Texas City Issues Notice Of Default For Project Associated With University Beach Developer

NORTHPORT, AL — A massive and long-stalled project in Texas previously associated with one of the developers of the controversial University Beach development in Northport has defaulted on its development agreement with the City of Rowlett.

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Most notably, developer Kent Donahue — who is heading up the proposed $350 million lagoon resort project off of Harper Road — was once involved with the long-delayed Sapphire Bay project in Rowlett that remains unfinished.

As Patch previously reported, Donahue is a member of the three-member University Beach Improvement District Board, along with developer John Hughes and investor Katie Le.

While Donahue has publicly said he has cut ties with the Sapphire Bay project, his name is still listed on the website's contact page — a website that looks similar to the current University Beach website.

The Texas development is also the subject of a federal investigation following a large fire that destroyed an apartment complex that had yet to open to tenants. The status of that investigation remains unclear.

The City of Rowlett issued a press release Thursday that said city leaders had notified the developer of the long-delayed Sapphire Bay project that it is in default of its development agreement after years of stalled progress.

The Rowlett City Council voted unanimously to issue the notice to Sapphire Bay Land Holdings I, saying the developer failed to pursue the project as required under its agreement with the city.

ALSO READ: University Beach Improvement District Board Manager Has Long History Of Regulatory Violations

“After weighing all options, consulting with our legal team, and having serious conversations about the future implications of this development for our community, the council has determined that this is the right step forward,” Mayor Jeff Winget said. “This project has remained stagnant for far too long, and we owe it to our residents to take action that will help spur progress on the peninsula.”

City officials said the action follows two council meetings in the past month and a meeting with the developer earlier this year.

Winget emphasized that Sapphire Bay remains a private development and the notice does not change ownership of the land.

“The city cannot compel construction or development,” Winget said. “The developer remains the owner of the property and is still bound by the zoning that is in place, which places limits on the amount of residential development allowed.”

The Sapphire Bay project, originally called Bayside when it was announced nearly a decade ago, has undergone multiple amendments, legal disputes and redesigns.

The city says the property was later split into Bayside North and Sapphire Bay South, with the latter envisioned as a mixed-use waterfront destination on Lake Ray Hubbard.

“While we are grateful for the investments that have been made over the years, we can no longer tolerate the absence of progress,” Winget said. “Now is the time for strategic, visionary decisions that will ultimately lead to the vibrant waterfront destination Rowlett residents were promised.”

The concerns around the project in Texas echo many of the issues voiced by citizens in Northport as the developers are asking a judge to validate nearly $60 million in bonds for the University Beach project as a major next for the proposed development.

The contentious project has sparked fierce pushback from the Northport community, including major changes on the City Council in the form of two incumbent council members being voted out by wide margins after they voiced staunch support for University Beach.

According to the project agreement approved by the City Council, the city has agreed to invest up to $20 million — capped at 75% of the cost of city-owned infrastructure — and to provide a 12-acre parcel valued at $2.7 million.

The city also agreed to split lodging and sales tax revenue generated by the project, rebating half to the developer and keeping the other half for public purposes.

To qualify for incentives, the developer must make an initial private investment of at least $63 million and operate the water park at its own expense for the term of the 30-year agreement.

Previous projections provided by the city estimate roughly $76 million in new tax revenue, with about half rebated back to the developer. Total incentives will not exceed $61 million, including infrastructure investment, land value and tax rebates.

Safeguards in the agreement include land reversion and a subordinate mortgage in favor of the city if the developer fails to complete the project or open the water park as required.

A date for the developer's bond validation hearing — the next hurdle for the project — has not been set as of the publication of this story.

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