San Antonio authority issues default notice to developer over federal office subleases

The Brooks Development Authority issued a formal notice of default to BOZ III-WatersEdge on Tuesday. The entity is associated with Preston Hollow Community Capital, a Dallas-based firm that controls office buildings at the former Air Force base. The move challenges two federal leases for space at WatersEdge II.

Federal documents reveal the leases cover 75,000 square feet of office space. The agreements are 15 years long and valued at $51 million. The space is designated for federal immigration-related legal operations. These include the Office of the Principal Legal Advisor and the Executive Office for Immigration Review.

Brooks officials state that the subleasing arrangement violates the existing lease agreement with the property developer. The authority argues that the proposed use of the building for federal immigration hearings is not permitted under the current terms. Brooks did not specify which lease provisions are being violated in the notice.

A spokesperson for the authority said in a statement, "Brooks did not negotiate or approve this sublease, and we oppose the proposed use of the property." The spokesperson added that the board is acting to protect the long-term interests of the Brooks community. The notice serves as a warning that the board believes Preston Hollow has breached the contract.

Preston Hollow has 60 days to address the alleged violation. If the company does not respond or resolve the issue, Brooks may pursue further legal action. The notice does not immediately halt the federal leases. It remains unclear what specific steps Brooks will take if the dispute is not settled within the designated period.

Preston Hollow disputes the allegations made in the default notice. A company spokesperson said Tuesday, "We don’t agree with the letter’s contentions, but this action by BDA gives rise to several options and we are considering them." The firm is now evaluating its response to the authority's actions.

Emails obtained by the San Antonio Report show Brooks leadership raised concerns about the leases shortly after they were announced in October. On Oct. 8, Mayor Gina Ortiz Jones contacted Brooks President and CEO Leo Gomez to confirm the agreements and request details on federal plans for the property. Gomez initially stated that officials were contacting Preston Hollow and its brokerage firm, Transwestern, for information.

Later that day, Gomez confirmed the agreements covered three of the four floors at WatersEdge II. He noted that Preston Hollow was solely responsible for negotiating the agreements with the federal government. Gomez wrote to the mayor, "While I frown upon the uses at Brooks, it’s important to clarify that Brooks has not been involved in negotiating or facilitating these leases."

The City Council approved a resolution on Oct. 15 directing officials to explore ways to prevent or delay the Brooks leases. This action expands the city's opposition to ICE presence in San Antonio. The city is also pushing back against a planned immigration detention and processing facility on the East Side. ICE already operates two field offices in the San Antonio area.

Brooks officials said they are awaiting a response from Preston Hollow or the expiration of the 60-day period. The authority will determine its next steps after that timeline concludes. The dispute centers on the rights to sublet commercial space at a mixed-use development on the city's Southeast Side.