Buying up the block

Spending spree gives Dallas company controlling interest on East 12th

Aerial footage by Jay Janner/American-Statesman Staff

Aerial footage by Jay Janner/American-Statesman Staff

In February 2014, the Austin City Council was finalizing the sale of a publicly owned parcel of land in the heart of East Austin. Efforts to revitalize the culturally important 12th Street corridor have had a long and unsatisfying history. So council members insisted the city get it right with one of the few remaining properties in the area they controlled.

A detailed bidding process had been won by Butler Equities, a local developer that proposed building three dozen housing units, some designated affordable, on the corner of East 12th and Navasota streets. Neighbors had preferred Butler’s project, as well — as much for what it wasn’t as for what it was. A competing offer from a Dallas-based company called Eureka Holdings would have used the parcel mostly as parking for a boutique hotel it hoped to build nearby — “no significant services … for the neighborhood,” the Swede Hill Neighborhood Association summed up.

Speaking from the dais, then-Council Member Bill Spelman stressed that the symbolic value of the project was larger than a single parcel. “You’re setting a standard for future developments on 12th Street,” he told Butler’s representative.

Soon after the deal closed, however, the company quietly sold the property to another developer, who then flipped it to Eureka. The plans that the city had carefully negotiated did not transfer to the new owners. Today, the property remains vacant, owned by the same company neighbors had opposed. Eureka said it has no immediate plans for the parcel.

At street level, Eureka’s acquisition of the lot at East 12th and Navasota is just one transaction in an out-of-town company’s extraordinary buying spree in East Austin. In recent years Eureka has purchased 114 parcels along and around the corridor, according to county records. They range from small vacant lots and older residences to a historic site and the Mount Carmel Village Apartments, a 50-year-old affordable housing complex.

Eureka’s central East Austin portfolio exceeds $50 million, public records show. That doesn’t make it Austin’s largest or wealthiest real estate company; the developers of downtown’s  “Jenga” skyscraper are spending an estimated $300 million on a single building.

But by accumulating so many properties in the East 12th Street corridor, once the heart of the city’s historic African-American community, the Dallas company has in effect become the largest shareholder of one of Austin’s most iconic and culturally sensitive neighborhoods.

Eureka’s managing partner, Rene Campos, said he is committed to creating the community locals want and need.

“We’re long term, so we don’t have the short-term immediate pressures some other organizations might have,” he said. “We want to do quality developments that fit in with the neighborhood.”

The company has so far revealed little about its intentions, though, telling KUT last year there was “no specific plan at this time” for the 12th Street portfolio. In a city that has seen its African-American share of the population shrink in recent years, Eureka’s leverage has created deep anxiety among locals.

“It feels like they have an agenda that is not necessarily the agenda of people who live there,” said Council Member Ora Houston, whose district includes the 12th Street corridor. “They can do whatever they want to that community.”

Houston said she walked out of an early meeting with company officials when it appeared they had no intention of working with her. It felt the way “indigenous people must have felt when nonindigenous people invaded their land,” she said. “It feels like colonization.”

Others worry that Eureka’s aggressive acquisitions are altering the neighborhood’s character, accelerating gentrification in an area ill-equipped to resist it.

“When people are offering as much as they were to us, it changes who stays and who goes,” Patrick Houck, a 12th Street resident who said he declined three buyout offers from Eureka, told the City Council recently. “We were able to resist the offers, but some of our neighbors who are struggling are less positioned to remain in their homes.”

Underpinning the Dallas company’s move into the area are the city’s own missteps in East Austin. Eureka’s acquisition of a publicly owned parcel slated for other purposes is an apt metaphor for Austin’s uneven record over the years on simultaneously developing and preserving a uniquely important neighborhood — efforts local activists say have accomplished neither.

“Eureka has taken advantage of an opportunity created by unfulfilled commitments,” said Mike Clark-Madison, who served nine years on the city’s Urban Renewal Board before stepping down this year. “They seized the opportunity here and went on a land grab, which has scared the neighborhood to death.”

Rene Campos, Eureka’s managing partner, said he is committed to working with locals to make sure development along East 12th Street matches the community’s vision. (RESHMA KIRPALANI / AMERICAN-STATESMAN)

Rene Campos is the managing partner at Eureka Holdings. (RESHMA KIRPALANI / AMERICAN-STATESMAN)

Distrust and ‘urban removal’

Austin’s complicity in establishing and maintaining its segregated and neglected east side neighborhoods is well-documented.

After the U.S. Supreme Court ruled in 1917 that cities could not use zoning to separate their populations by race, the City Council devised an alternative strategy to accomplish the same goal. By refusing to provide municipal services to African-Americans outside of so-called established Negro districts, officials deliberately created a divided city. The construction of Interstate 35, in 1962, provided a literal demarcation between black and white Austin that persisted for decades.

Despite that, many of the East Austin minority neighborhoods thrived, and longtime residents describe a vibrant community.

“We had a movie theater, a skating rink, a YMCA where we’d go for summer dances,” recalled Joyce Nesby, a 70-year resident of the area who grew up in the Rosewood housing development.

Near the corner of Chicon and 12th streets was a grocery store and a business center, she recalled. By the 1950s, there were more than 50 black-owned businesses along East 11th and 12th streets.

Yet by the 1960s, government neglect left much of the area in disrepair, and Austin’s urban renewal projects zeroed in on east side minority neighborhoods.

“As of June 1966, nearly one thousand acres were scheduled for clearance or rehab in East Austin,” Andrew Busch, an assistant professor at Coastal Carolina University,  wrote in a 2015 study of Austin history and gentrification. “Well over one thousand residents were dislocated.”

Many didn’t return. “Urban renewal was ‘urban removal,’” said Mark Rogers, executive director of the nonprofit Guadalupe Neighborhood Development Corp.

The East 11th and 12th street corridors were considered important arteries to the heart of East Austin, and starting in the 1990s city planners created a half-dozen plans to revitalize them. Hoping to lure investment, they relaxed development rules, raising heights, reducing setbacks and scrapping a requirement that new structures be compatible with older ones.

>>Inheriting Inequality: Read the American-Statesman’s 2015 series on how the city’s history of segregation, and continuing isolation of minority residents, threatens Austin’s economic well being.

Over the past two decades the streets’ fortunes have diverged.

“The 11th Street corridor has become an attractive entertainment and restaurant destination, while the East 12th Street corridor remains largely unimproved, with many vacant properties,”  a 2012 study commissioned by the city reported.

In some ways that made sense; 11th Street historically had been more of a commercial center, and the city already owned properties there that it could contribute to revitalization. Austin has spent tens of millions of public dollars on buildings and infrastructure improvements to seed the street’s rebirth.

The reasons for 12th Street’s relative neglect weren’t always obvious, however. The 2012 study recommended Austin invest $10 million to upgrade public infrastructure as it had done on 11th Street, but the money never materialized. Federal housing officials  threatened to take back property on 12th they’d helped purchase because the city moved so slowly making use of it.

The 12th Street area was one of the last inner-city neighborhoods to be swept up in the city’s recent economic boom. But given its proximity to downtown, its arrival was inevitable. Since 2010, the average price of a property there has risen faster than in any other area in the city.

Locals — by now many of them  recent, mostly white transplants drawn to the sleepy charm of a historic neighborhood in the shadow of Austin’s skyline — have greeted the land rush with alarm. With the corridor’s combination of suppressed development and builder-friendly zoning, the new neighbors say they are now scrambling to control new growth using outdated tools.

The Kealing Neighborhood Association recently convinced the City Council to lower height limits from 50 feet to 35 feet along parts of 12th Street. “My fear,” said Houston, “is that this will become the Domain.”

The old, hungry-for-investment land-use rules are “definitely not the Wild West,” Clark-Madison said. “But they do allow for an intensity of development that’s now outdated in Austin.”

Fertile ground, in other words, for an opportunistic real estate investment company to move in.

Eureka and a partner purchased the historic I.Q. Hurdle House at 1416 E. 12th St. two years ago. Hurdle was an African-American public school educator in East Austin from the 1920s through the ‘50s. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Eureka and a partner purchased the historic I.Q. Hurdle House at 1416 E. 12th St. two years ago. Hurdle was an African-American public school educator in East Austin from the 1920s through the ‘50s. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Monica Escobar peeks out of the door at Gia Cornejo, 4, and Kellan Martinez, 1, as Michelle Martinez looks on. Mount Carmel Village Apartments was one of Eureka’s first Austin purchases, in 2007. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Monica Escobar peeks out of the door at Gia Cornejo, 4, and Kellan Martinez, 1, as Michelle Martinez looks on. Mount Carmel Village Apartments was one of Eureka’s first Austin purchases, in 2007. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Explore East Austin parcels owned by Eureka Holdings

The company's 114 properties in the 78702 zip code, held under a variety of names, had a combined appraisal value of more than $51 million in 2017. Click on parcels to see date purchased and appraised value.

Source: Travis County Appraisal District as of June 2018

A half-gentrification?

As one of the fastest-gentrifying sections of one of the  fastest-gentrifying cities in the country, East 12th Street could be seen as among Austin’s most endangered ecosystems. So Eureka’s sudden position at the head of the table has created an urgent guessing game.

Natasha Harper-Madison, founder of East Austin Advocates and a City Council candidate, said that company representatives have been amicable but not forthcoming about their plans. “I have no idea,” she said “Nobody does.”

Campos acknowledged the tension. “I could understand why people would be anxious,” he said. “We have a significant presence over there.”

He vowed to work with locals to follow the land-use guidelines written into various neighborhood plans. “That’s what makes a great neighborhood —talking to the local residents, talking to the local nonprofits, trying to bring everyone together. A great, vibrant neighborhood is what we’d like to see,” he said.

Yet city officials say no blueprints have made it to their desks yet. Meanwhile, neighbors add that some Eureka properties remain vacant or run-down, prompting concerns the company is spurring a sort of half-gentrification — all the exploding prices and dislocation without any of the actual improvement.

For Eureka and Campos, building a neighborhood empire in East Austin represents a departure from previous ventures, which have concentrated on acquiring and managing government-supported affordable housing.

Campos first moved here in 1981 as a student. He moved east after graduation to escape the then-stagnant local economy. Yet it was a financial crisis that was to provide his first big business break.

Fresh out of Harvard Business School, Campos returned to Texas in the early 1990s. He teamed up with two partners to purchase a Dallas apartment complex, with hopes of adding more.

At the time, the Resolution Trust Corp., created to pick up the pieces of the imploded savings and loan industry, had seized more than 100 Texas banks and was looking to unload their portfolios. Campos’ first RTC purchase was a distressed apartment complex that rented to low-income residents of Dallas’ Bachman Lake neighborhood.

Click play button below to see Eureka purchases on and around 12th Street by year.

The partners moved into the building themselves, repairing it enough to raise both occupancy and rents. They used the income to pick up more RTC properties. Campos said the company eventually grew to 15,000 units. He cashed out in 2001 and traveled some but soon decided to re-enter the low-income housing business by himself.

Today, Campos’ Eureka Holdings owns 32 housing complexes in six states, 19 in Texas. Most cater to low-income tenants; a third are in the U.S. Department of Housing and Urban Development’s Housing Assistance Program, a voucher system for Section 8 tenants.

“A lot of the things we’ve done with Eureka is go in and improve neighborhoods, work with local communities to basically better the environment for residents, for community members,” Campos said.

Stevin Kane of Kane's Barber Shop cuts Martin Kareithi's hair on a recent Saturday. Kane said a Eureka representative came by his shop numerous times seeking information about the property’s owner. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Stevin Kane of Kane's Barber Shop cuts Martin Kareithi's hair on a recent Saturday. Kane said a Eureka representative came by his shop numerous times seeking information about the property’s owner. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

HUD bumps

It hasn’t always gone smoothly. In 2008, a Dallas subsidized housing property, Ridgecrest, failed a HUD inspection due to poor conditions in the apartments. The next year the city, citing code violations it said made Ridgecrest a dangerous place to live, sued Eureka to force the company to make the repairs. Eureka paid a $3,000 penalty to HUD in 2009. The suit with Dallas was settled three months later.

Campos said Eureka’s HUD properties have failed five inspections over the years, but that the identified problems were quickly fixed and each property passed its subsequent inspection. He added that the federal agency had approved Eureka to take over so-called troubled properties with failing scores, which the company improved.

A review of recent inspections showed all met HUD requirements. Still, the  names of Eureka’s apartments periodically appear in  grim accounts of  crimes committed on company property. In 2016, the city of Houston floated (but later abandoned) a “ gang injunction” that would have prohibited known gang members from entering a high-crime area centered on  Southlawn Palms apartments. The company  has been sued several times by former residents for failing to protect victims from murders and assaults.

Eureka donated a security camera system for Memphis, Tenn., police to monitor its apartments there. In Aliquippa, Pa., a Pittsburgh suburb, it added lighting and security cameras and tightened residency screening after a series of complaints about conditions in its Towne Towers. Acting Police Chief Robert Sealock said the measures have helped.

Eureka entered the Austin market on familiar ground, acquiring the low-income Oak Creek Village Apartments in South Austin and Mount Carmel Village in 2007. Both rent publicly subsidized housing.

Five years ago, the company redeveloped Oak Creek with  more than $20 million in public financing, subdividing the land off West Oltorf Street and building another low-income complex called Lucero. Eureka  earned high marks for creating affordable housing, particularly in the affluent 78704 area, and including residents in the planning of the complex.

Reviews of the six-story stucco complex since its completion have been mixed. “We didn’t anticipate some of the issues we’re finding now,” said Koreena Malone of the Oak Creek Village Tenants Association, who cited poor maintenance and a rat infestation as concerns.

Travis appraisal records show that between 2008 and 2013, Eureka didn’t acquire any additional Austin properties. Over the past four years, though, it has gone on a spree, adding about 30 each year to its portfolio.

Five years ago, Eureka redeveloped Oak Creek, subdividing the land off West Oltorf Street and building another low-income complex called Lucero. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Five years ago, Eureka redeveloped Oak Creek, subdividing the land off West Oltorf Street and building another low-income complex called Lucero. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Pastor Robert Waddle at Simpson United Methodist Church, 1701 E. 12th St. “How do you defend against growth and change when people are selling willingly?” (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Pastor Robert Waddle at Simpson United Methodist Church, 1701 E. 12th St. “How do you defend against growth and change when people are selling willingly?” (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Prices ‘have been real nice’

“I was in the yard and they came over to speak to me,” Otis Bell recalled. “They came with a fair price.”

Bell said he was ready to sell by the time Eureka approached him about buying his house near the corner of East 12th and Salina streets. When he acquired it in 1995, the house was valued at less then $17,000. Last year it was appraised at nearly $300,000.

“The taxes made me decide,” he said. “They kept going up, up, up, up.” He and his wife, Lola, best known as the owner of Nubian Queen Lola’s Cajun Soul Food Cafe, have since moved to Taylor.

Just to the west, Pastor Robert Waddle said Simpson United Methodist Church declined Eureka’s $300,000 offer for a sliver of land behind the church. “We use it for picnics,” he said.

Still, he added, he understands why people have been accepting the company’s offers. “How do you defend against growth and change when people are selling willingly? The prices they’ve been offering have been real nice. And they are very persistent.”

Eureka estimated it has purchased 70 percent of its 12th Street corridor properties from listings. But local landowners also trade stories of its relentless solicitations.

“Every other month for the past three years,” said Matt Harriss of Butler Equities, which is just starting to build a mixed-use project on East 12th and Angelina streets.

Eureka infuriated some last year when it sent a letter to corridor homeowners warning that Capitol view corridor restrictions limited the value of their land, suggesting it might be prudent to sell to Eureka. Yet the rules, which prohibit buildings that block views of the Capitol in designated sightlines, don’t apply to 12th Street.

Campos said the letter referred to a proposal by Houston to extend a Capitol view restriction over parts of the 12th Street area. But the City Council did not approve the idea, which the letter did not mention .

Other missteps have contributed to distrust of the Dallas company. “They are hugely responsible for their bad perception,” Clark-Madison said.

Last September, Eureka painted over an iconic mural of a black woman known as the Mama Sana, replacing it with a generic collection of musical instruments and the caption, “Austin, Live Music Capital of the World.” Nearly three years after the company purchased a 12th Street house designated historic for its connection to a prominent black family, the property remains boarded up.

“We thought we had made arrangements for the buyer to fix it up and move it,” the seller of the I.Q. Hurdle house, Irving Henry Allen Jr., said from his Utah home. Campos said Eureka purchased the property with a partner and although moving the historic structure “remains a potential plan” it “was not a condition of the sale.”

At the corner of East 12th and San Bernard streets, Stuart Hines King, owner of King-Tears Mortuary, which has stood at its current location since 1934, said he turned down an early offer to sell to Eureka but wishes the company well.

“I don’t have a problem with change and improvement,” he said. “But some things in East Austin need to be left alone. This is nothing money can buy.”

Alta Y. Alexander, owner of Altatudes, which she described as the only African-American-owned high-end women’s wear boutique on East 12th Street, said company representatives have approached her “aggressively” seeking information about her landlord. She said it is important to her that her business stay in the neighborhood. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Alta Y. Alexander, owner of Altatudes, which she described as the only African-American-owned high-end women’s wear boutique on East 12th Street, said company representatives have approached her “aggressively” seeking information about her landlord. She said it is important to her that her business stay in the neighborhood. (RICARDO B. BRAZZIELL / AMERICAN-STATESMAN)

Lola Bell and her husband Otis relax on the front porch of their home in Taylor. Last year, Bell and her husband sold their property to Eureka. (ANDY SHARP/ FOR THE AMERICAN-STATESMAN)

Lola Bell and her husband Otis relax on the front porch of their home in Taylor. Last year, Bell and her husband sold their property to Eureka. (ANDY SHARP/ FOR THE AMERICAN-STATESMAN)