What Windcrest Mayor Dan Reese remembers most about this time last year were the dark corridors of Rackspace Technology’s sprawling offices in the middle of a workday.
“My contact at Rackspace had called me over and walked me through the building and showed me that there were, in essence, 20 people in the building,” Reese said. “He said, ‘We can’t sustain this.’”
It was October 2022 and downsizing and the pandemic-induced remote work culture had left the 1980s-era shopping mall that the tech company had converted to an office building virtually empty of workers.
Shortly after that tour, Rackspace announced to employees it planned to relocate from its home of 14 years, the former Windsor Park Mall, to new digs a fraction of the size.
In the time since his dispirited tour of the nearly vacant offices, Reese said Rackspace and the city have reviewed six offers to buy the property.
One rose to the top: a developer that specializes in turning shuttered shopping malls into large industrial complexes and leasing the space to manufacturers and warehousing companies.
Reese confirmed that Ohio-based Industrial Commercial Properties (ICP) is in talks with company and city officials to purchase the property and redevelop it.
But no contracts have been finalized, he emphasized. Commercial real estate firm JLL is brokering the deal. JLL did not return a call for comment.
The building — what Rackspace called its “Castle” — sits on a 67-acre parcel of land along the heavily trafficked Interstate 35 in an area annexed by Windcrest, a 2.2-square-mile bedroom community in Northeast San Antonio with a $10.5-million annual budget.
Rackspace remade almost half of the 1.2 million-square-foot mall on Walzem Road, long before vacated by retailers, into a playful office space complete with a spiral slide.
A veteran and three-term mayor, Reese was serving on the City Council when the deal with Rackspace was brokered.
“I think the struggle at the time is that there were at least four owners [of the mall], and it just didn’t look like anyone was going to do anything with us,” he said.
Though Rackspace will be forced to repay the City of Windcrest $9 million in tax breaks, according to the 2007 agreement it made with the city that runs through 2037, its departure could have left Windcrest holding the bag.
Rackspace bought the property in 2007, however, it is listed as owned by the Windcrest Economic Development Corporation for the “property tax advantage,” Reese said. But the company has included the city in its discussions with the potential buyer.
In May, ICP presented a plan to City Council that would renovate the building into light industrial space while also using more of the land as potential commercial pad sites.
When fully operational, the project could generate annual revenue to the city of $5.4 million and to the state of $4.7 million, according to Reese, citing an economic impact study by the UTSA Institute for Economic Development.
ICP’s website states that it is currently redeveloping five shopping centers across Ohio and one in Missouri.
While negotiations between ICP and Rackspace are ongoing, Reese said, the city’s economic development officials are also working on a package of incentives that won’t be finalized until the transaction is completed.
The ICP project is estimated to be valued at between $40 million and $50 million, according to city documents. Proposed tax exemptions from the City of Windcrest, “County entities” and the Northeast Independent School District, will come to between $5.6 million and almost $7 million over a seven-year period.
The city’s economic development corporation also intends to contribute $1.3 million toward the property purchase, demolition and renovation, state the city documents.
Rackspace’s new home will be at RidgeWood Plaza II, an office building just north of Loop 1604 and near U.S. Highway 281. It will occupy 80,000 square feet of space there, a Rackspace spokeswoman said.
The company’s move date is expected to be in December or January 2024, she said. It plans to reuse furniture and systems from its Windcrest building and donate surplus assets to San Antonio nonprofits and schools.
