A probe by federal regulators prompted Austin-based real estate developer American Ventures to ask the San Marcos City Council to postpone a final vote on a proposed $500 million, 101-acre mixed-use project this week.
Request followed an August disclosure that the firm is under investigation by the Securities and Exchange Commission. Investigators have been questioning current and former American Ventures employees, as well as investors, about the firm’s business practices, the Austin Business Journal reported. The firm was asking for taxpayer-funded incentives for the project by establishing a public improvement district on land the company purchased near the intersection of East McCarty Lane and Rattler Road in San Marcos.
The buildout would take place across three phases, wrapping up in 2031. Documents estimate the project could eventually generate $66.1 million in sales and property taxes for Hays County and $145 million in property, sales and hotel taxes for the city. The firm also has a 60-acre mixed-use retail project deal with the city of Elgin, east of Austin.
While no charges have been filed against the firm or Parsi, several sources told the outlet that interviews have been ongoing since October of last year, with queries about the firm’s finances, business practices and questions about the firm’s CEO, Shravan Parsi.
How and what investor funds were used for, specifically whether Parsi used investor money for personal expenses, as well as what fees investors were charged and if that lined up with what they were told they would be charged, are some of the questions sources confirmed were on the federal investigators’ mind, sources said. Other questions arose about whether political donations were made with investor funds and other questions.
Businesses have some leeway with how and what they use funding for from investors, so long as those practices are clearly stipulated to them, said Christopher Yust, an associate professor of accounting at Texas A&M University.
According to SEC documents, $36 million was raised by Parsi and American Ventures from 236 investors since July 2023. Those funds were used to purchase developable land, including the sites in fast-growing Elgin and San Marcos, along with a redevelopment project in the Dallas area and for land along South Congress Avenue in Austin. The inquiry specifically questioned whether “double closings” were used to purchase the land — where one entity purchases land and transfers it to another, prompting title and other associated fees — and whether investors were privy to the transactions.
American Ventures’ previous developments include The Draper, at 217 Garland Avenue in the Dallas suburb Garland. That 155-unit project was funded with a 2.96 percent interest rate HUD loan with a term of 40 years, according to the firm’s website.
Whether the San Marcos project is merely delayed or eventually scrapped remains to be seen, but that would leave undone a plan for nearly 1,200 multifamily units, 44 townhomes, 120 build-to-rent homes, a 130-key hotel, almost 145,000 square feet of office and retail space, and an option for the city to purchase half-a-dozen acres for a future baseball stadium in the balance.
— Eric Weilbacher
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