEDC.
Recommendation
RECOMMENDATION:
Staff recommends approval of the NBEDC’s recommendation for this expenditure.
At the time of City Council agenda publication, the NBEDC had not considered or voted on the proposed expenditure.