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.

Houston - Green Building Resource Center ~

The Green Building Resource Center was prompted by former Mayor Bill White to be available for the public to get a chance to see what green building is all about. We met Mr. Steve Stelzer and he gave us a tour of the property and discussed it origins. The facility has several vendors products available. As Mr. Stelzer noted the industry overall is on the downturn of the learing curve regarding LEED Certification and its products.

The scarcity creates an inststneous demand causing products prices to rise. Vendors' could capitalize on their products keeping them within 500 miles of major markets. Mr. Stelzer states once the mass production of all the majority of LEED products are made available the prices will lower just as we have seen with current LEED commodity. Initially paint with low emissions. Costs a premium now that the majority of paint manufacturers offer thie type of paint the prices are lower.


Mr. Stelzer was extremely passionate about the building describing its many features such as adding wheels on the tables, its solar panels, raised floor, and efficient HVAC system. 85% of the furniture in the location was donated and is being reused. In a quest to acheive LEED Gold status he was not awarded all the points he aimed to receive. Although this would not have taken him beyond Gold status he still nevertheless wanted the points as a matter of principal. Mr. Stelzer also discussed the cost of LEED Certification registration depends on who you are dealing with and that it can be negotiated.

Houston-City of Houston~ Everything's Bigger In Texas

Like most out of towners I never understood the logic behind Houston's lack of zoning. For example a used car lot next door to a four plex, which is next door to a school that sits between a fast food store, and a convenient store. We met with Planning & Development staff members Director Marlene Gafrick, Richmond Coward, Brian Crimmins, and Louisiana native Ryan Albright. Obviously the staff is a true reflection of the city as they were all from different states.

The City of Houston extends its services to the surrounding suburbs. The territory is large enough to fit Cleveland OH, Washington D.C., Detroit MI, Baltimore MD, San Francisco CA, Baton Rouge LA, Denver CO, Chicago IL, Pittsburgh PA, and Miami FL in its boundaries all at once. The lack of zoning allows developers to create their projects and offer the residents several different options. Some development companies test their facilities in Houston prior to creating them elsewhere.


City officials say that they don't want to dictate to the developers projects. The city has ordinances that are enforced to keep what most would consider seedy establishments from propping up. There are transit incentives for develops that create projects along the rail. The city does not impose double impact fees it instead basically reserves the right to install or not install infrastructure of particular properties. Due to the high costs of infrastructure developers choose to work closer to the city's infill areas.


The City of Houston's Planning Development relies on Chapters 42, 26, and 23. Which are the basic guidelines for building property in Houston. These chapters address basic development, parking restrictions, and land preservation. There is no density ordinance for multifamily property. The majority of development fees are flat and fairly inexpensive. The city likes developments because developments create jobs, and generate property taxes. Therefore it is in the best interest of the city to continue to flourish with developments.

San Antonio - Alamo Architects ~

Alamo Architects, Inc. advise their clients on the benefits of LEED Certification, sustainability and its value. In need of a new location the company decided to take their own advice and convert a former dirty warehouse into an office space. The property sits in a quiet small industrial older area.
We met with Alamo Architect Founding Principal Mr. Mike McGlone and his assistant Nicki. Mr. McGlone said the property was covered in old ovens and various kitchen supplies and was in complete disarray. The garages floor was covered in oil stains.



The exterior of the building retained its original metallic finishes. 2500 lbs of broken concrete has been used throughout the property as steps, fencing, and unique flower beds. On the right of the property sits a 6500 gallon cistern that collects rainwater and condensate. The interior of the property receives 91% of interior spaces receive natural light. According to Mr. McGlone any items that could be reused were reused. This is evident when gazing upon what used to be a metal garage door now being used as a cubicle bearing wall. Wood 2 X 4’s were also re-used to add steps to the stair wells. The building has exposed concrete throughout the property.

The property achieved LEED Silver status and according to Mr. McGlone it is a huge selling point when potential clients visit the facility.

San Antonio Rain Makers - Mr. Ed Cross & Mr. Charles "Marty" Wender

As a student and entrepreneur one highly values information. We purchase books, attend conferences, and search the internet all in hopes of acquiring information that can help us get closer to our vast goals. After I graduated with a BBA in Real Estate I worked at Citifinancial Mortgage Corporation as a loan officer. As soon as the whistle blew I darted out of the building and went to a We Buy Ugly Houses Franchise on Abrams in Arlington or made pit stops at mortgage broker shops. These guys were out there practicing deals day in and out full time hell or high water, swim or drown. The more I hung around the more they would open up to me and tell me how their businesses operated. Eventually I opened my own residential real estate investment, and mortgage company.

While visiting San Antonio we had the privilege of meeting two ambitious real estate forerunners Mr. Ed Cross and Mr. Charles "Marty" Wender. These men both are real estate experts and successful in their own right. They both were charitable with their time and knowledge. People purchase books by authors like Warren Buffett, Donald Trump, R. Donahue Peebles, etc., because it is highly unlikely that one would ever get a up close and personal with them long enough for them to impart their wisdom.

Cross & Wender experienced awful economic downturns yet managed to forge ahead. Mr. Cross continued to purchase properties even when the market spit out double digit interest rates, Mr. Cross ate them with a smile as they captured hefty chunks of cashflow. Mr. Wender stated that his partner lost the funding to one of his projects during the crash of Savings & Loans, and 80's Oil Bust. The media posted his picture in the newspaper and bluntly said he would not see his dream come to fruition. Most people would have thrown the towel in. Not Marty Wender, he's not most people. He worked hard and obtained new financing. It takes all of a few seconds to mention the most stressful times of your life. However when you endure stress day in and out it feels like an eternity.

From 2004-2007 it seems as though everyone wanted to practice real estate. Today some people are so devastated of what transpired and their losses they will never try their hands at real estate again. Mr. Cross & Mr. Wender have remained focused, and consistent in their approaches having both outlasted three economic downturns. I am all the more resilient having spent time with them and share some of their most agonizing and triumphant times of their lives.

Oh by the way! Be on the lookout as I share the details of the properties visited in San Antonio!

In the words of my favorite politicianPublish Post

Onwards & Upward
http://www.westoverhills-sa.com/developer.htm
http://www.cross-co.com/

Day 2- Seaholm Power LLC- Austin Adaptive Reuse

We met with Mr. John C. Rosato of Southwest Strategies Group at the 130,000 square foot Seaholm Power Plant. The property was built 1949-1956 and was decommissioned in 1989. Not only is the property taking $180 million to redevelop it has also taken 5 years to remove numerous hazards, concrete, piping, and antiquated mechanical devices and fixtures The property has undergone $13million in remediation since 1997. It is the first facility in the country to receive a “ready for reuse: designation under the federal “Toxic Substance Control Act”. The goal is to add value to downtown Austin lifestyle with shopping, entertainment, a convenient grocer, density, and access to transportation.

A project of this magnitude takes experience, patience, and money. To get the experience the development team is made up of Southwest Strategies Group, Centro Partners, and La Corsha Hospitality Group. This is a public private venture that the City of Austin supports. The development team seeks to receive LEED Silver designation. This property will be used for a variety of concerts and special events. There are plans for a 160 room hotel and 80 condo’s and penthouses. Although Seaholm Power Plant will retain the majority of its unique power plant features there are plans to remove 3 boilers and the turbine platforms.

Day 1 Chestnut Commons - Ausitn

Chestnut Commons proves the strong housing demand near downtown. The project is 100% occupied despite its proximity to high crime. The properties design and overall layout are the visions of 30's something year old's right down to the exterior paint selection. It has bright colors and inviting sitting areas throughout the project. Developing 32 cottages and 32 flats in price ranges of $140-$220k one could only assume that gentrification is occuring.

I tend to agree with Ausitn resident, Brian K. Burns author of Revitalization vs. Gentrification. Revitalization, in its purest form, refers to a process in which there is a "giving life back to", or "stimulating the life of", an existing body. As a socio-economic term, and as it relates to East Austin, it has to do more with the building up of the existing neighborhood in order to enrich the lives of the people who currently reside there. It is NOT the improvement of the houses, roads, businesses, and amenities of a region with the intention of making it aesthetically pleasing or financially profitable for others (i.e. new residents, new land owners, and financial speculators). When improvement is made to an economically impoverished area by a wealthier group of outsiders, and the first focus is not to better the lives of the downtrodden or current population, but instead to increase the financial holdings of this outside group, it is not classical revitalization - it is gentrification.


Prior to the development of Chestnut Commons it was a concrete facility. Therefore it’s not as if Momark Developments are offering neighbors low amounts to take control of residents existing properties. Momark Development built with the intentions to create affordaeble housing but do to site costs could not do so. Therefore Momark Development donated $1.2 million from their sales proceeds back to the community to rehabilitate existing housing stock.

However this project may entice real estate investors to jump on board. Rehabilitating some of the existing properties in the area should prove to be extremely profitable. The fact that individuals purchased 667 square foot one bedrooms with one car garages for $130-$140k tells me that 3/2/2 renovated homes could be extremely profitable. I believe that if the market wouldn't have turned sour there would be much more activity in this area.

Overall the development was a success. Individuals can easily access downtown without major traffic concerns. The neighborhood is improved and all investing parties recieved a return.

Day 2 -Mueller Airport Redevelopment

The City of Austin closed the Robert Mueller Airport in 1999. The property sat dormant until 2007 and the city approved an urban plan development. The 711 acre project should take roughly 10 years to complete. The 4,600 properties will range from $120k-$1.0 million offering a wide variety of single family residential units, mixed use condominiums, floor plans, builders, and options. There's something for everyone, from empty nesters to young up and comers. All properties will be meet Green Building efficiency energy guidelines.

The affordability program has strict guidelines. To receive any assistance, potential homebuyers will not qualify with $500,000 or more in there personal savings. Potential recipients must use the property as their primary residence. For those that do qualify, the city will add a lien on the property for the amount awarded. To recoup their funds they have implemented a shared appreciation mortgage in the event of a future sale and also in the event of foreclosure, the city accepts it as loss.

I drove the neighborhood. The difference between a $1 million dollar property and one for $120k is clearly evident. The properties with the higher price tags were custom developed and constructed with higher quality materials. The condominiums were very impressive with modern urban design.

Nearby are the Ronald McDonald House, Hospitals, and a shopping center. The overall layout encourages being outdoors with various ponds and walking trails. This project will continue to thrive with time. Hospital employees may opt to live nearby and kill any long distance commute.
www.muelleraustin.com

San Antonio ~ San Antonio River Authority

The City of San Antonio was proactive in cleaning up this stretch of river which was at one time forgotten like the nearby residential neighborhoods only blocks away. Pedestrians can find solace while veiwing art, plants, and natural wildlife. Thousands of people will flood this area on fair weather days for years to come. This investment has increased the property values of all properties that sit along its path. Some properties are now being invested in such as 1221 E. Broadway property and others are being placed on the market. I noticed two properties for sale during the walk. One was for sale by owner and the other was listed by a Grubbs & Ellis representative. The owner of an older motel would like to sell but at a price point the City of San Antonio and the once interested Pearl can't come to terms with.

San Antonio - Friedrich Building

When I arrived at the Friedrich Building I immediately crossed the street to get a better view of the old refrigeration building. Once again the City of San Antonio invested in itself adding to the tropical palm trees and new sidewalks. The property is only a few minutes from downtown. The property used to be a multi level manufacturing facility. A portion of it will be renovated and others demolished. The owners were able to capture several funding sources new market tax credits, the benefits of being in an empowerment zone, and historic tax credits.

The building has been a fixture in the community for such a long time that the city would like to retain its essence. We met with real estate broker Mr. Patrick Shearer who informed me that the owners would not have to restore all facets of the property. This was based on its 80 year history and the approval of a city council vote for local designation. Federal and National historic association will have their own set of guidelines. Seeking historic designation these routes could possibly require antique finish outs thereby raising the cost of construction drastically.

Asbestos and old transformers were required to be remediated. The property is currently listed for $8 million. The property has 533,000 square feet and high ceilings. However this property will require a seasoned developer to save costs. This building is older and it could very possibly have other unknown problems behind the walls and floor. Also there are not comparable rents in the area to justify the feasibility of this product. Currently architect companies are the primary tenants and truly appreciate the projects style.

San Antonio - 1221 E. Broadway ~ When Things Fall Apart

When major developments are announced there is usually a press release with city officials and the developers all digging dirt with golden shovels. In 24 to 36 months a ribbon cutting ceremony takes place. A San Antonio developer unfortunately did not get a chance to make his vision of 253 apartment units come to pass. We discussed the failure of 1221 E. Broadway prior to our onsite visit. According to a credible source, the developer was being backed by a European bank that funded the project site unseen. The developer however did not do the homework necessary such as a market feasibility study. Instead of outsourcing an experienced architect firm with a solid track record he opted to hire a retired architect. According to sources this architect was basically a "yes man," and agreed to the developer's instructions. In time the lack of preparation would catch up to the ambitious developer. Soon he found himself way over budget.

Unable to meet his financial obligations the developer was forced to stop the project. The city was stuck with a giant concrete eyesore near its major freeways for all to see for the next several years. The property remained in legal battles for several years.

When we arrived at the site it was obvious that vagrants used the property as temporary housing. The property still had plenty of potential. The thick concrete frame was already in place and the parking garage was in tact. In my other real estate courses I discovered that parking garages can be extremely expensive to create.

Apparently Developer Ed Cross also recognizes the potential to redevelop this property. His company, Cross & Company recently purchased the property once it was out of litigation. They have already parked a mobile office adjacent to the property and plans to begin renovating the property this year adding an additional floor and demolishing certain portions of the building.

The City of San Antonio - Checks & Balances

We initially met with Mr. Richard Milk and Mr. Jesus Garza respectfully from the City of San Antonio’s Planning and Development Services Department accompanied by Mr. David McGowan from the Center City Development Office.

Mr. McGowan, Dr. Forgey’s former real estate student from Texas A&M, informed us that currently the largest projects that he foresees impacting the city are joint ventures with the federal government. The City of San Antonio will be redeveloping large non performing real estate assets for federal tenants heavily funded by the GSA. General Service Administration is a central management agency that sets Federal policy for Federal procurement and real property management and information resources management funds to create public facilities. This will hopefully benefit the City of San Antonio by creating a $300 million value within 3 to 7 years. The city also finds resources to assist developers with products such as new market tax credits. The New Markets Tax Credit (NMTC) Program permits taxpayers to receive a credit against Federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs).

According to Mr. Jesus Garza San Antonio receives somewhere in the neighborhood of $13 billion from tourism while capitalizing on its strong military presence benefiting another $3 billion. Not known for its fortune 500 corporation capacity, according to Mr. McGowan and Mr. Richard Milk courting larger corporations in San Antonio is challenging. This as we discussed, is partially due to the lack of workforce, and the emphasis/dependence that the city places on tourism.

All men stated that they would like to see a denser, more sustainable San Antonio however several factors stand in the way to make this a smooth possibility. One of the key issues is the perception of crime and education in urban areas. Residents who choose to live in the suburbs are concerned about their children’s education. Mr. Howard stated that this tends to be a huge misunderstanding and that in-fact the schools in older/urban areas offer quality educations.

Investors as a whole have not risked their capital in inner city redevelopments. Investors would rather invest in hotels where they are almost guaranteed a decent ROI without dealing with inner city headaches. Mr. Garza stated that though the city does not want to be forceful with developers and dictate what and where they should build. However the city discourages sprawl by increasing impact fees.

Afterwards we met with Ms. Betty Feldman City Architect and Mr. Laurence Doxsey, Director of Environmental Management. Ms. Feldman stated that more required sustainable measures will be in San Antonio’s development policies/ordinances. I tend to disagree with this strategy. Creating a policy that mandates investors to spend additional funds on making properties sustainable is not fair. Investors often take risks with their personal funds therefore it should be their decision.

Mr. Doxsey practices what he preaches. He arrived to the building on his bicycle and believes that we all should go the extra mile to reduce our carbon foot print. Currently the city has implemented the Mission Verde Center which will become a multipurpose education, training and research center for renewable and energy efficient technologies, water management, and conservation demonstration. The city also has Casa De Verde for low inecome families whose income is at or below 20% of the poverty level. Families can receive loans for home improvements to decrease their monthly utility bills. Loans are given up to 20 years in some cases for payback periods and payment amounts tend to be less than the amount families save.

City Inspectors Mr. Ray Herra and Ms. Sylvia Cortez stated that their primary concerns while inspecting properties are any life and safety issues. They use an investigative staff to ensure that residents and real estate investors do not operate outside the scope of their permits. Their department is complaint driven. Ms. Cortez stated that in San Antonio you must pull permits for just about everything with the exception of basic plumbing permits for primary residents. This includes the replacement of sheet rock. Anyone found in violation will receive a penalty that includes a double fee for the permit. Historic properties maybe given some leeway as to structures within however this is done on a case by case. Historic properties require a certificate of appropriateness. Should a commercial properties usuage change owners or landlords should request a new certificate of occupancy to ensure the property meets all guidelines.