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Federal Realty Investment Trust, Developers of Hotel Valencia, Planning a 27 story
 Hotel and Condominium Complex in Downtown San Antonio; Some Speculate
 the Project Will Carry the Fairmont Brand

By Rachel Stone, San Antonio Express-News
Knight Ridder/Tribune Business News

May 20, 2006 - The historic downtown Kress building is about to transform its five-and-dime past into a four-star hotel future.

Kress owner Federal Realty Investment Trust, which brought San Antonio the glamorous Hotel Valencia, this week got preliminary conceptual approval to build a 27-story hotel and condominium complex on what is now a parking lot at East Houston and Jefferson streets.

The adjacent six-story Kress building would be converted into a high-end hotel and restaurant, connecting to floors one through six of the new building. Floors seven through 27 of the new building would be high-end condominiums.

The project's lead developer is the Robert Green Co. of Barstow, Calif.

So far, no one will say which company would operate the hotel. But 3D/I architect Andrs Andjar described the hotel operator as a well-known high-end chain with hotels in Dallas, San Francisco, Chicago and other cities.

The San Antonio Historic and Design Review Commission gave developers preliminary approval to add a pool, spa, bar and terrace to the Kress building's roof.

The commission's approval is based on the condition that developers preserve the Kress retail signs at street level and on the building's roof.

The commission also requires that the high-rise addition's facade match the Kress building's architecture.

Renovations to the Kress building also would include a new elevator and stairs and facade restoration.

The historic landmark most recently housed the Houston Street Live nightclub complex, which closed over a year ago, and has been vacant since.

While there is no official word on the coming hotel chain, Bob Shearer of Cambridge Realty speculated it could be Toronto-based Fairmont Hotels & Resorts, based on Andjar's description.

In 2000, Cambridge sold 13 properties, including the Kress building, on three blocks of East Houston Street to Rockville, Md.-based Federal, which invested $150 million to renovate the properties as part of the Houston Street revitalization.

"That's going to be a very interesting project," Shearer said of the Kress hotel.

The Houston Street development "has taken longer than people thought, but it's gaining critical mass and it's really taking off," he added.

Hotels in downtown San Antonio are the most profitable in the state, said Bruce Walker, president of Source Strategies Inc., a local hotel consultant.

"You're going to make money," Walker said.

"When someone tells me they want to convert a building into a hotel in downtown San Antonio, I say, 'What's new?'" Despite the hot downtown hotel market, some do struggle when they open in San Antonio without a recognizable brand.

When the Hotel Valencia opened three years ago, it wasn't a hit right away. Investors didn't start making money until recently, Walker said.

"They're doing great now," he said.

If the proposed hotel were in fact a well-known high-end chain, then, it might do well right from the start.

S.H. Kress & Co. started building department stores in 1896, employing architects to design its buildings to match the style of cities in which they were built, according to the National Building Museum's Web site.

Kress buildings have been renovated and reused as lofts, hotels and retail and office spaces in New York, New Orleans, Long Beach, Calif. and many other cities, according to the site.

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To see more of the San Antonio Express-News, or to subscribe to the newspaper, go to http://www.mysanantonio.com.

Copyright (c) 2006, San Antonio Express-News

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