By Sahar Chmais
KYLE – Amazon, Lowe’s, ENF Technology Co. and potentially another Fortune-500 company – all these businesses are nesting in the city of Kyle and for a good reason. But these big names were brought to Kyle using a less conventional, yet apparently effective method.
Kyle has long been a primarily residential city, but logistics companies are starting to come in, bringing the city a new source of taxes while opening more job opportunities for the region. In order to expand and open the door for more companies to come in, the city had to make a somewhat risky financial decision.
Instead of waiting for these companies to choose Kyle, the city contracted with Majestic Realty, had them develop large buildings, and hoped companies would make their way into the available space.
This tactic may not have worked without Kyle’s already attractive amenities for logistics companies. To understand Kyle’s role, it is best to know the surrounding areas.
Austin has experienced a large success, becoming like the Silicon Valley of Texas, said Brian Masterman, senior vice president of Majestic Realty Company. So what does that have to do with Kyle?
Companies moving out of the crowded and expensive California first went to Austin; now Austin has become more expensive and has created difficulty in getting approval to build, Masterman said. The city is also hilly, which makes it more difficult to build industrial structures because they require flat land.
Kyle, on the other hand, checked many boxes Majestic Realty was looking for: it closes the gap between Austin and San Antonio, it is on the I-35 corridor, the land fit the developers’ needs and the city gave tax incentives.
The incentives were based on a five-year tax ramp-up deal; the first year Majestic Realty pays nothing in taxes, the second year they pay 20%, then 40%, 60%, 80% and so on. The deal works as long as the buildings were not being leased. Once leased, full taxes are due.
“The property was not generating tax revenue to begin with,” Mayor Travis Mitchell explained why the city struck up the deal. “What we gave up was a couple years of tax revenue – if the building remained unleased.”
Mitchell said the land was not going to be generating revenue regardless, because until someone came along to use it, it was just sitting dirt.
Not long after the buildings were complete Amazon decided to open up. It increased the value of the building by equipping it with air conditioning, Mitchell said. Shortly after Amazon made the deal, Lowe’s distribution followed.
Having Majestic Realty build before finding a tenant also brought more attention to the city’s logistics potential.
NorthPoint Development has purchased land in Plum Creek. Mastermind said that Majestic Realty proved the market, opening up more room for others to follow.
While the city had given out incentives to developers before, moving forward, that will no longer be the case.
“Next industrial park that comes up,” Mitchell said, “there will be no tax deals because the market has opened up.”
Mitchell also hinted at a Fortune-500 company coming to Kyle, but could not disclose any details because nothing has been signed — yet.