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Technology & Entrepreneurship

Rackspace Prepares To Allow Another Company Into 'The Castle'

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Davis Staedtler | https://bit.ly/2LKBdR2
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The first main entrance to "The Castle" was the old Mervyns Department Store

Rackspace is dividing up part of the Castle and giving away a key. The San Antonio technology company is preparing to take on a tenant at its Windcrest headquarters.

“This sublease would give us an opportunity to take advantage of our unoccupied space and be good stewards of our investment and resources,” said a company spokesperson. “We look forward to welcoming new tenants into our neighborhood…”

The Castle, formerly Windsor Park Mall, has been the headquarters of the managed cloud company since 2007. The first 84,000 sq. ft. the company renovated was known as Phase One and now some portion of it will be the home of a new tenant.

Phase One was formerly the site of Mervyns department store, which closed in 2005.

Rackspace declined to comment on who the tenant would be, exactly how much space would be leased, or other details of the ongoing deal.  Rumors about the renovation have been circulating for weeks online, as employees were shifted out of that area. 

Rackspace signed a 30-year lease for the 1.2 million sq. ft. Windsor Park Mall 12 years ago. The mall was boarded up, having closed years before but quickly took on the Windsor Castle or just “the Castle” moniker. 

Rackspace was in the midst of a rapid expansion at the time and eager to find a better fit than its Datapoint facility. The company would fill the Castle space with more than 3,000 people, invest more than $100 million in renovations and receive tens of millions in tax abatements and incentives.

Phase one was inhabited most recently by third-shift personnel, but according to former staffers the area’s focus changed often over the years. It initially hosted executives and the marketing department, but changed as the company redeveloped more of the mall. More than 600,000 sq ft were renovated by 2012.  

The company has never leased out a portion of the building before now. The company has seen many changes since going private in 2016 when it was bought by Apollo Global Management for $4.3 billion.

Just prior to going private, the company had changed business strategies becoming a managed cloud provider, partnering with old rivals like Amazon Web Services, Google and Microsoft rather than directly compete with its OpenStack platform.

Since 2016, Rackspace has had three different chief executives, seen three rounds of layoffs, and taken over multiple smaller companies in big-money acquisitions.  

More recently the company eliminated several executives. It also partnered with India-based Tech Mahindra for internal IT resources. According to multiple employees, Rackspace eliminated 125 employees, who were offered jobs at Tech Mahindra. 

Paul Flahive can be reached at paul@tpr.org or on Twitter @paulflahive.