Dallas ALoft

After we met with Dallas city officials we walked across the street to the hip sustainable  aLoft Hotel. The building is a true example of adaptive reuse done the right way. The building was built in 1925 initially as a.  Sante Fe railroad depot that once housed Haggar Slacks and the OK Paper Company. Devlopers Mr. Susah Naik, and partner  Ted Hamilton are not rookies when it comes to developing hotels. Mr. Naik has been involved with developing hotels in Dallas-Fort worth for the past twenty years. Mr. Hamilton is the son of a developer with strong roots in Denver, CO. In addition to creating hotels Ted Hamilton also is the Chairman of the City of Dallas' safety committee.

Together they have been able to obtain a historic tax credits and received a 7 year TIF that totals in the amount of $4.2 million due to a City of Dallas commitment. The aLoft Hotel also received the Deal of The Year for 2009 from Preservation Dallas.

The shape of the building is not a perfect square and this created some design challenges. They managed to add a ninth floor creating 19 additional rooms for a total of 193 rooms and 11 meeting areas. Currently the aLoft Hotel has a average occupancy in the mid 60% with rates of $110. This is above the average competitors 50% occupancy rates in a down market. Online travel agents dominate the hotel market and cause rates to adjust daily across the industry. The in house sales team generates a salary and receives commissions on all the business they generate for the hotel This cost affects the operation expenses by 2% but improve the revenue by 30%. Past guest include the likes of entertainer Jaimie Fox and basketball NBA All Star DeWayne Wade.      

The aLoft Hotel is a very refreshing place to be. The decor is very modern and the rooms are spacious with nice views.  After the new convention center is complete the aLoft hotel will have positioned itself to capture potential guests seeking a lower rate for high quality for many years to come.

Dallas- City of Dallas

When I arrived at Dallas City Hall I wondered how much natural light the building received. It appears to be greater than 80% thanks to the multiple large windows dominating both sides. The architect was well ahead of their time.

  

Our first meeting was with Mr. Paul Dyer Director of Park and Recreation. Mr. Dyer discussed the importance parks. According to Mr. Dyer  parks are vital in making cities more appealing for potential companies and homeowners. The development of parks or lack thereof  can affect demand. Properties in decent proximity of parks will more than likely see increases in property value. Currently Dallas's Uptown and Downtown areas lack connectivity. The creation of  a 6 acre park that bridges over  the bustling Woodall Rogers Freeway (aka 75) will connect the two areas.  This is part of the city's bigger plan to connect all corners of the 68 acre cultural district that consists of museums, restaurants, and residential towers, and performing art centers. Please note areas also include Fair Park and Deep Ellum.The City of Dallas was awarded $16 million in stimulus funds for the project, contributed $20 million of their own funds, and are also receiving private donations amongst others. The city did receive $30 million dollars for their Barnett Shale mineral rights and may renew the contract upon it expiration. No drilling has occurred to date.  

The power to raise capital privately is vital all major cities. The City of Dallas has a Real Estate Council made up of successful local real estate agents, developers, and professionals that assist with raising capital for various projects.  The project will revive Dallas' downtown quality of life as the gray brick turns into a green lush parking with trails, and amenities that  include a dog park. 

Dallas Mayor Tom Leppert and former CEO of Turner Construction surprised me and I believe the majority of my classmates by taking time out of his busy schedule to briefly take our questions. Mayor Leppert discussed his efforts to address some of the ailing portions of the city such as the southern section. The city has doubled the demolition docket to remove abandoned antiquated potential hazardous properties. He also mentioned that the city has incentives for those that develop along the DART line. When I questioned him on the city's stance on sustainability he stated that the City of Dallas has the largest alternative fuel fleet in the United States.To improve downtown the city acquired 7 vacant buildings. The city is not seeking  LEED existing building certification due to their physical conditions and current lack of occupancy.  Dallas truly benefits from having a world renown real estate developer in office.      

Ms. Teressa O'Donald Director of Sustainable Development spoke to us candidly. Ms. O'Donald stated that housing has pushed the economy out of economic meltdowns historically including 9-11. The mortgage crisis has taken its toll. The city generated $2 million dollars in prior years but after the mortgage crisis that amount has reduced by 50% In the past the city averaged 3500 development permits per year which is far from last years total of 700. According to Ms. O'Donald the Medical District is Dallas' largest economic provider in that it can offer full time employment to those that have a GED or a Ph.D.  

Ms. O'Donald stated that the city was land locked and as the biggest city surrounded by several suburbs there are greater expectations. The City of Dallas offers temporary housing/shelters for those that find themselves in need. Neighboring cities are thought to often refer those in need of housing to Dallas. Dallas has roughly 6000 homeless people which can be taxing on the city. 

In the Sustainable Development department Ms. O'Donald's staff must also consider pedestrian access for the disabled. To fight blight the city will occasionally  purchase property demolish it and replace it with a public use such as a library or school.  The department works with the Police, Housing, and Economic Development  departments to sustain or improve areas.

The City if Dallas received a $5 million dollar trust and $2 million of that is allocated to the creation of the  City of Dallas-CityDesign Studio. This was improve the Trinity River Corridor,  change the culture of  City Hall, and ensure viability. According to Assistant Director Mr. David Whitley the studio is looking to assist with development and redevelopment of West Dallas. In the past the City of Dallas has not intentionally created urban design. That along with Dallas' skyline is about to change, thanks to the Margaret Hunt Hill Bridge.

The CityDesign Studio will set out to enforce these initiatives. Recently an investment group purchased 80 acres. The challenge is to preserve the community and avoid gentrification. Part of the plan is to add color and sculpture elements while improving the area with new housing, retail, and the much needed grocery store. The older predominately Hispanic, Latino La Bajada neighborhood will receive in-fill housing. Developers in search of financing in todays climate still proves to be difficult.



Director of Economic Development Mr. Karl Zavitkovsky discussed the City of Dallas Regional Center which allows foreign investors who can purchase or create businesses valued at $500k-$1.0 million in Targeted Employment Areas while creating 10 full time jobs will receive temporary EB-5 visas for themselves and their immediate family members. The United States benefits with additional job opportunities, collection of    tax, and additional available capital. Investors can maximize their stay in the United States improving their business and gaining educational opportunities for family members.

  

Dallas ~ CRAIG RANCH

Developer David Craig a former Texas A&M football player turned international businessman has faced tough challenges while developing Craig Ranch. First there were property owners who held out during the land assemblage and the two lane roads.  Then there was 9-11 that threaten to hinder the PGA golf course partnership. Today the residue of yesterday’s mortgage crisis still hangs over the capital markets forcing lenders to tighten their belts with stricter guidelines. Through it all Mr. Craig stands at the Craig Ranch’s model development table with quitting nowhere on his agenda he forges ahead full throttle. “Be willing to put in the long hours,” Craig advised.

If you love golf and the feel of a small town then you will love Craig Ranch.  Its founder developer, Mr. David Craig spares no amenities for current and future residents.  The vision for Craig Ranch was spawned 10 years ago during a New Urbanism convention. With the support of the City of McKinney’s 380 simple TIF agreement and business partner the vision has now materialized.

The hard work and patience has paid off Craig Ranch is home to several custom home builders, PGA/TPC golf course,  residents include pro golfers, the Craig Ranch Hospital, Cooper Fitness Center, Dr. Pepper Starcenter, the Gold Medalist Michael Johnson Performance Center, and many more. After our meeting with Mr. Craig concluded I drove around Craig Ranch. Since Craig Ranch has a trolley for residents perhaps if I had its schedule I could have opted to take it.  The custom homes were beautiful several so close to the golf course one could travel to it on their golf cart. I believe that Craig Ranch will continue to thrive as the markets thaw.

Houston-The Core Apts. ~ Fundamentals Don't Change

Developer Micheal Morgan created The Core a 326 unit apartment near several nightlife establishments such as the trendy Sawyer Park. Michael Morgan's father William Morgan, established the Morgan Group in 1959 today he and brother Ronnie Morgan are focused on Class A multifamily developments, construction, and property management.

Michael Morgan stated that while reviewing projects he looks at the worst case scenario imaginable and evaluates risk. The use of very conservative practices such as saving the majority of  earned development fees has allowed their company to prosper and prevail in the eye of the real estate financial storm.

With nothing to hide Mr. Morgan shared The Core apartments financial position with our group. Currenlty they are 98% leased. If they continue at this rate they are on course to meet the lenders requirements.
This company basically does the right thing every step of the way leaving no stone unturned. The Morgan Group has built up their trust and confidence with equity partner Archstone Smith to the point that the Morgan Group can consistently receive Archstone Smith's  investment with minimal financial obligations.    

In this day and age several companies have gotten away from solid basic business principals in search of the fast buck negatively impacting society. Its refreshing to see the rewards of the diligent.

http://www.morgangroup.com

Houston - CityCentre

 

We met with the Midway Companies Director of Development,   Mr. Brad Houston whose duties include the oversight of acquisitions and development from start to finish. This responsibility also entails legal, architecture, construction, and capital issues.  

Mr. Houston gave us the history of Midway Companies which was incepted in 1968 with a focus of industrial development and included office properties in 1983. The company was based in Dallas and then opened offices in other cities however closed the majority of them through 1994-1998. The company moved its headquarters to Houston.

The Midway Companies raises capital for projects through traditional relationships of with wealthy individuals, banks, and insurance companies. The company typically seeks to be the general partner on all developments through their Limited Liability Company (LLC’s) or Limited Partnerships (LP). As general partner the company takes a position to do the construction, leasing, and property management, for standard development fees.

On average partners seek a rate of return in the high teens up to 20%. The Midway Companies do not act as a merchant. They take a long term position and build to generate annual income. Some would argue their approach is conservative. CityCentre appears to be Class A facility. Class A facilities will usually have no problems should a need arise to sell or receive additional investment. Midway Companies did not accept any city funds as they wanted to remain independent keeping the control of this posh product.  

The CityCentre site was originally a Town & Country Mall that cost the Midway Company a mere $30 million. The property included three parking garages. This is a huge benefit as parking garages can be quite costly to develop and take several years to recoup. A Fort Worth, Texas development company who I won’t disclose at this time paid $25 million to construct a parking garage. 

The Midway Companies knew that 2 million people could get to the CityCentre location with relative ease. Many of its end users tend to work in the oil and gas industries. The majority of the surrounding demographics consist of fairly high net individuals who work in the oil & gas industry. The city of Houston has relied on the oil and gas industry for decades. In the event of an oil and gas crisis the city itself would take severe losses. 

Although the buildings are not LEED certified they are considered sustainable. They are currently considering building another office building and would seek LEED certification for it. Companies like Exxon Mobile want their buildings to be LEED Certified therefore Midway Companies will build to suit regardless of the additional cost to go green. 

Mr. Houston stated that the City of Houston's lack of zoning is beneficial to ease of development but can be devastating as it relates to competition. He told the story of two developers building the same product next door to each other which hurt the properties performance. Zoning can create barriers of entry. 

CityCentre offers housing, entertainment, shopping, restaurants,  and a state of the art fitness facility. The property will only get better as the troubled market thaws.   

   

Houston - New Hope

Mrs. Joy H. Brown  gave us a complete tour of  Brays Crossing. What once was a seedy extended stay plagued with drugs, violence, prostitution, and loitering gangs has been transformed. Today it’s a peaceful single room occupancy apartment complex decorated with calming colors, a tranquil water spring, and inviting sitting areas.  New Hope a 501c non profit started in 1993 and offers transitional temporary affordable housing to those who qualify.  Individuals can not make over $22,350 per year, and meet criminal background requirements. Individuals with a violent criminal history and sex offenders are not eligible. Credit reports are not required. The tenants are typically people that are making minimum wage, were recently homeless, elderly, or facing some physical health challenge. The property meets all criteria for Americans with Disabilities Act.

New Hope Housing Inc. does not place single parents with children. All visitors must enter through the office. There, visitors will be greeted by an attendant present 24 hours a day 7 days a week. This helps to secure the property and keep the wrong element out.  The room rates are $415 or $475 per month with two floor plans to choose from.  If someone can not make their rent the foundation has a fund created by donations from local churches among other donors, to make up the difference. After a 6 month period tenants pay month to month. Residents never give notice they simply move out after their lives change.  The average waiting list is15 people  and there is a 100% occupancy at all times.

 

All rooms meet sound wall requirements, are extra insulated complete with double pane windows. Mrs. Brown calls it high quality property at a low cost. For a donation of $2000.00 to the organization you can have a room dedicated to a friend or loved one.

The City of Houston does support New Hopes efforts and the financing terms are those typical of Texas non profits that provide housing. New Hope is currently covering their operational expenses through rents. They are considered a Community Housing Development Organization (CHDO). The property has 149 units. They advertise and receive non profit advertising discount rates. This project broke the Not In My Back Yard (NIMBY) crime infested perceptions.  

New Hope Housing Inc.'s 2821 Canal St. property was developed on a Z shaped piece of land with Japanese architecture. This properties is only 5 yrs old very inviting with inviting common areas that includes tables and grills. The property has 133 rooms similar to the size of rooms at Brays Crossing. New Hope’s board members are made up of local attorneys, and CPA’s. New Hope is currently in the process of developing 3 properties.

   

Houston - West Ave - Gables Resdiential

Gables Residential is proud to introduce their West Ave mixed use development located in Houston's River Oaks Community. Currently the residential portion of the property is 89% occupied and the retail continues to lag at 41% occupancy. The average unit is 1080 square feet at approximately $1.65 per square foot (effective rent). The retail has two levels. In many instances two story retail does not perform as well as first floor units. If necessary Gables Residential could convert the retail space to apartments at a loss of 10 basis points.


The tenant mix includes all types from empty nesters, college students, to the young up and comers landing their first job. Gables Residential not long ago disposed of their suburban assets. They have the land on a ground lease that is owned by the Dickey family. Across the street is direct competition, 2727 Kirby. 2727 Kirby, was designed by architect Scott Ziegler designer of The Austonian. The original developer has passed away and now his spouse is attending to his affairs. The $600 per square foot pricing in this economy may have shifted the average consumer’s priorities. West Ave is positioned to be an alternative to such rents. West Ave offers recreational activities, leisure, and has access to the same shopping opportunities, if not more considering the projected on site tenant mix.