Developers Awarded $41 Million to Build Mixed-Income Apartments at Former Cabana Hotel
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The Dallas City Council approved Wednesday $41 million in tax increment financing funds for the redevelopment of the former Cabana Hotel into mixed-income housing.
Developer Zach Krochtengel with Cabana Sycamore Development Inc. requested the Tax Increment Financing funds to boost a $116 million redevelopment project on 3.27 acres at 899 North Stemmons Freeway.
The former historic Cabana Motor Court Hotel is within the Design District’s Tax Increment Financing District, so developers are eligible to apply for funds collected from property taxes within the TIF zone to use for reinvestment purposes.
About $5 million will be distributed to the developer upon acquisition, and another $5 million will be paid at 50 percent completion. The remainder is paid after the building is complete and 70 percent leased, said Economic Development Director Robin Bentley.
Of the 3,041 residential units in the Design District TIF zone, only 63, or 2 percent, are income-restricted, according to city documents.
The Cabana project will offer 160 multifamily residential units — 64 income-restricted and 96 market-rate units, the developer’s proposal states. The number of affordable units represents about 40 percent of the development.
During a Sept. 5 meeting of the Economic Development Committee, Councilman Omar Narvaez said the greatest need for affordable housing in Dallas lies in the Design District.
“This would be a huge victory for this area, especially with all the new housing coming in,” Narvaez said. “Typically TIF funding requires 20 percent affordability at 80 percent [area median income], so this is definitely way more. It also only requires 15 years. This one will be 45 years of guaranteed affordability. As much as I would have loved to see the old Cabana Hotel come back, housing is much more important to us, especially in the Design District.”
Cabana Hotel’s Long Road to Redevelopment
Built in 1962 by Jay Sarno of Caesar’s Palace fame, the Cabana Hotel holds many stories of celebrity parties with The Beatles and Led Zeppelin. It was repurposed into a county jail and purchased in 2017 for a reported $8.1 million by Mehrdad Moayedi’s Centurion American Development Group.
“For over a decade this building has been empty,” Narvaez said during Wednesday’s council meeting. “There was a developer who had plans to rehab it and bring it back to its old glory, but that is no longer in their plans. [Krochtengel] came in and wants to change it into housing. What we’re missing is workforce housing.”
Former Dallas City Councilman Philip Kingston, an attorney representing the developer, said the plurality of the affordable units are designated for residents at 30 percent area median income.
“That’s the level of housing that someone teetering on the brink of homelessness needs,” he said. “Some of those units will be three-bedroom units, allowing families in desperate need to live here.”
From a finance perspective, this is not an affordable housing project, Kingston added. Texas Department of Housing and Community Affairs, Historic Preservation state and federal tax credits, and the City’s Economic Development Department also have contributed to the project.
“You’re getting three of those big-ticket items that this council has been very focused on achieving for Dallas in one project,” he said. “That, I think, is going to be the new model going forward.”
Mixed-Income Apartments Draw Opposition
Former Dallas City Councilman Ed Oakley said the planned development and Design District TIF zone were put in place while he was in office to provide infrastructure funding for public improvements.
“It’s not that I’m opposed to affordable housing, it’s the amount of money that’s being allocated — $41 million to this project that’s going to cost $116 million for 160 units,” Oakley said. “It doesn’t make economic sense to me.”
He questioned whether it’s safe to have children in an apartment building on a freeway.
“I don’t understand the logic,” he said. “Somebody needs to explain to us why you would be taking the entire TIF funds for this project … You’re now taking all the funds that were allocated for infrastructure improvements in the oldest industrial park in the City of Dallas.”
The Design District TIF Board voted 3-1 against the deal earlier this month.
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So that’s $116M/160 or $725K per unit? And the taxpayer is paying $41M? That looks like someone is going to make a hell of a lot of money on this deal.