Austin City Council will decide next week whether to enter into preliminary negotiations with Aspen Heights Partners regarding the redevelopment of the former Health South property and its accompanying parking garage, on Red River Street.

The Health South site, at 1215 Red River Street, would be part of the city's burgeoning health innovation district—a nexus of academic, business and public tenants focused on new health policies, systems and products—along with the redeveloped Brackenridge Campus, Dell Medical School and Dell Seton Medical Center.

As proposed, the district could provide nearly 3,000 new permanent jobs, increased land value, a new property tax base and $800 million in economic output, according to an analysis commissioned by the Downtown Austin Alliance.

It would also be surrounded by other destinations—including the University of Texas at Austin campus, the urban parks network Waterloo Greenway, the Red River Cultural District and the Capital Complex—and served by a realigned Red River Street, which UT is constructing to make space for its new basketball stadium.

(Downtown Austin Alliance)

The Health South redevelopment would serve as a catalyst project, weaving together the different entities of the innovation district and serving its neighboring sites, Economic Redevelopment Program Manager Margaret Shaw told council during a work session on Tuesday.

The city purchased the Health South property and its parking garage in 2017. At that time, council directed staff to issue a solicitation to redevelop the property, with a focus on including affordable housing. Due to the pandemic, the solicitation process was extended slightly, from November 2019 through April of this year.

"We were quite pleased with the response from the market, given the fact that we were under a global pandemic and real estate was quite up in the area," Shaw said. "We received four proposals in strong, well known partners locally and nationally."

City staff recommended Austin-based developer Aspen Heights Partners, which was behind the Independent, a luxury condo tower downtown, based on its proposal. It includes two towers—a 36-story residential building with 348 apartments and 160 condos and a 15-story office tower—connected by an elevated park plaza. More than a quarter of the residential units would be designated affordable, targeting residents who earn between 50% and 60% of the median family income, with ownership options for those earning 80% of the median family income.

"I find it to be comprehensive and amazing, and it addresses the need in the community (and) it addresses the need in that area," District 1 Council Member Natasha Harper Madison said. "I'm very happy to support this project in District 1."

Council members postponed the vote until next Thursday to allow residents more time to provide feedback on the proposal. If council grants its approval, city staff will begin preliminary negotiations with Aspen Heights Partners, which could take up to six months. Once that process is completed, the city would move on to negotiating a master development agreement for the project, which could take up to two years, prior to the start of construction.

Over the last year, some council members have suggested using the site as an emergency homeless shelter, which prompted disagreement on the dias.

In the meantime, Austin Resource Recovery has used the former Health South parking garage, at 606 East 12th Street, as part of its Violet KeepSafe Storage program, which provides storage for homeless residents.