SAN MARCOS, Texas — A $40 million boutique hotel is set to rise in the heart of downtown San Marcos, bringing new lodging, dining, and event space as part of a public-private partnership aimed at boosting tourism, supporting university expansion, and driving economic growth.
During Tuesday night’s city council meeting, trustees voted to approve the project dubbed Project Cat Tree, a proposed 120,000-square-foot hotel that will be located at 429 N. Guadalupe St. on a 2.18-acre site once occupied by the Richard A. Castro Administration Building. Texas State University, which owns the land, relocated the administrative facility to another location on university property.
The hotel, a collaboration between Houston-based developer Midway LLC and Austin-based hotel operator New Waterloo, is expected to include 130 guest rooms, a full-service restaurant and bar, meeting and event space, and a courtyard with a pool.
“New Waterloo is proud to be the operator of this distinctive project, connecting the energy of Texas State University to the historic downtown,” said CEO & Partnership, Bart Knaggs of New Waterloo. “The hotel will provide thoughtfully designed spaces for folks to gather, stay and celebrate, fostering a vibrant, connected culture for our guests and the community of San Marcos.”
San Marcos City Manager Stephanie Reyes said this kind of investment is not just about buildings; it’s about jobs, tax base, and creating a stronger, more connected downtown.
“This agreement ensures a transformative development for our downtown that meets high standards and brings long-term benefits to our residents,” Reyes said.
To help bring the project to fruition, the San Marcos City Council approved a Chapter 380 Economic Development Agreement that will provide tax rebates to Midway in exchange for meeting specific development benchmarks. The incentive agreement is designed to spur private investment, elevate the city’s tourism offerings, and align with long-term growth plans.
Under the terms of the agreement, Midway will receive annual reimbursements of up to 95 percent of both city sales and hotel occupancy taxes generated by the property. As the hotel’s revenue per available room – or RevPar – increases, the rebate percentage decreases. For example, a RevPar of $275 or higher will drop the rebate to 25 percent, while levels below $225 will maintain the maximum 95 percent rebate.
The project is expected to create approximately 250 jobs, with an average salary of $50,000.
The development must break ground by Dec. 31, 2026, and be completed within 30 months. Completion will be determined by the city’s issuance of a temporary or final certificate of occupancy.
To qualify for the incentives, the developer must comply with all city ordinances, codes, and laws in effect at the start of the agreement – even though university-owned land is generally exempt from some local regulations. Midway is also required to make commercially reasonable efforts to comply with applicable ordinances from which the site may otherwise be exempt.
The city will also reimburse sales taxes paid on construction materials purchased before the hotel’s opening, regardless of the project's performance. Requests for reimbursement must be submitted using a city-approved form.
All tax reimbursements must be used in accordance with Texas state law, such as for tourism marketing, promotion of the arts, sporting events, historical preservation, and directional signage to local attractions.
The agreement will remain in effect for 15 years following the hotel’s completion. After the term expires, Midway may sell its interest in the hotel to a public entity without any obligation to repay previously granted incentives.
“We are grateful to receive the city’s support of this transformational project that should turn more day trips into room nights and prove to be an economic catalyst for the region,” said Clayton Freels, Executive Vice President of Midway.
The Hays County Commissioners’ Court approved the project as well on Tuesday.
“We are thrilled to welcome this much-needed project into our Downtown footprint,” Hays County Judge Ruben Becerra said. “It represents the kind of quality investment our community deserves, and we are proud to be working with the city and the university to make it a reality for our region.”