Kevin Covey bets big on downtown San Antonio’s future

Holding a Local Coffee cup in one hand, San Antonio developer Kevin Covey examined a brick in the other before leaning in to look at the mortar of a wall at a popsicle shop he’s building in Southtown.

He visits the shop about twice a day to check on the bricklaying, windows, metalwork, landscaping and pretty much everything else, Covey said. He picked out the brick himself at the D’Hanis Brick & Tile Co. a few weeks earlier. The shop is in a retail center in the heart of Southtown — just one of the $200 million in projects he’s building as managing partner of GrayStreet Partners.

On a visit the night before, he told his masons to level the mortar with the surface of the bricks instead of scooping it out. It looked good, he told his crew.

“Anyone who walks there, consciously or subconsciously, will notice that brick,” Covey said afterward. “Whether the project is spectacular or not is all based on the effort that someone puts in the details.”

It’s that attention to detail — amid days jammed with meetings with architects, engineers, tenants and city officials — that helped catapult the 32-year-old from relative obscurity to the center of the real estate renaissance downtown in just two years. His projects dominate three blocks of Houston Street between the Alamo and the San Antonio River, an iconic thoroughfare that was San Antonio’s most fashionable shopping district before it fell into decline over the last 50 years. He’s already overhauled 300,000 square feet of office space in the area, targeting tech startups, with another 250,000 square feet underway, he said.

Covey’s ambition isn’t limited to Houston Street. He’s become one of the biggest players at The Pearl, where he owns 4 acres and has another 15 acres under contract to buy. Last year, he bought the Light building on Broadway with plans to turn it into creative office space, and he wants to build an apartment complex next door.

“It’s an impressive feat, no question. He’s been able to raise a significant amount of money to buy a significant portfolio of assets, and he’s got a very large pipeline in front of him,” said David Adelman, another major downtown developer. “As someone who’s been plugging away at it for 25 years myself, he’s come a long way in a very short period of time.”

Covey took a roundabout path to San Antonio. With an American father and Mexican mother, he spent the first 10 years of his childhood in Monterrey, Mexico, drawing inspiration from the country’s dense, free-for-all building style. He still picks up ideas on frequent trips to Mexico, where he admires developers’ willingness to experiment and take risks. He refined his urban philosophy while living in Chicago, New York City, Los Angeles and Houston.

He’s known for his laid-back personality and wry sense of humor, as well as his perpetual 5 o’clock shadow. He has a strong intellectual curiosity, his friends and associates say. An amateur astronomer, he uses his telescope on clear nights to measure light from distant stars, entering his observations into an international database.

Super-quirky

“His style is understated and intellectual and thoughtful,” said David Heard, co-founder of Tech Bloc, a group that advocates for the local tech community. Covey chooses his words carefully, he said. “He says fewer words that are impactful rather than running on and on.”

Andrew Weissman, a local restaurateur who has worked with Covey on Moshe’s Golden Falafel and other restaurants, said he is a “quirky-as-hell guy.”

“He’s super-quirky, he’s smart, he is always disheveled, but at the same time he’s got his act together,” Weissman said.

Covey is betting big on downtown — he said he expects to spend more than $200 million in the area, most of it from money raised from family and friends. He has an idealistic side, with a passion for urban living, but he also insists that he’s making a good bet, based on research that shows increasing demand for urban living and office space. In a decade or two, he envisions downtown as a vibrant, pedestrian-friendly neighborhood with plenty of apartments and “five places to eat brunch in every square block,” he said.

Downtown is a long way away from that vision. Large parts of it are still blemished with vacant buildings, weedy lots and surface parking. It lags far behind the vibrancy that’s been achieved with the rebirth of other major city centers like Chicago or Washington, D.C.

But the district is heading in his direction. More than 30 office, residential and hotel projects are in the works. Grand office buildings are being constructed. San Pedro Creek is being turned into another River Walk. Hemisfair is transforming into what officials say will be a world-class park.

“Yeah, it’s risky,” Covey said of his investments. “Is this riskier than doing something at Loop 1604 and I-10? At the moment, absolutely. However, I think that the risk metrics have been changing in our favor … We get calls every day for office now. We didn’t two years ago.”

Becoming a developer

Covey’s education in real estate started during his childhood, when he tagged along while his father, Paul, worked on his own developments in Mexico and Texas.

“His exposure to business at an early age was almost at an adult level. He was a sponge, absorbing everything that Paul exposed him to,” said Martin Bronstein of Houston development firm BHW Capital, who has been working with Paul Covey for more than 20 years. “Paul always has treated Kevin as an equal.”

Paul Covey is a different kind of developer from his son. He typically sticks to safer, less ambitious projects, such as suburban shopping centers. Kevin Covey said he’s willing to take more risks and is more focused on design than his father, but he inherited the same hands-on management style.

Both men obsess over the smallest details of their construction projects, colleagues say. They attended a conference in Las Vegas just to learn more about different types of concrete.

“Without question, my father is the biggest influence in my life, period,” Kevin Covey said.

Covey credits both sides of his family with giving him an “entrepreneurial bent.” His mother, Beatriz, runs a company that operates billboards. She comes from the affluent Barrera Segovia family in Monterrey. One of her eight siblings is a well-known plastic surgeon in Houston, while another served as the CEO of Mexican bank BBVA Bancomer.

One of Covey’s two brothers is managing partner of local real estate investment firm CCJ Capital, while the other is an opera singer, he said. In January, Covey married Federica Padilla, a business development manager at H-E-B who runs the supermarket’s ice cream selection.

“He comes from a background of very strong work ethics, very high valuation of academic achievement — people who have accomplished, through their own efforts, wonderful things,” Paul Covey said of his son.

Kevin Covey decided to become a developer around 2010, three years after he graduated from the University of Chicago with a degree in economics, he said. He worked in finance in New York City for two years but said he despised the cutthroat nature of the business. He and his father started a tech company, Kind Systems, that made a computer program allowing users to monitor street and billboard lights remotely. It failed, an experience that Covey said gave him a soft spot for startups, “because it’s a harsh gig.”

Covey dabbled in real estate in Los Angeles and Houston, and even considered working out of Detroit, but in the end he decided to concentrate on San Antonio. He was familiar with the city, having gone to high school at Saint Mary’s Hall. But the crucial factor was the abundance of opportunity he saw here — unlike in other cities. There wasn’t a huge crowd of developers to compete with, Covey said. He was inspired by what billionaire Christopher “Kit” Goldsbury had done with the Pearl.

“It was a sleeper,” he said of San Antonio. “I saw a lot of opportunity here to develop and change it.”

Covey started buying high-profile properties shortly after founding GrayStreet Partners in 2013, including the vacant building at the critical Southtown intersection of Alamo and St. Mary’s streets, where he’s putting the ice pop shop. Then, as now, Covey raised most of the investment money from family and friends, including his mother’s family in Mexico and friends he made at Saint Mary’s, he said. He also raises some financing through bank loans.

He vaulted to the big leagues in 2015, when GrayStreet bought nine properties on Houston Street, many of them historic gems, from Federal Realty Investment Trust of Maryland. The upstart firm prevailed over bidders such as downtown developer David Adelman.

Covey’s vision

Covey sees drawing technology companies to San Antonio as key to reviving the city center. Two brothers, Yousef and Rommy Kassim, decided last year to move their tech startup from Austin to San Antonio. They chose to locate in GrayStreet’s Vogue Building on Houston Street because they were impressed with Covey’s passion for their business, EasyExpunctions, which specializes in removing customers’ criminal offenses from their records.

EasyExpunctions was likely to grow soon, so the brothers asked for a provision in their lease that would let them move into larger space in the building if needed. Unlike other landlords, Covey was happy to oblige, they said. He stops by to ask how things are going and jokes about hiring O.J. Simpson as a spokesman for the company.

Covey is “essentially taking a vested interest in our growth and success,” Yousef Kassim said. “That’s not the typical landlord stuff.” .

Michael Girdley, CEO of Codeup, a coding boot camp that is also in the Vogue, said he felt like Kevin was “on our team.”

“It’s more of a familial relationship,” he said. “Like the way you would look out for a cousin.”

Covey is one of the leading builders of the downtown tech district. He recently scored a huge win for the district when he struck a deal with CaptureRX, a local health care technology company, to expand its headquarters in the Kress building on Houston Street. All those new employees will need places to eat, live and shop — all of which he’s also working on.

The Kress building will have retail shops designed to appeal to tech workers. He’s working with Weissman, the restaurateur, on a 24-hour restaurant for employees working late.

In part, GrayStreet focuses on tech-related projects because the firm sees it as good business, Covey said. But he also thinks it’s what San Antonio needs to be competitive in the modern economy. Tech workers are becoming more important as globalization and automation destroy middle-class occupations, such as taxi driver and factory worker, he said.

Covey thinks society is about to go through major shifts, and he designs his projects around them. He’s a big believer in autonomous vehicles — his family has invested money in them. He said he doesn’t include much parking in his projects because he doesn’t think there will be much need for it once autonomous vehicles are on the road in a decade or so.

San Antonio is his permanent home, he said. He lives in a house in Alamo Heights but wants to move to Southtown. Ironically, he’s been putting off the move because he doesn’t want the hassle of renovating a home.

He’s been growing his public profile. Last year, he was involved in the effort to persuade city officials to allow ride-sharing companies like Uber, Heard said. He’s a major donor to Tech Bloc and Centro San Antonio, a nonprofit that promotes downtown. He and his family have been giving more money to city politicians; he gave $1,000 each to Mayor Ivy Taylor and District 1 Councilman Roberto Treviño last year.

GrayStreet has already taken on enough developments to last the better part of a decade. But it’s ready to take on more and is looking to team up with other development firms on new projects, he said.

The growth of downtown San Antonio shows no sign of slowing — Weston Urban broke ground last month on the Frost Tower, downtown’s first new office tower in more than 25 years. Major new projects are being announced nearly every month.

“Myself and my partners are doing so much more in San Antonio now, three or four years later, than we ever thought we would. And it doesn’t seem like that’s abating,” Covey said. “I would love to keep finding new things to do in San Antonio as the tide rises.”

rwebner@express-news.net

@rwebner