When it comes to big mixed-use projects in Central Texas, The Domain in North Austin has become a common benchmark for what developers try to emulate. But a long-time Austin developer looked south for inspiration for a 45-acre project in Kyle called "Project Two Step."
The team at Capella Commercial LLC has spent years developing the ambitious plans for the site that straddles a curved area of Farm to Market Road 150 East near Interstate 35. That involved several meetings with city staff and analyses of what was missing from the fast-growing city south of Austin — and what was coming and how they could fit into it.
But it also involved multiple trips to The Historic Pearl in San Antonio, an integrated district filled with dining, entertainment options and more.
"The whole idea is to create something that's really unique," Todd Dailey, managing partner at Capella, said. "It's not like a Domain, which is massive.... We wanted it to be more quaint and really kind of aesthetic."
What they've proposed is something that could transform two parcels at the eastern gateway of Kyle. Plans for a western 15-acre tract include an outdoor amphitheater surrounded by restaurants, retail outlets, office spaces, a hotel, town homes, residential flats and two small ponds. The roughly 31-acre tract on the east side could include a multifamily project with retail, encompassing a beer garden, rooftop pickleball courts and a large pond. The larger pond will allow kayaking and paddle boarding. The site also includes a dog park and parking structure.
It's Capella's largest project as the brokerage and development firms looks to grow its commercial real estate team and development pipeline, with an eye on areas south of Austin and up north in Williamson County. Capella leaders are looking to add a handful of people to their team of roughly a dozen, and they also made two recent promotions: Nichole Sproull as chief operating officer and Jason Beers as director of development.
While the company has a number of storage and industrial projects, Dailey said it wants to tap into the demand for mixed-use development as people continue to move to Texas in droves.
"People are wanting to live, work, play, have really cool outdoor scenery. It's just convenient," Dailey said. "I think that's where everything is headed."
The company also is developing a seven-building commercial hub in Marble Falls, a city outside of Austin that's poised to see population growth in the coming years.
Capella has had a front-row seat to the region's growth. Dailey joked that it has developed in just about every city in and around Central Texas, including office, retail, multifamily and industrial projects. That includes Arena Tower near The Domain, River Place Medical Center and Pflugerville Crossing.
Dailey said his impression of the current market is that the fast rise combined with rising interest rates and costs — and, essentially, a resetting of the economy — has left developers "a little bit spooked." While others put projects on hold to await an anticipated drop in costs, the Capella team has been working on getting a number of projects shovel-ready so they can start once costs come down. He said that gives them a leg up in the Austin market.
"The good news is we're in Austin, Texas, and the growth hasn't really slowed," he said.
That starts with Two Step. Dailey said another broker pitched the parcels to the Capella team years ago. They were intrigued by the projected cityscape around it, including proposed developments like the expanded H-E-B, as well as the Vybe Trail that is expected to bring walking, running, bike and cart paths throughout the entire city. That, plus the visits to San Antonio, prompted them to plan a mixed-use project.
The project is focused on being "local," with small business restaurants and retailers and local performers at the amphitheater. Aesthetically, they're trying to model it based on other city developments. That's one reason they plan to have a silo at the front of the project, which can also advertise future entertainment options.
"The idea is just, 'What can we do to draw people there that want to spend not just an hour or two but half a day there?'" Dailey said.
Capella presented those plans to the public for the first time in December after a number of meetings behind the scenes with Kyle officials. What has stood out about Kyle compared to other cities is its "pro-growth mindset," Dailey said. He said they've been friendly with developers compared to some other places they worked where permits could take years to get approved or they get more pushback on what they're trying to do with a project.
"There's just some stigma out there in a few different areas," he said. "We never really heard any, 'No we don't want this,' or 'No, we don't want that.' It is just very, very welcoming."
Developers are seeking incentives for the project in the form of a 15-year, 50% property and sales tax rebate that is estimated to equal $14.3 million. City officials estimated that the project would bring $62 million in sales and property tax revenues to the city over a 20-year period. The funds would be used for construction of the parking garage and integration of amenities.
The first of those agreements — the approval of incentives, a planned unit development and more — are expected to return to Council by next month. Kyle council members did not previously take a vote but did propose smaller tweaks to the plan, such as looking into reusable water options to account for the region's droughts and shade for the dog park.
"This project is very exciting to me because, for many years, I've been a resident of the area and have seen this land vacant and been excited to see who wants to take it on and what they can do with this property," Kyle's economic development director Victoria Vargas said during the December meeting.
If the approvals are secured, Capella's goal is to start construction in the fall and complete all three phases by May 2026. Dailey said the company already is receiving interest to operate the beer garden and hotel and is close to finalizing a contract with a multifamily developer. Their project team includes Gensler as the architect, Kimley-Horn and Associates Inc. as the civil engineer and SEC Planning LLC as the land planner.
Kyle, which is located about 20 miles south of Austin, had an estimated 2022 population of about 57,500 — about 11% year-over-year growth that ranked it the third-fastest city in the country among those with a population of at least 50,000.
That population growth has attracted a host of new employers and large-scale development. Other notable companies that are opening in the area include Sovereign Flavors Inc. and Tesla Inc. Other retail projects include Costco Wholesale Corp., Sprouts Farmers Market and the $240 million Vybe Park.