Texas Real Estate Study Tour comes to Conclusion

Thank you Dr. Forgey for an awesome tour and to my classmates for making all the visits possible.  I look forward to more classes together.  Finally, thank you to all our guest presenters who were so kind to make all our visits fun and informative.

Cheers

J2M

Craig Ranch

Last but not least...Craig Ranch  www.craigranchtx.com  We deviated from the urban to the Sub-urban but not to be fooled, Craig Ranch has its own New-urbanism within its boundaries.  Master Developer, David Craig was turned on to New Urbanism by John Kessel, City of McKinney EDC.  David has stayed the course on this development despite the media has said it would never make and he has been bankrupt several times over.  David has brought many community amenities to Craig Ranch including The TPC at Craig Ranch, Baseball and Soccer Fields, Cooper Fitness Center and Clinic, Dr. Pepper Star Center and may other attractions.  This development has Single family homes, Condo's, Apartments, Offices, Retail, a City Center and much more is still to come.

David has created one of the most prestigious information centers is the nation.  He toured us through it and gave us the VIP treatment along with a presentation in the Media Room.  We then gathered around his topo board and showed us how it all lays out.  I have been fortunate to know David for a couple of years and he has always been a motivating contributor to McKinney and Craig Ranch.  He is the epitome of a Master Developer.  I would encourage everyone to check out Craig Ranch.  Thank you David for spending time with us and as always, you were most hospitable.  Continued success in all you ventures.

Cheers,

J2M

aLoft - Dallas

We were greeted by Suhas Niak and Ted Hamilton, owners as well as the architect and the management company to give us the low down on this hotel.  First of all, this was originally one of  four Santa Fe Railroad buildings and one time home of Hagger Slacks and OK Paper. 

They have owned the building for the last 10 years and for a while they were unsure what to develop the building as - Apartments, Condos, or a Data Center but recently opened under Starwood's "W" Brand as aLoft.  This is a 9 story Hotel (they actually added the 9th floor) and has 193 rooms and 8000 sq.ft. of meeting space, pool, business center, bar, and a workout facility.  They are currently about 65% occupied with an average room rate of $110.  They indicated this is not bad considering the market conditions and further stated in a bad economy it would normally take 24 months to ramp up and stabilized and they have done it in 12 months.  It is a $42 million dollar project. The development is located in a TIF district of which $4.2 Million came from the City of Dallas, $5 million came from a historic tax credit of which Chevron bought at $1.06 per credit.  The cost per room was between $175,000-$185,000 but if you add in the tax credits it was $125,000.

Andy, the hotel manager then came and gave us a tour of the hotel and it was pretty cool. 

These guys were great.  Thank you for all your time and best wishes to you.

J2M

City of Dallas

Home sweet home!!  We were honored to have a panel of City officials beginning with Paul Dyer, Mayor Leppert, Theresa O'Donnell, David Whitley, and Karl Zavitkovsky.

Paul talked about the parks department and some of the current projects underway including the Belo Development and the Deck Park over Woodall Rogers.

He discussed the use of eminent domain and condemnation.  He also told us of  how he gets some of the deal done when assembling the land and its through a third party Trust for public Land whereby they do simultaneous closings with the land owner and then with the City.  He also advocated for a Parks master plan to the tune of $400,000 and he says it was some of the best money spent and they still follow the plan today.

Mayor Leppert joined us for  few minutes in between meetings.  While I did not know these facts but he stated Dallas is 400 square miles and a population of 1.4 million people.  He talked about the need for a stronger commercial tax base, the $350 million arts district and a $100 million coming on in a month or so, the City is a leader in sustainability  - 40% wind power energy consumer, largest alternative fuel fleet, and all future buildings will be green buildings.  In Oak Cliff he doubled the demolition docket and has a vacant building initiative to get owners to step up of get out.  He touched on many other subjects as well including TIF's that have not been as successful as planned.  Mayor Leppert was kind enough to do a photo shoot with us in Council Chambers.

Theresa O'Donnell discussed the role of Sustainable Development and Construction and Stated housing development was the driver for the Dallas economy however it would not be able to sustain that on a go forward basis.  Two years ago she had 3500 new housing starts, today she has 700.  She discussed the Forward Dallas Master Plan.  We got into a discussion about the homeless in Dallas vs. the homeless in surrounding areas and the extensive burden it has on the City.  She stated Re-development is their focus and most developments were PD's.

David and Paul then joined us.  David talked about the City's Urban Design initiatives and that they were busy setting Urban Policy.  He then discussed the westward development over the Trinity River.  there is 80 acres of land that has been assembled with Phil Romano as one of its investors.  It was made a TIF district in 2007 and since then they have been working with the community to do right by everyone.  The 4 themes that surfaced for the area were preservation of the community, more services, regional draw, and strategy for active use.  Paul talked about many developments in the City but what was interesting to me was how creative the financing of some of these deal are and that financing is the major issue these days.  He said HUD is the only game in town and they have a program HUD 108 that basically takes a 2nd mtg. as part of the stack and the city chips in, and new market tax credits which serves as part of the equity in the deal.  Crazy stuff but it is getting done.  He also talk about the EB 5 program whereby a foreigner can buy a green card for 500,000 investment.  It's obviously more than that but in general if you can generate jobs you can come to the states and get a green card. This is just another example of creative financing.

Great day all in all.  Thank you so much Mayor Leppert and to all your staff for participating. 

J2M.   

David Whitley confirmed

David Whitley, with the City of Dallas' Trinity River Project will be joining us tomorrow to discuss the progress of his project.

City Centre

http://www.citycentrehouston.com/

Vishal and I were driving into Houston and staying at a friends house when I called to see if he wanted to meet us somewhere for dinner and drinks and he said yes, meet me at the old Town and Country Mall at I-10 and Beltway 8 at Yardhouse, its a cool new development that was recently built..so we did.  When we arrived and looking for Yardhouse we drove around and I was amazed at what they had done.  Being from Houston, I only remembered the mall and what a transformation!!!  My friend said the only thing they did not demolish was the parking garages.  So the next morning I told Dr. Forgey we should check out this place we met my friend last night, it's a vibrant new redevelopment of a Regional Mall.  Low and behold, this was on the itinerary and I just didn't know it...great minds think alike!!

City Centre was developed by Midway Companies whose roots were actually from Dallas...does Midway sound familiar?  Well of course it does...Midway Road just off of 635 in Dallas.  They developed industrial office parks just off Midway and had offices there back in 1968.  In 1983 they opened a Houston office and in 1994 they relocated their corporate office to Houston under the leadership of Brad Freels, Chairman and CEO.  Anyway, City Centre is a 1.8 million square foot mixed use project on 38 acres of which they developed 28 acres.  There is approximately 425,000 sf of retail, 450,000 sf of offices, 224,000 sf hotel with 22 condos, and 525,000 sf of residential.  All in it is a $500 million dollar re-development project with Michigan State Teachers providing 60% of the institutional equity.  Here is a little tidbit that makes this deal happen...they were able to quietly purchase the old mall (off market) for $30 million in 2005 with only 6 months to close the deal.  Why is this significant? Had it gone to market it probably would have brought $100 million or more and equally as important, if you were to figure it costs between $10,000 - $12,000 dollars per parking space to construct parking garages... at $10,000 per space with 3,500 spaces already constructed on site that's $35 million!!!  That math works all day long.  They created a LP that bought all the property and created sever other LP's to sell of thus creating several parcels independent of one another yet all controlled by Midway Companies to form City Centre five years later.

  

Brandon Houston, a Texas A&M graduate and a Masters from Rice University (needless to say, he's a pretty smart guy) and the Director of Development for Midway met with us and gave us the VIP tour. Brandon was great, he shared a plethora of information and was just fun to be around.  The development is in a TIRF's district and while they used there own capital initially, one of the lessons learned was to use the TIRF's money upfront.  He also stated they took no incentives from the City of Houston and they did not dedicate any of the streets to the City so the could close them down whenever they wanted to when the were heaving concerts of other forms of community entertainment. Below are some of the pictures I took for you to see this cool re-development..Enjoy:

 

New Hope Housing

Brays crossing is a single room occupancy apartment community is for adults living alone on a modest income. Resident income must be less than $22,350 per year to qualify. It was dedicated on May 20,2010 and is currently 50% occupied. Rental rates are between $405-$460 per month. This includes a fully furnished efficiency apartment with a bed, desk with a lamp, chair, refrigerator, microwave, small closet, under bed storage free utilities and satellite TV. Use of community rooms including a kitchen, TV lounge, library, fully equipped business center, coin-operated washer/dryer facilities, and courtyards with BBQ grills.  Below are pictures of what this place was like prior to the re-development:

This property was once certified as  a public nuisance property with armed responses every night.  Before that it was an extended stay residence for NASA.

Joy Horak-Brown, Executive Director and her assistant Nicole toured us through this facility as well as Canal Street.  We were then treated at Ninfa's for Mexican food

These are the typical rooms.

These are the community Amenities.

We were also taken to Canal Street which has been open for 5 years and I must tell you, it is a well maintained facility and I can say I had my doubts as to the sustainability of the product after a few years but hats off to New Hope Housing, they are doing a fine job and this is a community I would not be ashamed to live in.

Nilesh and Suhas Naik confirmed

Check out Savaone.  These are the guys who own the aLoft in Dallas.


http://www.savaone.com/

Check out Hamilton Properties

We are checking Larry Hamilton's schedule to see if he can join us while at aLoft Hotel in Dallas.  Larry was involved in aLoft and has some pretty cool projects.  Check out the website.

http://www.hamiltonproperties.com

The Core Apartments

http://thecoreapts.com/  The Core Apartments developed by the Morgan Group is located in the vibrant "New Heights" which is experiencing tremendous re-development in residential and retail along Washington ave.  Washington Ave is a short, straight drive into downtown from the West.  Michael Morgan met us at the property for a sit down discussion about himself, his company and The Core.   Michael is in his 50's with a strong work ethic that started when he worked with his father taking care of their apartments.  He did everything including sweeping floors and cleaning toilets.  He has a construction background and therefore pays particular attention to the construction and more specifically the budget.  Speaking of budgets, Micheal was one of the only a few who actually provided detailed numbers on his development.  He also shared the structure of how it was financed and who his partners are.  To give you some of the highlights, The Core had a budget of $45 million and was completed for $42.9 million at a cost of $131,613 per unit for a savings of 5.42% of budget. His proforma gross rents were $1.52 but currently the gross market rents are at $1.62 and are 98.8% leased.  His equity partner is Archstone who put in $10.2 million to his $170,000 and has a 50/50 partnership with them.  The equity partners get an 8% return and the anticipated accumulated preferred returns are $2.6 million.  Other than the 50% ownership, Morgan received a 3% developer fee, a 6% general contractor fee and they are the on-site management company.  The debt was provided by JP Morgan Chase for $32.5 million.  What was particularly interesting to me is Michael keeps a close eye on his debt information and has a category titled "maximum recourse" which as of this date was $1.8 million.  Basically this is a category that tells him that if the project failed at anytime, this is what he has personally to lose at any given point in time. Also, from an operations perspective, Michael tracks his NOI with particular attention to trailing debt service and cash flow to monitor his cash on cash yield which is 18.43%.  Finally, he tracks the valuation of the property with trailing 3 months and cap rates at 5.5%, 6%, and 6.5%.  Michael's attention to detail from the construction, operations and financial perspectives have served him well as evidenced by his success.  He is also very transparent in his reporting of the details and this is good to see.  

From a real world perspective, I would rate this visit the best.  Thank you Michael and continued success in all your ventures.

J2M

West Ave Apartments by Gables

http://www.westaveriveroaks.com/  West Ave Apartments by Gables sits just South of the affluent River Oaks at Westheimer and Kirby in between Downtown and Uptown.  Westheimer and Kirby is a very active intersection in a vibrant neighborhood. West Ave has 380 apartment units on 5 levels, has 50 storefronts with 190,000 square feet of retail.  Josh Landry and Ben Pisklak of Gables stated they are 83% leased and 80% occupied in the residential and 41% of the retail is already leased.  on the residential side, the market rent is going for $2.00 a square foot which is higher than most in the area however, once Josh and Ben took us on a tour, one can see why they can command these rents.  Here are a few pictures and you will see what I a mean. 

They are very nice. 

They also have an amenity package for the residents outside the apartment that include a pool with a high end party room attached, a weight room, a multimedia room and a business center just to name a few.

 

And finally, we find Brant tucked away in his chair.

The Gables is exclusively a residential developer and operator.  They have 38,000 units owned and managed with 59 stabilized communities with 15,000 units they own. The Gables is a privately held REIT in partnership with ING Clarion and Lehman Brothers.

Gables focus itself in four areas:

1. Operations of Gables’ owned apartment and mixed-use communities

2. Providing property management, leasing and consulting services to third-party institutional and private apartment community owners.

3. Providing dedicated sales and service for corporate and short-term accommodations

4. Development, general contracting and construction of new Gables residential communities and mixed-use developments featuring residential, retail and office space.

If I were to move to Houston, this would be were I would like to live.  Thanks Ben and Josh, we enjoyed meeting you both.

City of Houston/Green Building Resource Center

The City with no Zoning...not so fast, they actually do have a section of town that has zoning, so there.  Richmond Coward, Brian Crimmins, Ryan Albright and their Director Marlene met with us to discuss this City's planning process.  According to Marlene, Houston is a Developer Driven City and is testing grounds for their developments primarily because it is faster for developers to deal with the regulations, the zoning process is not applicable and platting is cheap.  Many pilot projects are down in Houston...many good, some not so good.  The market flushes them out or makes them successful.

The City's mission is to be Vibrant and sustainable - have a sense of flexibility, sustainability and community growth and not promotes sprawl.

There dept. revolves around what they call the Big 3:

1. Chapter 42 - Development which is 2 dimensional not 3 dimensional

2. Chapter 26 - Parking

3. Chapter 33 Landscape and Historic preservation

Richmond Coward then took us on the light rail to the Green Building Resource Center, where we met Mr. Steve Stelzer, Program Director.  The resource center is located in the Code enforcement building and if you take notice of  the photos, the building has 40 Solar panels on the roof that were donated by BP (before the oil spill) and they reclaim the rain water to water the plants in the front. 

Inside the resource center there are numerous green product displays for everyone to check out.  Steven has many visitors through the building on a daily basis.  If you want to check it out, go to www.codegreenhouston.org 

Theresa O'Donnell confirmed

Ms. O'Donnell, Director of the Sustainable Development and Construction for the City of Dallas will be joining us on Thursday.

J2M

Karl Zavitkovsky confirmed

Karl is with the Dallas EDC and will be sharing is wisdom and expierence with us.

J2M

Paul Dyer, City of Dallas' Director of Parks and Recreation confirmed

http://www.dallasparks.org/

Paul Dyer will be joining us at 8:45 am on May 27th to discuss what he has going on in his department.  You'll be amazed at whats going on.

Alamo Architects

http://www.alamoarchitects.com/

Nicki Melleado and Mike McGlone greeted us at their offices to tour us through their building and discuss how they re-developed a former industrial warehouse into a LEED Silver certified building.  This is a very nicely done building.  They have a 6500 gallon cistern that collects rain water and condensate reducing the need for 78% of potable water; 95% of all construction waste was diverted from the landfill through innovative reuse like the concrete fence pictured below; 15% of materials from recycled content; 26% of all material were derived from regional sources and 91% of all spaces are naturally daylit.