On our final day of our real estate tour we visited Dallas, TX. We started out by meeting with city officials. Paul Dyer was the first to speak to us and he talked to us about the city of Dallas and its parks and green space. He told us that they spent $1.5 million for a master plan and Chicago had actually invested in the same plan after Dallas. The Parks and Recreation department is very much involved in the much grander Trinity River Project. The reason for the purchase of the TRP is for flood control, parks, and transportation. Next we got to meet with the Mayor of Dallas. He talked to us about the emphasis of redevelopment in downtown. There are many different TIFs in downtown but the mayor pointed out that these TIFs only become useful if their is active redevelopment going on in those districts. This is tough when there are 40 office buildings vacant in downtown, which does not encourage development. He then got to brag on his city a little bit by telling us that Dallas in number one in the country in the purchase of renewable energy. After the mayor, we met with Tracy, who talked to us about Dallas' sustainable redevelopment program. She was very clear in pointing out that the city of Dallas in landlocked and that the focus going into the future needs to be on redevelopment and increasing density where needed. She told us that in the past 3500 permits were being issued a year, which would bring in $2 million in revenue to the city, but now only 700 permits a year are issued. She cited the reason for this being the capital markets are dried up and that most projects are now being publicly financed. Next was David Whittle. He spoke to us about urban design. He says the function of his department is to be an advocate of good design. They have been vital with the happenings of the Trinity River Project. Finally, we spoke with Carl of the economic development department. He told us that there is not a dominant developer in Dallas and how it has been a challenge to garner interest in from investors to redevelop certain areas. When no one is investing it does not inspire confidence to city officials or other people who have been tentative to parting with their money. He did mention a program, however, that if a foreign investor invests $500,000 or more he can get a green card for themselves and their family. This has been vital in raising capital for developers in the area. Apparently 75% participating in this program are Koreans.
ALOFT HOTEL
After meeting with the officials we walked over to the ALofts boutique hotel. The second I walked in there was only one word to describe the atmosphere, SWANKY. We got to talk to the developers and this is the 44th Aloft hotel to open in the U.S. but the first adaptive reuse Aloft project. They used an old historical warehouse and received historical tax credits and grant money from the city. They got $4.2 million from the city and another $5 million in tax credits. The developers told us that this money was the only way they could make the project feasible. The hotel has now been open for eight months and has 193 rooms. The cost of construction was about $170,000 per key but with all the government incentives it comes to about $120,000 per key.
CRAIG RANCH
For our final site visit of the tour we drove north to McKinney, TX and saw a massive community development known as Craig Ranch. We met with David Craig who is the visionary behind Craig Ranch. It is a huge development centered around the golf course, TPC at Craig Ranch, that will contain office, retail, single family, multi-family, condos, and its own medical facilities. Mr. Craig was very clear that some of the land was flexible and on the model had it as apartments and such, but he envisioned that land being used for big corporations that would relocate into the development. He is looking to create a walkable urban environment in a suburban area. He wants to truly create a work, live, play environment with lots of green space and first class amenities for a true balanced, healthy, and happy life.
Thursday, May 27, 2010
Dallas Pictures
The enormous model of the Craig Ranch Development
Single Bed Room
Two queen room.
Lobby at the ALofts HotelDays 5 & 6, Houston, TX
On Monday, we met with urban planners for the city of Houston. We met Richmond Coward, Brian Crimmins, and Ryan Albright. I was very impressed with these guys as they seemed very clued in to the Houston market and all the issues that go along with it. They told us that Houston is a playground for experimenting with different product types before taking them to other markets. This is because of the lack of zoning in the city. They cited chapter 42 and 26 of the urban planning many times saying that chapter 42 is the bible of houston planning. Chapter 42 discusses the no height restrictions on buildings while chapter 26 deals with parking ordinances that is a big issue in Houston. The city does not offer many incentives to encourage urban infill development, but since the city of Houston and Harris County pay for infrastructure that could be an incentive in itself as developers should want to develop where the infrastructure already exists. Although I mentioned above that Houston does not have zoning many parcels of land have deed restrictions attached to them which the city enforces. So if a developer purchases a piece of land with a use in mind he better check the deed restrictions to make sure he can use it in the intended manner.
WEST AVE.
After our visit with the city officials we made our way over to West Ave where we met with Josh Landry. West Ave is a mixed use development with first floor retail and residential on the upper floors. The average unit size for the development is around 1080 square feet with a rental rate of $1.98/SF. There are 397 apartments and they are 89% leased at the moment. West Ave. is currently offering 2 months free rent in concessions.
There is just under 200,000 SF of two story retail in this project. It is currently 41% leased. The interesting part of the retail space is the second story and how it can be flexible space. The developers would like to keep the space flexible as they can switch it back and forth from office and retail depending on what the market dictates. They also mentioned it can be turned into loft apartments, but that would be a last resort as then it could not go back to office or retail.
Josh told us that their development company focuses on putting their projects in EPNs (Established Premium Neighborhoods). This development is located in River Oaks which is one of the most affluent neighborhoods in Texas.
CORE APARTMENTS
After West Ave. we went over to meet with Michael Morgan at the Core Apartments. I really enjoyed hearing his development philosophy and was appreciative of the financials that he provided us. His philosphy of development was to limit your downside and let the upside take care of itself. He told us that too many developers go broke, but his philosphy had kept him business for over 25 years. He also believes in not over extending yourself and taking on too many projects so that you can give proper attention to projects. He suggested always setting up guaranteed corporations to avoid having to personally sign loans.
The project itself had a completed cost of about $43 million with 25% of the equity coming from a public REIT. The project caters to young just graduated students and one of the managers claimed it became a frat house on the weekends. It is 326 units and it is 98.8% leased with a rental rate of $1.62/SF.
LOW INCOME HOUSING
The next day we started our site visits at Bray's Crossing. This is low-income housing project. They rehabbed an old apartment complex and turned it into single room occupany dwellings. The Hope foundation is in charge of this development and they are a non profit organization that gets the money for these projects through city and state funding as well as donations from foundations and corporations. The kind of tenants they attract are minimun wage workers and people in drug rehab or were formerly homeless. A cool feature on the project is the sound wall. The property fronts Gulf Freeway (Interstate 45) so it could be quite noisy, so the sound wall was put in place to muffle the sound of passing cars.
Bray's crossing has 149 units. We then drove over to Canal Street which is also a Hope foundation project and has 133 units. It was completed in 2005 and is 100% leased with a 3 month waiting list to live there.
CITY CENTRE
Our final stop in Houston was the City Centre. Midway Development Company developed this giant mixed use development. The project contains office, retail, residential and a hotel. This is my kind of project in that there are ZERO public dollars in the project. All $500 million of the total costs come from the private sector which the Michigan State Teacher's Fund making up 60% of the Equity needed in the project. I really liked their strategy of development in which they would not start construction of a certain phase until it had reached a pre-leased milestone so it would be able to cover its debt service upon completion.
Right now the retail in the project is 60% leased. One office building is 100% leases while the other is 70% leased. There is 425,000 square feet of retail space going for $35/SF, 450,000 square feet of office space going for $22/SF, 244 hotel rooms, 22 condo units, and 525 rental units going for $1.50/SF in the development.
WEST AVE.
After our visit with the city officials we made our way over to West Ave where we met with Josh Landry. West Ave is a mixed use development with first floor retail and residential on the upper floors. The average unit size for the development is around 1080 square feet with a rental rate of $1.98/SF. There are 397 apartments and they are 89% leased at the moment. West Ave. is currently offering 2 months free rent in concessions.
There is just under 200,000 SF of two story retail in this project. It is currently 41% leased. The interesting part of the retail space is the second story and how it can be flexible space. The developers would like to keep the space flexible as they can switch it back and forth from office and retail depending on what the market dictates. They also mentioned it can be turned into loft apartments, but that would be a last resort as then it could not go back to office or retail.
Josh told us that their development company focuses on putting their projects in EPNs (Established Premium Neighborhoods). This development is located in River Oaks which is one of the most affluent neighborhoods in Texas.
CORE APARTMENTS
After West Ave. we went over to meet with Michael Morgan at the Core Apartments. I really enjoyed hearing his development philosophy and was appreciative of the financials that he provided us. His philosphy of development was to limit your downside and let the upside take care of itself. He told us that too many developers go broke, but his philosphy had kept him business for over 25 years. He also believes in not over extending yourself and taking on too many projects so that you can give proper attention to projects. He suggested always setting up guaranteed corporations to avoid having to personally sign loans.
The project itself had a completed cost of about $43 million with 25% of the equity coming from a public REIT. The project caters to young just graduated students and one of the managers claimed it became a frat house on the weekends. It is 326 units and it is 98.8% leased with a rental rate of $1.62/SF.
LOW INCOME HOUSING
The next day we started our site visits at Bray's Crossing. This is low-income housing project. They rehabbed an old apartment complex and turned it into single room occupany dwellings. The Hope foundation is in charge of this development and they are a non profit organization that gets the money for these projects through city and state funding as well as donations from foundations and corporations. The kind of tenants they attract are minimun wage workers and people in drug rehab or were formerly homeless. A cool feature on the project is the sound wall. The property fronts Gulf Freeway (Interstate 45) so it could be quite noisy, so the sound wall was put in place to muffle the sound of passing cars.
Bray's crossing has 149 units. We then drove over to Canal Street which is also a Hope foundation project and has 133 units. It was completed in 2005 and is 100% leased with a 3 month waiting list to live there.
CITY CENTRE
Our final stop in Houston was the City Centre. Midway Development Company developed this giant mixed use development. The project contains office, retail, residential and a hotel. This is my kind of project in that there are ZERO public dollars in the project. All $500 million of the total costs come from the private sector which the Michigan State Teacher's Fund making up 60% of the Equity needed in the project. I really liked their strategy of development in which they would not start construction of a certain phase until it had reached a pre-leased milestone so it would be able to cover its debt service upon completion.
Right now the retail in the project is 60% leased. One office building is 100% leases while the other is 70% leased. There is 425,000 square feet of retail space going for $35/SF, 450,000 square feet of office space going for $22/SF, 244 hotel rooms, 22 condo units, and 525 rental units going for $1.50/SF in the development.
Wednesday, May 26, 2010
PICTURES
Kitchen at the Ronald McDonald House in Austin.
LEED Platinum certified building (Ronald McDonald House)
Seaholm Power Plant in Austin
Front of the Power Plant
Hill Country Galleria
Hill Country Galleria
Friedrich Lofts
Alamo Architects LEED silver office building
Pictures of the units at West Ave in Houston, and then a view from one of the units
The Core Apartments. Houston, TX
The Core Apartments. Houston, TX
Monday, May 24, 2010
San Antonio: Days 3 & 4
We started out in San Antonio by meeting with the city officials. It really seemed that there was not a consistent vision for the downtown riverwalk area. Developers and city officials seemed to not be aligned with each other to accomplish their goals. One of the city officials was very determined to change this and was talking to us about offering new market tax credits, and city financing as incentives to work with the city for a more urban feel in downtown. We were told that this could be even tougher in San Antonio then most other cities, because tourism is such a big part of the city's economy and hotels are the projects that seem to do the best. The officials told us that UTSA has really helped the economic development of San Antonio but city officials were encouraged by a few projects that promoted downtown living. We talked to city inspectors for a while and they were relatively conservative with regards to adaptive re-use projects and the zoning and inspections that those projects would require.
After the meeting with city officials we met with Ed Cross. Ed Cross was the developer behind the Vistana, a mixed used development with bottom floor retail and multi-family living above. The Vistana takes up a whole city block and is a gorgeous development. Ed admitted that they were sucking wind on the retail part of the development, but were doing very very well in the residential being 96% leased. He told us the total cost of the project was around $60M and that on his original proforma he only had a 7% return. Relatively low, but since the completion he told us he has realized a bigger return. He told us he had many stories, but summed up his real estate philosphy by investing in projects and buildings that have low capital expenditures. He realized that office takes a lot to maintain and that he would rather invest in a warehouse type space because then all you need to do is sweep when tenants change.
The next day we started at Friedrich Air Conditioning Lofts. This is a massive building that is in serious disrepair. There is an office that is very tastefully done on the first floor, but the rest of the building is still yet to be redeveloped. The building was built in the 1920s and is located in a major incentive zone in San Antonio. It is in a TIF district, and a developer could also receive historic tax credits and new market tax credits. There is still much work to be done on the over 500,000 SF bulding. It will be a major challenge for any developer and architect to lay out this building as the massive cavernous inside feels more like a cave at times and you cannot have aparments or condos without windows, so figuring out what to do with all that space will be very tough.
After the Fred Lofts, we had a brief meeting with Alamo Architects. They had redeveloped an old industrial building that manufactured trailers. They earned a LEED silver rating because they were able to reuse many materials from the industrial building. Some of the materials they re-used were the wood from the old building and even concrete which they turned into a quite cool and funky fence.
We then had lunch with Marty Wender, and he filled us in on his history in the development industry. He assembles land in mass quantities and then sells the land to companies for development. He told us of the many deals he has done, but pointed out how important it was for him to know how the developer was going to use the land as their intended use would directly affect the value of the surrounding land, which he also owned. He was a very interesting man and is a natural salesman and it showed in the meeting.
For our final stop in San Antonio we met with the Riverwalk Authority. We walked a couple miles up and down the riverwalk as we were told how the community is finally buying into the idea of the revitalization of the riverwalk and the city is now offering incentives to developers. One of the incentives is one would not have to pay property taxes on the increased value along the riverwalk for 15 years and that money saved would then go into reinvesting in the riverwalk redevelopment.
After the meeting with city officials we met with Ed Cross. Ed Cross was the developer behind the Vistana, a mixed used development with bottom floor retail and multi-family living above. The Vistana takes up a whole city block and is a gorgeous development. Ed admitted that they were sucking wind on the retail part of the development, but were doing very very well in the residential being 96% leased. He told us the total cost of the project was around $60M and that on his original proforma he only had a 7% return. Relatively low, but since the completion he told us he has realized a bigger return. He told us he had many stories, but summed up his real estate philosphy by investing in projects and buildings that have low capital expenditures. He realized that office takes a lot to maintain and that he would rather invest in a warehouse type space because then all you need to do is sweep when tenants change.
The next day we started at Friedrich Air Conditioning Lofts. This is a massive building that is in serious disrepair. There is an office that is very tastefully done on the first floor, but the rest of the building is still yet to be redeveloped. The building was built in the 1920s and is located in a major incentive zone in San Antonio. It is in a TIF district, and a developer could also receive historic tax credits and new market tax credits. There is still much work to be done on the over 500,000 SF bulding. It will be a major challenge for any developer and architect to lay out this building as the massive cavernous inside feels more like a cave at times and you cannot have aparments or condos without windows, so figuring out what to do with all that space will be very tough.
After the Fred Lofts, we had a brief meeting with Alamo Architects. They had redeveloped an old industrial building that manufactured trailers. They earned a LEED silver rating because they were able to reuse many materials from the industrial building. Some of the materials they re-used were the wood from the old building and even concrete which they turned into a quite cool and funky fence.
We then had lunch with Marty Wender, and he filled us in on his history in the development industry. He assembles land in mass quantities and then sells the land to companies for development. He told us of the many deals he has done, but pointed out how important it was for him to know how the developer was going to use the land as their intended use would directly affect the value of the surrounding land, which he also owned. He was a very interesting man and is a natural salesman and it showed in the meeting.
For our final stop in San Antonio we met with the Riverwalk Authority. We walked a couple miles up and down the riverwalk as we were told how the community is finally buying into the idea of the revitalization of the riverwalk and the city is now offering incentives to developers. One of the incentives is one would not have to pay property taxes on the increased value along the riverwalk for 15 years and that money saved would then go into reinvesting in the riverwalk redevelopment.
Tuesday, May 18, 2010
Austin: Day 2
We had four site visits today and a lunch meeting with some ladies from the department of agriculture.
Our first site visit was with Kent Buress and he gave us a tour of the LEED platinum Ronald McDonald House. The RMH provides lodging for families who have children in the Dell Children's Hospital. The building was built for a purpose and the design of the building started in 2003. Construction started in November of 2006 and they moved in the property in December of 2007. It is the first LEED platinum building in Austin and the 3rd in Texas. The property received an energy and innovation credit for going above and beyond what was called for. He told us that the entire building receives at least some natural light except for the bathrooms and closets. Although building LEED can cause a premium of 16-18% on construction costs he said that the money they are saving from being efficient has already recouped the money paid up front.
Next, we went to check out the Mueller Development. This a huge project comprising of 700 acres and lots of single family residential, multi-family, commercial, medical, and parks and green space. We were told that they have a lot of flexibility when it comes to zoning as they can change the use fairly easily depending on what the market dictates. The whole development is a TIF district and the city reimburses Catellus for costs incurred regarding infrastructure. There is a 10-15 year timeframe on the completion of the whole development and 600 homes have already been sold and occupied. A 440 unit apartment complex that has been completed is currently 85% leased. In the development there are 25% affordable homes with condos starting at around $150,000 and single family homes ranging from $218,000 all the way up to around $1 million.
During our lunch today we met with Judy Fort and Sherri Gothart-Barron of the Texas Department of Agriculture. Judy Fort works in the rural economic development Department and she helps get businesses into rural communities. While she tries to get new businesses to relocate to rural communities, she also emphasized that rural governments should focus on their existing businesses and make sure they stay there and have all the opportunities needed to expand. Some businesses can get grant money if they create enough jobs in the community. We then spoke with Sherri about retirement communities. She said they are trying to persuade the wealthy baby boomer generation to retire in Texas by promoting these communities that have nice amenities and country living.
After lunch, we visited the Seaholm Power Plant very briefly. It was built in 1952 and quit generating power in 1992. It was a vacant building that was going through remediation because of various environmental issues. The purchase of the plant and the land surrounding it happened because the buyers were told that they could develop the surrounding land as long as they redeveloped the plant itself. Retail, Office, Restaurant, and Event Center are all ideas being looked at for the redevelopment of the plant. As for the development on the land, it cannot exceed two stories due to the view corridors that were discussed in the day 1 blog.
Our final stop of the day was with Lance Morris at the Hill Country Galleria. This is a huge lifestyle retail center located in Southwest Austin. The development started in 2005 and 2006 by Lincoln Properties and Opus. The city of Bee Caves got the developers build them a new city hall and public library and then the land was deeded over to make their ownership free and clear. Recently the shopping center was foreclosed on and bought for $75 million in cash when the outstanding debt on the property was $160 million. One of the problems with the development is that it was built knowing the surrounding area was about to be developed by A LOT of single family homes. The market then crashed and some of the development came to a halt so then there was this HUGE retail location with not enough people to support it. Mr. Morris suggested that putting in a grocery type anchor that people would visit many times a week would draw more traffic to the center. Another part of the center is that there is second story office space availabe almost throughout the entire complex. Recently, this was 3% occupied but in the past 70 days it has been brought up to 55%. Mr. Morris is optimistic that this will help him lease up more of the retail space. This is important as many of the tenants are wanting rent relief but once the center becomes 70% occupied that relief will be harder to come by.
Our first site visit was with Kent Buress and he gave us a tour of the LEED platinum Ronald McDonald House. The RMH provides lodging for families who have children in the Dell Children's Hospital. The building was built for a purpose and the design of the building started in 2003. Construction started in November of 2006 and they moved in the property in December of 2007. It is the first LEED platinum building in Austin and the 3rd in Texas. The property received an energy and innovation credit for going above and beyond what was called for. He told us that the entire building receives at least some natural light except for the bathrooms and closets. Although building LEED can cause a premium of 16-18% on construction costs he said that the money they are saving from being efficient has already recouped the money paid up front.
Next, we went to check out the Mueller Development. This a huge project comprising of 700 acres and lots of single family residential, multi-family, commercial, medical, and parks and green space. We were told that they have a lot of flexibility when it comes to zoning as they can change the use fairly easily depending on what the market dictates. The whole development is a TIF district and the city reimburses Catellus for costs incurred regarding infrastructure. There is a 10-15 year timeframe on the completion of the whole development and 600 homes have already been sold and occupied. A 440 unit apartment complex that has been completed is currently 85% leased. In the development there are 25% affordable homes with condos starting at around $150,000 and single family homes ranging from $218,000 all the way up to around $1 million.
During our lunch today we met with Judy Fort and Sherri Gothart-Barron of the Texas Department of Agriculture. Judy Fort works in the rural economic development Department and she helps get businesses into rural communities. While she tries to get new businesses to relocate to rural communities, she also emphasized that rural governments should focus on their existing businesses and make sure they stay there and have all the opportunities needed to expand. Some businesses can get grant money if they create enough jobs in the community. We then spoke with Sherri about retirement communities. She said they are trying to persuade the wealthy baby boomer generation to retire in Texas by promoting these communities that have nice amenities and country living.
After lunch, we visited the Seaholm Power Plant very briefly. It was built in 1952 and quit generating power in 1992. It was a vacant building that was going through remediation because of various environmental issues. The purchase of the plant and the land surrounding it happened because the buyers were told that they could develop the surrounding land as long as they redeveloped the plant itself. Retail, Office, Restaurant, and Event Center are all ideas being looked at for the redevelopment of the plant. As for the development on the land, it cannot exceed two stories due to the view corridors that were discussed in the day 1 blog.
Our final stop of the day was with Lance Morris at the Hill Country Galleria. This is a huge lifestyle retail center located in Southwest Austin. The development started in 2005 and 2006 by Lincoln Properties and Opus. The city of Bee Caves got the developers build them a new city hall and public library and then the land was deeded over to make their ownership free and clear. Recently the shopping center was foreclosed on and bought for $75 million in cash when the outstanding debt on the property was $160 million. One of the problems with the development is that it was built knowing the surrounding area was about to be developed by A LOT of single family homes. The market then crashed and some of the development came to a halt so then there was this HUGE retail location with not enough people to support it. Mr. Morris suggested that putting in a grocery type anchor that people would visit many times a week would draw more traffic to the center. Another part of the center is that there is second story office space availabe almost throughout the entire complex. Recently, this was 3% occupied but in the past 70 days it has been brought up to 55%. Mr. Morris is optimistic that this will help him lease up more of the retail space. This is important as many of the tenants are wanting rent relief but once the center becomes 70% occupied that relief will be harder to come by.
Monday, May 17, 2010
Day 1 Pictures
Here is a look at the one of the model units at the Austonian
The cottages at Chestnut Commons
The pool and outdoor area at the Austonian. On the 10th floor.
This is the view from the master bedroom of a condo on the 36th floor.
Fitness area on the top floor (56th) overlooking Austin
View from top floor
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