Metro to hold Midtown land for private developer

The Chronicle reports today on an interesting land deal going down in Midtown: Metro is buying two blocks of Main Street property from a developer with plans to sell it back to the developer after a few months so the developer can build a transit-oriented development there. For developer Robert H. Schultz of RHS Interests, it's a pretty sweet deal: He gets cash in hand for the property now, a year-long guarantee that he can buy the property back for the same price Metro bought it, and several months of essentially owning the blocks tax-free. Not bad! We bet everyone's going to want to get in on this kind of Metro-backed development.

Here's the skinny: Metro is closing now on the purchase of two blocks bounded by Main, Travis, Holman and Winbern at a price of $7.2 million. The agency will hold the land for Schultz (who also owns the Continental Club in the block south of the property) for 18 months; for the first 12 of those, RHS will be able to buy the land back from Metro for the same $7.4 million the agency paid for it. After 12 months, RHS will be able to buy the land back for the original cost plus interest, and after 18 months, Metro may do whatever it wants with the property. Schultz said the deal buys some time for RHS to get city variances for the development, which could contain up to 50,000 square feet of retail, 400 residential units and hotel or office space. Also included in the plans is a parking garage that Metro might help RHS develop so that it could be used — in part, at least — by rail riders. Schultz said Metro is willing to put some money into the garage, but didn't want to get into full-scale development: "They didn't want to extend that kind of money," he said. "They wanted to be much more conservative until they would see this thing was going to happen." Todd Mason, Metro's vice president of real estate services, said the agency wants to be an "enabler" of projects that could put people on public transit. This development, he said, could increase Metro ridership by 1,000 passengers a day.

Thing is, as the Chronicle points out, no one will be paying taxes on the property as long as Metro holds it: The agency is tax-free, and though Schultz will essentially have a hold on the land, he won't have to worry about the $200,000-ish tax bill, either. Metro spokeswoman Raequel Roberts said the deal "is fully compliant with the law," but City Councilman Michael Berry said it shows Metro overstepping its duties. "Metro has completely lost focus," he told the Chronicle. "They're supposed to be in the business of moving people, and instead they want to be real estate developers."