REDNews August 2019

AUGUST 2019

YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

Redeveloping: Houston's MSA

Land Development: Southeast Texas

New Tax Laws:

Leveraging Your Development

Women in Real Estate

Event - September 24 Page 11

AUGUST 2019

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© 2019 Berkadia Real Estate Advisors LLC and Berkadia Real Estate Advisors Inc. Berkadia® and Berkadia Commercial Mortgage® are trademarks of Berkadia Commercial Mortgage LLC. Investment sales and real estate brokerage businesses are conducted exclusively by Berkadia Real Estate Advisors LLC and Berkadia Real Estate Advisors Inc. Commercial mortgage loan origination and servicing businesses are conducted exclusively by Berkadia Commercial Mortgage LLC and Berkadia Commercial Mortgage Inc. In California, Berkadia Real Estate Advisors Inc. conducts business under CA Real Estate Broker Lic. #01931050, Berkadia Commercial Mortgage LLC under CA Finance Lender & Broker Lic. #998-0701, Berkadia Commercial Mortgage Inc. under CA Real Estate Broker Lic. #01874116. For state licensing details for the above entities, visit: www.berkadia.com/legal/licensing.aspx

AUGUST 2019

Morton Rd. REDNews August2019Ad.indd 1

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7/16/2019 3:41:34 P

IN THIS ISSUE

8

18

12

Market

Sales & Leases 2-3, 5, 7, 13, 15, 17, 21

Services Environmental 22, 35 Financial 15, 17 Legal 21 Property Tax 19

Scoop

Events 11, 24, 26, 28, 33 Social 25, 27, 29 Bulletin 30 – 32

Features

Redeveloping Houston's MSA 8-10 Land Development in Southeast Texas 12, 14, 16 How to Use New Tax Laws to Leverage Your Development 18-19 Working with Local Stakeholders 20-21 RAY’S BUZZ CCIM Luncheon 34 O'Connor & Associates 34

4

AUGUST 2019

936.703.2101

936.703.2101

936.703.2101

AUGUST 2019

5

Letter from the Publisher

YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE

PUBLISHER Ginger Wheless ginger@REDNews.com

EDITOR Margie Gohmert info@REDNews.com

Dear Readers,

I

hope you are all having a fabulous summer and, if you’re the typical Type A CRE broker, you’re probably doing deals somewhere cool via your cell phone while vacationing on a sandy beach or in the mountains.

A big Texas "Thank You" to everyone who attended our Houston & Southeast Texas Development/ Redevelopment Summit in June. Our panelists and moderators provided unique insight into some of the opportunities and challenges in this region, while also answering direct questions from our attendees.

Throughout this issue, we have recapped each of the four panels: Redeveloping Houston’s MSA ( pages 8-10 ), Land Development in SE Texas ( pages 12-16 ) , Working with Local Stakeholders ( pages 20-21 ) & How to Use New Tax Laws to Leverage Your Development ( pages 18-19 ).

Our next event will be our second annual “Women in Real Estate´ Summit held on September 24th at The Briar Club, so mark your calendars to hear a dynamic lineup of incredible female leaders discuss everything from current workplace issues/state of the market today to measuring women’s success in today’s market.

Next month’s issue will feature Industrial, Office and Land so let us know about your projects.

Enjoy what’s left of your summer!

STAFF WRITERS Janis Arnold janisarnold1@gmail.com Ray Hankamer rhankamer@gmail.com Brandi Smith info@REDNews.com

MANAGING DIRECTOR Benton Mahaffey accounting@REDNews.com

EMARKETING DIRECTOR Sarah Evans Carter emarketing@REDNews.com

CREATIVE DIRECTOR Michelle Hurtado digital@REDNews.com

SALES Ginger Wheless ginger@REDNews.com

PRINT & DIGITAL DISTRIBUTION REDNews is directly mailed each month to commercial real estate brokers, investors and developers throughout Texas and the US. Texas Brokers: 8,150 Texas Leasing/Tenant Rep: 6,232 Texas Investors: 4,979 Texas Developers: 4,710 Outside Texas Investors, Brokers,

Best Regards,

Developers etc: 26,387

Ginger Wheless

REDNews has gone green using recycled paper.

Thank you Midway Press!

TOTAL QUALIFIED ONLINE REDNews DISTRIBUTION: 50,458

To subscribe to REDNews call (713) 661-6300 or log on to REDNews.com/subscription.

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AUGUST 2019

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7

Redeveloping Houston’s MSA

BY BRANDI SMITH

In the Houston real estate market, sometimes your end goal can be overshadowed by the process of how to achieve it. Development is a challenge, even in a city with no zoning laws, as Oxberry Group learned when it eyed a 1.5-acre property at the corner of San Felipe and Chimney Rock in Southwest Houston. The intersection appeared to be the ideal site for a luxury retail development, but there was a reason no developer had touched it yet.

“That land has been in a deed-restrictive association for more than 80 years,” principal Sean Jamea told those in attendance at REDNews’ Houston & Southeast Texas Development / Redevelopment Summit.

Seeing that obstacle, Oxberry led a nine-month marketing effort to educate homeowners in that association, Briarcroft, about the project and Houston’s everchanging real estate market. In the process, Jamea said he got to learn about the area as well.

“One homeowner shared that when she was young, her house was on San Felipe and she used to ride her horse up and down San Felipe and Chimney Rock,” he laughed.

Oxberry’s work paid off. It needed 191 of Briarcroft’s 285 households to sign off on its plan and remove the property’s deed restrictions. In the end, 199 approved.

“It’s hard to get ten people to agree on anything, but it is possible,” said Jamea.

“That’s probably the fifth or sixth deal in which we’ve led a very strong marketing effort to make people understand that Houston is changing. This was not the way Houston was planned.”

“We’re finding a lot of grocers and big-box anchors see the benefit of having medical and alternative uses such as fitness and entertainment alongside their projects,” said Strickland.

The company paid the association nearly $1 million for the property, a parcel many homeowners didn’t realize they owned.

It’s an evolution, she explained, from older leases, some of which wouldn’t allow leasing more than 10 percent of the total gross leasable area to medical, office, entertainment and fitness.

“It’s a really tradable right that they have in their association,” Jamea said.

The resulting development is the Shops at Tanglewood, a two-story retail center that’s currently leasing retail, restaurant, medical and service space.

“My family lives nearby and they ask me daily what’s going in in that project,” noted fellow panelist Ashley Strickland, vice president of NewQuest Properties’ healthcare & wellness division. “You’ve really kicked off and spurred a lot of great new development.”

She knows well the battle over restricted property. NewQuest is near execution on a 4-acre site just south of its Kroger development at I-10 and SH-99 in the Katy area. It will feature a 40,000-square-foot multi-disciplinary medical facility.

“It’s been a long time coming to even get to the point of a lease signature,” Strickland told the audience. “Kroger had an REA that encompassed any new developments thereafter, including these four acres.”

She said her company successfully worked with Kroger to get some of those restrictions amended.

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AUGUST 2019

“Frankly, those are really the active tenants that are coming into projects and expanding,” Strickland said. “It’s an interesting time. As long as you keep your periscope up and you’re really aware of the best uses that work together and how to strategize in the long run, I think you’ll end up with a great result.”

“... something more …”

Property restrictions are just one of the challenges facing developers in Houston and Southeast Texas these days. Municipal cooperation can be another.

“We have a lot of municipalities we deal with,” said Kenneth Katz, co-founder of Baker Katz, adding that it can be more difficult to work with smaller communities.

The reasons for that can vary, though a disconnect between expectations and economic reality can be one.

“An example: everyone goes by CityCentre and they see a great project created by Midway. They have visions for CityCentre in their small town,” Katz said. “Developers show up and want to build a shopping center, or whatever the case may be, but cities have the

Redeveloping Houston’s MSA Kenneth Katz

Pat Duffy

Sean Jamea

Ashley Strickland

freedom to push back. They’ll say, ‘Wait, we want to see something more, like what you’ve got over here.’”

He said trying to bridge that gap can be a challenge.

But vision isn’t the only barrier to significant development; sometimes staffing is as well.

“They want their markets to be developed in a true fashion, but candidly, they’re still staffed as a lessthan-10,000-population type of a system,” Strickland added. “We have to have a conversation: ‘If you’re going to have us execute on this timeline, then we also need you to execute alongside us.’”

By contrast, the City of Houston received a lot of praise from panelists. Katz called it “a very developmentfriendly city.”

“NewQuest has a strong name and presence here in Houston. We’ve always been fortunate to have pretty ideal relationships with the city and get the approvals we need to be able to execute our vision,” said Strickland.

Jamea echoed that, citing The Mondrian, a high-rise condo development in the Museum District that Oxberry recently completed. The 68,000-square foot, 8-story building went up on a 13,000-square-foot property, a project so dense, he called it virtually “impossible.”

“The city has to work with you all the way to the end because utility issues come up constantly and it isn’t possible to know that from the beginning,” said Jamea.

“We have found that the city has been helpful in understanding the complexities of dense projects and helpful in resolving that through the project.”

“... a more dense Houston …”

The density of the project can be another complication, according to Jamea.

“Really dense development all comes down to parking,” he said. “Parking is the only thing inside the city that differentiates one project from another.”

Oxberry is currently building a 20,000-squarefoot multi-use investment space in Midtown.

City regulations mandate that 160 parking spaces accompany the project.

“That would totally kill the deal,” said Jamea. “We went to the city and asked for a variance. The city was responsive and we were able to do the project with 33 spaces.”

The problem isn’t solved completely, however. Tenants need spaces for customers and employees.

“We’ve successfully been able to convey to tenants that they either pay us $45/SF for rent and get 33 parking spaces or they pay $85/SF and get 160-space structured parking,” said Jamea.

The development, which just started construction, is almost 100 percent leased out.

“Tenants understanding,” Jamea added. “It’s not going to be, business as usual, and they are going to have to adapt to a more dense Houston.”

“... an opportunity or not? …”

Behind the popularity of dense projects is, more often than not, the cost associated with developing the property. The pricier the lot, the more motivation to increase the bang for the buck.

“It’s impossible to do a low-density project in any of these places in the city when land prices are more than $150/SF,” said Jamea.

Competition from multi-family and senior living groups are helping drive those costs up.

Ashley Strickland “They’re coming in and temporarily or artificially raising these dirt prices to $150-plus a foot. That doesn’t make sense for a retail development. We can’t even get in the game,” Strickland said.

She predicted, as it always does in the cycle, multifamily will plateau and back off in purchasing. However, Strickland added, "there’s still growth to go".

“Our general population is growing at 100,000 new residents a year, so the rule of thumb is usually a fourth of that needs to be in new multi-family units.

That means around 25,000 and I think we’re at about 20,000 today,” she said. “At the end of the day, it’s more of a benefit than a deterrent, but it’s certainly something we always have to watch: at what point are we in that cycle and does it make sense to jump on an opportunity or not?”

While new development, which is a focus of NewQuest, learns how to cope with its cost challenges, firms, such as Baker Katz, that primarily deal with redevelopment are dealing with their own.

“One is just latent conditions. When you’re taking an existing building and retrofitting it, there are just so many surprises that you encounter as you’re going through that process,” Katz said.

Another factor involves working on a property that already has existing tenants.

“That adds a level of complexity. We’re working around existing businesses that are open and operating, so we want to minimize destruction to those businesses,” said Katz.

“... a different animal …”

Those issues are more pertinent than ever as redevelopment sees explosive growth due to the retail landscape’s evolution.

Continued on Page 10>

Redeveloping Houston’s MSA < Continued from Page 9

“The internet’s stepped in and retail’s a different animal than it was,” said moderator Patrick Duffy, president of Colliers International’s Houston office.

As big-box retailers such as Toys ‘R’ Us and Sears shutter stores nationwide, developers have an opportunity to turn what didn’t work into something that will: lifestyle concepts that mix a variety of retail with green space.

“You’re laying out buildings in an open-air setting, so each retailer has its own specific storefront. That’s coupled with amenity-driven space, such as parks. You’ll see a lot of restaurants and service groups,” Strickland explained. “For a family of four, while the wife’s shopping, the husband with the two kids can take the kids out to the park and have a nice day.”

The layout is markedly different from the traditional mall, which is all interior facing.

Many malls are rethinking the layout of days past. Strickland highlighted the San Jacinto Mall at I-10 and Garth Rd. as an example.

“The closure of Sears has helped them be able to redesign that overall layout and bring in some really neat, new visions,” she said. “I think when a big box closes, there’s a quick knee-jerk, ‘Oh my gosh, what are we going to do? Is it going to sit vacant?’ I actually think it creates new opportunities.”

Added Duffy: “This is has been a successful mall. They’ll tear that down and spend $300 million freshening up, revitalizing and making a mall that’s currently doing quite well pertinent for the next 20 years.”

Note that these examples are not of malls closing down, but simply maturing.

Rumors of retail’s death have been greatly exaggerated, per Katz, who points out that most retailers fail due to poor location, poor operations, poor merchandising or poor customer support.

“Today, any time a retailer fails we overlook all those possible causes and we immediately blame it on the internet,” he said. “There’s no doubt that the Internet has an effect on it, but I think that retail’s probably getting a disproportionate amount of attention in society and among the mainstream media as an industry that’s particularly susceptible.”

“... 2020 and beyond …”

Redevelopment is also a theme in the office market, said Duffy.

“There’s far more money being plowed into buildings that were built in the ‘80s, some of them in the early 90s. All of the office owners in downtown are putting millions and millions of dollars into their common areas, adding the types of amenities that they’re seeing in the new buildings,” he said.

The reality, Duffy added, is that to hold on to office tenants, property owners need to offer what people are looking for in 2020 and beyond in terms of amenities.

“The old buildings are being vacated because there’s a drop in quality. If you don’t maintain the quality of your building at a competitive level, you lose,” he said. “So it’s a redevelopment opportunity of existing office structure that will stay an existing office structure.”

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AUGUST 2019

Duffy also addressed the state of the land market in Houston, noting that there’s a shift away from buying raw. Instead, buyers are looking at older industrial product.

He called it a “cash-flowing land play.”

From their perspective, they really own a multi-tenant mixed-use site, an apartment site that’s just waiting for the market to be right,” Duffy said, “They’ll sit on them and gradually stop renewing the tenants that are in there. It’s the ultimate land banking with a little bit of cash flow. We’re seeing a lot of that. Houston’s ripe for this.”

(For more about the Houston-area land market, read Land Development in SETX on page 12.)

“... a very dynamic market …”

Though development in the city of Houston comes with a unique set of challenges, none are insurmountable. In fact, our REDNews summit panelists suggest they help set our market apart from others.

“Our population growth, our income, our jobs, everything here makes this a very dynamic market that’s going to keep changing,” Duffy said. “People, like our panelists, will make those changes come to life and keep this a city we can all be proud of.”

Celebrating Female Pioneers in the Commercial Real Estate Industry • Early Pioneers: Making their way into a male dominated industry • The challenges in overcoming the paradigms in a male dominated industry • Looking Back: could the early pioneers have done anything different • Initial industry reaction to women in the business • The Vision for Women in Real Estate for the future Current Workplace Issues Faced by Women • Flexible Work Arrangements Can be Key to Success • Sexual Harassment; Why this isn’t going away; How to Handle it • Role Models and Mentorship; or lack-thereof • The Double-Bind paradigm; are you a strong leader or well-liked, why not both?

• Current Bias in the Workplace: Race, Gender, and LGBT • Overcoming Fear and Trusting Your Own Voice • Equal Pay; What is it going to take to Even the Field State of the Market – Commercial Real Estate • Where are current development opportunities; • Is low unemployment hurting or helping real estate?

• Where is the growth in tenants; are companies expanding their footprint?

• What is the market for Female Entrepreneurs today?

MORE INFORMATION and REGISTRATION: www.resummits.com/houstonwire

Measuring Women’s Success in the Industry: What We Know Today • Embracing our differences: Should women try to differentiate (or “brand”) themselves in the commercial real estate industry? Does this make a difference in general or only in highly specialized roles?

• How women can use their accomplishments in marketing internally or externally.

• Mentoring young women today that are interested in commercial real estate • What additional skills do women bring to the table in working in the commercial real estate industry?

• Standing in Your Success; How to Properly take Credit for Your Accomplishments • Are there any cracks in the glass ceiling?

• Being a Champion for Change: Continuing to Improve the Outlook for Women • Building Alliances with Decision Makers

Speakers Include:

More Speakers To Be Announced

To learn about how your company can sponsor this event contact:

Ginger Wheless | REDNews | (713) 661-6300 | Ginger@rednews.com

AUGUST 2019

11

Land Development in SE Texas

BY BRANDI SMITH

Duane Heckmann

John Bonner

Danny Signorelli

Melanie Edmundson

For The Signorelli Company, its most recent success involves “chasing the corridor,” keeping up with the Grand Parkway as it expands access to new areas of Southeast Texas.

“It’s changed traffic patterns, the way people move, the way they shop, where they’re going. It’s making farmland convenient, and that has opened up a lot of opportunity for us,” president and CEO Dan Signorelli told the crowd gathered at The Briar Club for REDNews’ Houston & Southeast Texas Development / Redevelopment Summit in late June.

The most significant opportunity upon which Signorelli has seized may be the 1,400-acre Valley Ranch. His company bought the first parcel at the intersection of US-59 and SH-99 back in 1999. It took another seven years 12

AUGUST 2019

Minor Taylor

before he’d assembled the full property needed for the master-planned community in Porter.

“We would rather take a methodical approach and hit that maximum benefit for how the pieces come together. We’re more interested in the longer-term returns,” Signorelli said. “We take a lot of pride in what we do.”

Valley Ranch and its 240-acre Town Center are spurring new development in the area, long seen as too distant to be a viable Houston suburb.

“We’ve created more than 3,000 jobs so far within the project, and we’ve only developed about 600 of the 1,400 acres so far,” Signorelli said. “The balance of the project will be density development: medical, retail, multi-family, Class A office, and hospitality. Whatever you would find in a typical central business district, that’s what we’re creating for that corridor.”The project has also helped the land development Continued on Page 14>

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Land Development in SE Texas < Continued from Page 12

division of The Signorelli Company expand. Signorelli said it has nine projects spread around the greater Houston market.

“... doing deals …”

Addressing current opportunities in the land market, Signorelli was flanked by fellow experts: John Bonner, founder and president of First Continental Investment Co.; Minor Taylor, founder and president of Taylor Land Investment; and Duane Heckmann, MSA advisor with Land Advisors. They shared their views about what appears to be working.

“It’s a pretty simple process to figure out,” laughed Heckmann. “Wherever there’s a large piece of land on a new or improved road, that’s where development is going. We’re doing deals in Magnolia, Huffman, Manvel, Angleton, Fulshear.”

First Continental, meantime, is completing the final 900 lots of the 2,000-lot Harper’s Preserve, a masterplanned community near The Woodlands, per Bonner.

On the other hand, Taylor sees opportunities in pipelines.

“We’re seeing an increase in industrial sites for new refineries going in west of town,” he said. “New pipeline plans have been coming in, so we see these opportunities continually coming.”

“... they don’t know what they’re looking into …”

Scouting out potential is something these pros are, well,

pros at.

“If you’re looking for land, you call Land Advisors. That would be our recommendation,” said Heckmann.

Taylor elaborated on the value of a land sales specialist, adding they don’t just “sell this piece of property,” as people have asked him in the past. He stressed that specialists like himself and the other panelists can identify issues and troubleshoot in a way most ordinary buyers can’t.

People just want to go out and buy a 1,000-acre farm. They don’t really know what they’re looking into,” Taylor said.

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AUGUST 2019

“Next thing you know, you have mineral issues. We’re seeing water issues now as well.”

Water rights, he said, are now being treated like mineral rights in Harris County, which he called “almost unheard of 10 years ago.” However, that’s been common practice in West Texas, so he has experience negotiating that part of a deal.

“... one of our biggest issues right now …”

Those rights are certainly an aspect of the price of land, but location still reigns as the No. 1 factor.

“If you’re within a 50-mile or 60-mile radius of Houston, we’re seeing land prices just skyrocketing based on development. A lot of it is industrial development, lot of commercial, lot of residential as well,” Heckmann said.

He told summit attendees that Land Advisors has been hired by county and economic development organizations to help them find land for clients who need rail, power or paved roads.

“Five years ago, we were selling class-A land at $2,500 an acre,” said Heckmann. “I don’t think you can buy anything less than $4,500 now, even way outside of Houston. Inside Houston, it could be anywhere from $10,000 to $50,000 an acre for large tracts.”

Buyers are gobbling up lots faster than they come on

the market, which is driving those prices up. “There’s a lot of money out there right now in the land business.

In this past year, I’ve had a 1031 guy with $300 million looking for farmland. That’s not an easy thing to find in this country. I had to move up to Illinois,” Taylor told the crowd. “So I would say good quality property is one of our biggest issues right now.”

“The population is booming, so demand for housing is up there. It’s a tight supply for lots, and it’s a long period from taking a raw piece of land to delivering a lot on the ground. It’s 12 to 18 months,” explained Signorelli. “They’re all running around frantically, trying to put together positions for 2021, 2022. It’s a function of numbers.”

Some of the lag time in turning these lots around comes down to overregulation by local governments, said the panelists.

“Zoning, drainage, Atlas 14, ETJ, Rule 76. These are all things that have got to go through a governmental process, and it’s getting slower, longer, more tedious to get anything done,” Heckmann lamented.

Signorelli backed him up, saying with every new wave of elected officials, there are new folks who need to learn how change impacts the development process.

“If we’re not careful with who we elect to create regulations and bureaucracy, then we can eliminate some of the advantages that are reasons that our population is growing,” he said.

Continued on Page 16>

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Land Development in SE Texas < Continued from Page 14

profitability moving forward.”

Taylor added to that: “As interest rates go down, it increases the purchasing power of those homeowners. That can move a homebuyer up from a $180,000 price point to $210,000 very quickly.”

“... moving plateaus …”

Financing is another bureaucratic hurdle land developers are running into as banks are under more of a regulatory burden than ever before.

“Banks don’t love land. It’s a security thing. It’s a dirty word. I don’t know if that’s some scar from a down cycle,” said Signorelli.

The reality, he argued, is that land prices consistently go up, making property an excellent investment.

“Land prices are like moving plateaus,” added Taylor. “Typically, land will go up in price. It’ll plateau for a little while, then it goes up again.”

The fear, with which we are all familiar, is that a significant burden of debt can bite a lender should a down cycle hit. That’s why Heckmann said so many buyers are skipping the banks altogether.

“Almost all of our major land tracts sold since 2012 have been in cash. No bank financing. It’s an institutional fund. It’s a high-networth individual just coming in and dropping quite a bit of cash on the deal,” he said. “It’s really hard to get hurt when you don’t have debt on you.”

Another option available to buyers and lenders is non-recourse financing, a loan secured by collateral. In this case, the lender would seize the property, but not be able to pursue the borrower for any additional funds.

As prices increase, developers are forced into performing a balancing act, said

Signorelli: paying more for real estate means alienating the bulk of potential homebuyers who are looking for a home around the $200,000 mark.

“When you’re out there paying $40,000 to $70,000 an acre for farmland, that’s impossible,” Signorelli said. “We would like to do an awful lot more homes in that target price range, but we just can’t because it’s difficult to find those parcels.”

Interest rates are another significant factor when it comes to the price of a home, Bonner pointed out. Six months into 2019, they’re down 75 to 80 basis points compared to 4Q 2018.

“Everything’s rosy again,” he said. “I think we’ve reached a pivot point on interest rates. They are going to be a big part of our home builders’ volumes and 16

AUGUST 2019

“The significance of non-recourse financing is that when you go through these cycles, when you do put some debt on your land, you can hang on to your net worth,” Bonner clarified. “Depending on the length of your deal, if you were to hold onto your net worth, non-recourse financing is very important in our industry.”

While the land market faces challenges, overcoming them is part of the thrill of being a land specialist, according to Bonner, Taylor, Signorelli, and Heckmann.

Every deal holds the promise of a region-changing development, like those that have already made a mark on the Houston area.

“Look up in the life cycle of Kingwood, Cinco Ranch or The Woodlands. Look at the job creation, the economic impact and the quality of life that those types of development create over time,” said Signorelli. “It can be pretty special for an area.”

AUGUST 2019

17

How to Use New Tax Laws to Leverage Your Development

BY BRANDI SMITH

When Texas State Sen. Paul Bettencourt took his seat at the panel focused on tax laws, he did so having finally achieved a long-sought success: property tax reform.

The result has been ever-increasing appraisal values.

In 2017, he notes that 75 percent of properties saw their value go up. A year later, that number bumped up to nearly 89 percent.

“We were chasing New Jersey to be the highest tax rate in the nation. We decided to pull out and let Illinois and New Jersey stay Nos. 1 and 2,” said Bettencourt. “We’re actually going to start reducing our tax rate next year.”

“The economic impact of increasing taxes is a real problem in the state,” said Bettencourt, illustrating why he led efforts for reform in the Texas Legislature.

To understand how necessary the solution was, one must first understand the impact of the problem.

To highlight it, Bettencourt cited the Harris County Appraisal District.

“For almost all the major business properties, there’s actually a model of your property, specifically if you’re on income and you’re multi-tenant,” he explained. “They’ll actually estimate your income and your expenses. They’ll do a reconciliation of their models, and then they do quality control before they send out the value notices. “ 18

AUGUST 2019

The result is the Property Tax Reform & Relief Act of 2019, which, among other things, drops the rollback tax rate from 8 percent to 3.5 percent for most local governments. It also caps the school district rollback rate at 2.5 percent. Any tax increase over that triggers a public vote.

“This rollback rate had not been lowered in 38 years,” Bettencourt said. “The good news is that as values go up, tax rates are going to start coming down more than they have.”

Other facets of the reform passed include

significant changes to appraisal review boards, such as term limits, and implementing a standardizeduse model.

“Has anybody at the appraisal review board ever threatened that they should’ve raised the value, that the value should’ve been higher and you should be happy?” asked Bettencourt. “Well, that technique is now off the books.”

Changes to deferrals, delinquent taxes, and disaster reappraisal are all part of the package as well.

“These bills will actually impact a lot of your projects that you’re looking at,” said Bettencourt.

“They basically slow the growth of government while cutting the tax rates. If you did just one and not the other, you don’t get the combined long term effect. So that’s what I’m really happy about.”

In the debate over how to manage property taxes, panelist Robert Martin, principal at Robert E. Martin & Associates, noted the option of a state

How to Use New Tax Laws to Leverage Your Development income tax had been brought up repeatedly as a way to mitigate property and sales tax costs.

“Once a tax is in place, it’s very hard to get it lowered,” said Martin. “That’s what scares me most about an income tax. I don’t think the other taxes would not be lowered enough. Our whole business structure is based on the present tax structure, and during a transition, there could be a lot of problems.”

While Bettencourt has had his eye on state tax issues, Martin has been watching changes at the federal level, specifically, those linked to the Tax Cuts and Jobs Act of 2017, the effect of which is just being felt on 2018 tax returns.

“Fortunately, the real estate industry came out pretty well,” Martin said, before running down some of the most significant impacts.

As far as housing credits, he said the 10 percent historical credit for pre-1936 structures was eliminated, though the 20 percent historical credit still stands.

“The only modification is that you have to take that over five years,” said Martin.

He also mentioned that, at first glance, it didn’t appear the low-income housing credit was changed. Though it did survive, Martin noted that it got hurt in the cut in corporate tax rates.

“Because the corporate tax rate went from 35 percent down to 21 percent, the value of the credit went down,” he explained. “That industry of people who were working with low-income housing credits, from what I understand, has been hurt quite a bit.”

Martin also tackled the 20 percent qualified business income deduction, which, he said, was added to equalize things since corporations received such a big tax break. Most personal service businesses, such as attorneys, accountants, and brokers, don’t qualify.

“But there is a window there. If you have income up to $157,000 as a single person, or up to a little over $300,000, you still do get this 20 percent,” Martin clarified, while mentioning that many tax preparers overlook this deduction because it’s not automatic. “You have to go in and make the changes manually.”

Paul Bettencourt

Bob Martin

on, the idea received negative feedback. There weren’t any regulations, and people were afraid to get in. They thought opportunity zones were too risky,” he said.

Since then, the Fed has released two rounds of guidance pertaining to opportunity zones, which REDNews has covered in-depth with the help of national experts.

In summary, Martin told the crowd there is a lot to be optimistic about when it comes to tax reform in the years ahead.

“Between the state property tax code and the federal code, you really should take advantage of this,” Martin said. “This may be the Golden Age.”

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Opportunity zones, a topic discussed during the previous panel at the Houston & Southeast Texas Development / Redevelopment Summit hosted by REDNews, was also something Martin wanted to tackle if only to emphasize the incredible possibilities available even as time is running out.

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“If you put your capital gains into an opportunity zone, not only do you defer the gain, you won’t have to pay the tax in 2026, you also won’t have to pay tax on down the road,” said Martin. “The biggest problem is that not enough people know about it.”

He said because the tax law involved so many other changes, opportunity zones have been a low priority for tax professionals. Martin added that, early

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19

B.J. Simon

David Showlater

Dave Irvine

Vince Yokom

Working with Local Stakeholders

BY BRANDI SMITH

When Amazon opened the doors of its 1 million-squarefoot distribution center in Brookshire, it was heralded as one of the biggest economic development projects Waller County had ever done.

“That will change if you guys all do your jobs,” joked Vince Yokom, executive director of the Waller County Economic Development Partnership.

Yokom has headed up the organization for the past 15 years and has seen development in the area increase exponentially as population growth has shifted west.

“We’re excited about the future of the Houston region and certainly in Waller County,” he told the crowd assembled at the Houston & Southeast Texas Development / Redevelopment Summit organized by REDNews.

Waller County EDP’s goal is to work with existing businesses and those wanting to move into the county to facilitate positive growth in the county.

“We try to encourage developers or any end user coming into the community to engage with us as soon as possible,” said Yokom. “In a high-growth area like Waller County, we’re constantly changing rules and regulations. Things are on the move. We don’t want 20

AUGUST 2019

someone to start in a particular direction and have to change directions.”

He noted that every project is evaluated on its own merits, that there is no “cookie-cutter” or “one-sizefits-all” approach to working with a developer.

“A lot of developers don’t realize that we are here to help and we can help guide where you are looking,” Yokom said.

B.J. Simon, associate executive director of the BaytownWest Chambers County Economic Development Foundation, added that organizations like his can serve as interpreters between different organizations within a region, especially when it comes to zones and uses.

“What is ‘general commercial’ in Houston may not be ‘general commercial’ in the city of Baytown,” he explained. “Depending on the nature of projects, it’s key to understand what flexibility exists.”

Simon stressed, as Yokom did, the importance of starting the process early.

“Contact us early, get involved early, let us help you as early as possible,” said Yokom. “That’s probably the number one thing I would recommend.”

That is something both men have learned in their roles working with various governments and developers.

They also took the opportunity to share other lessons they’ve picked up along the way.

“Time is critical. Leverage can be a killer. Get in and get out of projects,” advised Simon. “Picking the right location is helpful. Of course, freeway locations are better that off-freeway locations, if you have an unknown property in the time of need. Good locations are always important.”

“Being sensitive to the time, we try to develop everything we do around making sure that you make a good decision on your behalf or on your client’s behalf as fast as possible,” Yokom said.

He mentioned that Waller County has introduced what it calls parallel abatement, a process aimed at speeding up approvals.

“We work with the cities and as soon as the city indicates to us that they are going to participate, instead of waiting for them to finish their process, we start immediately,” said Yokom. “So you have both entities running simultaneously to go through the process of shortening that incentive prep approval process. We’ve taken it from 90 to 100 days to maybe 45 days.”How to utilize opportunity zones, a

Working with Local Stakeholders relatively new federal program aimed at injecting economically poor areas with investment, was a popular topic for audience members, who asked panelists multiple questions on the topic.

“Baytown has 8.25 square miles of opportunity zone designation, essentially the old central business district,” Simon said, adding that Baytown EDF has been working with municipal governments and private industry to develop projects in those areas.

“I think opportunity zones are a great tool,” added Yokom. “I’m very fortunate to have a lot of land in Waller County to be taken advantage of. So, if you know anybody out there that has excess capital gains and looking to offload, look out in Waller County.”

His county was also the focal point for a discussion about eminent domain, led by attorney David Showalter. Waller County residents have pushed back against plans for Texas Central Partners to claim property along its proposed route for a Dallas-toHouston high-speed rail line.

“There are a lot of strong feelings from folks, like

legacy farms with big land holdings where the rail’s going to cut through,” Showalter said. “This is going to have a big impact on those people.”

The panelists appeared to agree that, despite resistance, the project will likely move forward. As it does, state leaders are taking notes.

“Some lawmakers have been trying to get eminent domain reform passed in several sessions. They got close this time; it was unsuccessful,” explained Showalter.

He added that the reform that’s being considered involves preventing low-ball offers from condemning authorities and to bring some fairness and transparency to the eminent domain process.

“A lot of it is shrouded in mystery or intimidation,” Showalter said. “It’s intimidating to land owners to have to deal with the process of eminent domain.”

The Texas Central project is not the only one taking advantage of the state’s eminent domain policies.

Showalter, who has handled hundreds of eminent domain cases since graduating from Baylor Law

The y t i n u t r o Opp Zone Welcome to a place where your money goes further, and your capital gains taxes disappear.

School in 1977, noted that pipelines are also picking up property all over Texas.

“There are thousands of miles of pipelines being under construction right now bringing crude out of the Permian Basin area to refineries in the Gulf and elsewhere,” he said. “So pipeline companies are blowing and going right now, condemning land from Fort Stockton to Midland to Houston. It’s pretty amazing.”

Showalter stressed the importance of education about the process, as well as hiring an attorney steeped in the nuances of eminent domain.

Education seemed to be a theme for this panel, focused on working with local stakeholders. Panelists emphasized the value of research, asking questions and, above all, coming to the table prepared.

“Find out what you need. Start the conversation by being very honest,” said Yokom. “We try to get you in and go over and quantify you as fast as you possibly can, so you won’t have to worry or wonder what is going to happen with your project in our community.”

Protecting Property Owner’s Rights

EMINENT DOMAIN Compensation For Property Lost Due To:

Roads Pipelines Power Lines www.ShowalterLaw.com 281-341-5577 Info@ShowalterLaw.com AUGUST 2019

21

22

AUGUST 2019

SCOOP The following pages contain a calendar of Texas CRE events, networking photos, and deals/announcements. For more updates, log on to REDNews.com

AUGUST 2019

23

CENTRAL SOUTH TEXAS

AUGUST

2019

1

Thursday

BOMA Austin - BOMI Course: Real Estate Investment & Finance [8:00am - 5:00pm]

15 Thursday

REC Austin - Networking Happy Hour [5:30pm - 7:00pm]

19 Monday

ULI San Antonio - Mentorship Forum Information Session [5:30pm - 7:00pm]

5 Monday 6 Tuesday

7 Wednesday

REDNews Newsletter [4:00pm] BOMA San Antonio - Luncheon [11:00am - 1:00pm] IREM Austin - Board Meeting *Invitation Only [11:30am 1:00pm]

STCAR - Board of Directors Meeting *Invitation Only [10:00am - 12:00pm] REDNews Newsletter [4:00pm]

20 Tuesday 21 Wednesday

IREM Austin - Future Leader Exclusive Event [4:30pm 6:00pm]

CTCAR - Property Information Exchange and Lunch [11:30am - 1:00pm]

CREW Austin - Hard Hat & Heels Tour - The Independent [10:00am - 11:30am]

CTCAR - Property Information Exchange [7:30am - 9:00am] REC Austin - Christmas in October Committee Meeting *Members Only [12:00pm - 1:00pm]

CBA Austin - Luncheon [11:30am - 1:00pm]

22 Thursday

REDNews Newsletter [4:00pm] REDNews September Issue Deadline [5:00pm]

24

IREM Austin - Luncheon [11:30am - 1:00pm]

AUGUST 2019

BOMA Austin - Board of Directors Meeting *Invitation Only [8:00am - 9:30am] IREM San Antonio - Board Meeting *Invitation Only [11:00am - 12:30pm]

26 Monday 27 Tuesday

REDNews Newsletter [4:00pm] CCIM Central Texas - Luncheon: Retail/Office Panel [11:30am - 1:00pm]

REC Austin - Networking Happy Hour [5:30pm - 7:00pm]

13 Tuesday

ULI Austin - Breakfast: How Regulatory Burden Affects Affordability [7:30am - 9:00am] Retail Live Austin - Trade Show [10:00am - 8:00pm]

ULI Austin - Coffee Chat (South) [8:00am - 9:00am]

12 Monday

REC San Antonio - State Legislative Recap *Members Only [7:30am - 9:00am]

BOMA San Antonio - SAC Meeting *Invitation Only [3:00pm - 4:00pm]

REC Austin - Policy Briefing *Members Only [12:00pm 1:00pm]

8 Thursday

TABB Austin - Luncheon [11:30am - 1:00pm]

ULI Austin - 2019 Impact Awards [5:30pm - 9:30pm]

28 Wednesday

CTCAR - Commercial Leasing Deep Dive [9:00am - 11:00am] TABB San Antonio - Luncheon [11:30am - 1:00pm]

29 Thursday

BOMA Austin - Building Measurements Seminar [8:00am 5:00pm]

The events listed are confirmed at the time of printing. Please make sure to check with the event host for any changes. For the full listing of events, visit REDNews.com.

BOMA AUSTIN: bomaaustin.org/ BOMA SAN ANTONIO: bomasanantonio.org CBA: cbaaustin.org/ CCIM CENTRAL TEXAS: ccimtexas.com CREW AUSTIN: crewaustin.org

CREW SAN ANTONIO: crew-sanantonio.org CTCAR: ctcaronline.com IREM AUSTIN: iremaustin.org IREM SAN ANTONIO: iremsanantonio.org

whatâ&#x20AC;&#x2122;s going on

RECA reca.org RECSA: recsanantonio.com/ RETAIL LIVE: retaillive.com STCAR: www.stcar.org TABB AUSTIN: tabb.org/austin_chapter.php

TABB SAN ANTONIO: tabb.org/san_ antonio_chapter.php ULI AUSTIN: austin.uli.org ULI SAN ANTONIO: sanantonio.uli.org

CREW Austin Special Events Committee Members Amanda Aaron, Catherine Case Larson, Suzanne French, Nina Murrell

CREW San Anto

nio Summer Mem

lopment Update REC Austin Deve

Luncheon at the

bership Drive M

ixer

JW Marriot

e Blvd in Austin

Revelry on th ls Happy Hour @ na sio es of Pr g CTCAR Youn

IREM San Antonio's Member

ine Hagg

her Spotlight for July 2019 is Kat AUGUST 2019

25

NORTH TEXAS

AUGUST

2019

1

Thursday

5 Monday 6 Tuesday

15 Thursday

TREC Dallas - ALC Open House II [5:30pm - 8:00pm]

TREC Dallas - ALC Open House I [5:30pm - 8:00pm]

19 Monday

REDNews Newsletter [4:00pm]

REDNews Newsletter [4:00pm]

21 Wednesday

BOMA Fort Worth - CSC Meeting *Invitation Only [11:30am 12:30pm]

BOMA Fort Worth - New Member Orientation [10:30am 11:30am]

22 Thursday

CORENET North Texas - The Chase - The Art of Regional Real Estate Pursuits [11:00am - 1:00pm]

8 Thursday

TABB Dallas - Luncheon [11:30am - 1:00pm] BOMA Dallas - Real Estate Principal Member Event [11:30am - 1:30pm] TREC Dallas - TREC Talks: Dallas City Manager T.C. Broadnax [5:00pm - 6:30pm] CORENET North Texas - 6 x 6 Young Leaders Event [5:30pm 7:30pm]

12 Monday

BOMA Dallas - Sporting Clays Tournament [7:00am - 2:00pm] IREM Fort Worth - Industry Partner Luncheon with Board Members [11:30am - 1:00pm]

BOMA Dallas - Gala Happy Hour! Wine/Spirit Collection [5:00pm - 7:00pm]

REDNews Newsletter [4:00pm] REDNews September Issue Deadline [5:00pm]

IREM Dallas - Industry Partner Exchange [3:30pm - 7:00pm]

26 Monday 27 Tuesday

REDNews Newsletter [4:00pm] BOMA Fort Worth - Board Meeting *Invitation Only [12:00pm - 2:00pm] CREW Dallas - Community Night of Awareness [5:30pm 7:30pm]

TREC Dallas - Mayoral & City Council Welcome Reception [5:30pm - 7:30pm]

14 Wednesday

CORENET North Texas - New Member Breakfast [7:30am 9:00am] BOMA Fort Worth - Lunch & Learn: Energy Procurement Strategy for CRE [11:00am - 1:00pm] CREW Dallas - Luncheon [11:00am - 1:00pm] CREW Fort Worth - Luncheon [11:30am - 1:00pm] BOMA Fort Worth - Volunteer Day [4:00pm - 8:00pm] ULI North Texas 2019 Impact Awards Jury Tours

26

AUGUST 2019

@ American Airlines Skyview Office

The events listed are confirmed at the time of printing. Please make sure to check with the event host for any changes. For the full listing of events, visit REDNews.com.

BOMA DALLAS: bomadallas.org BOMA FORT WORTH: bomafortworth.org CCIM NORTH TEXAS: ccimconnect.com/ ccimnorthtexas CORENET NORTH TEXAS: northtexas.

corenetglobal.org CREW DALLAS: crew-dallas.org CREW FORT WORTH: crewfw.org GFWAR: gfwar.org IREM DALLAS: irem-dallas.org

whatâ&#x20AC;&#x2122;s going on

Sam Ware and Allen Gump

IREM FORT WORTH: fortworthirem.org LADIES IN CRE: ladiesincre.com NAIOP: northtexasnaiop.com NTCAR: ntcar.org SCR: scr-fw.org

TABB DALLAS/FORT WORTH: tabb.org/dallas_ ft_worth_chapter.php TREC DALLAS: recouncil.com REC GFW: recouncilgfw.com ULI NORTH TEXAS: northtexas.uli.org

CCIM North Texas Volunteering with Fami

ly Gateway

on

at CCIM North Texas Lunche

CREW Dallas Multifamily Market in Te xas & Leadership Wi

sdom Provided by

ed elbach Moderat Brandon Geng ith w at Ch e Firesid se Navejar REC Fort Worth & Hosted by Ro

by Tony Creme

Susan Ansel

BOMA Dallas Bill Moebius Recognized as BOMA Southwest Region Outstanding Member of the Year AUGUST 2019

27

SOUTHEAST TEXAS

AUGUST

2019 1

Friday

5 Monday 7 Wednesday 8 Thursday 12 Monday 14 Wednesday

CREN Gulf Coast - Happy Hour [4:30pm - 7:00pm] REDNews Newsletter [4:00pm] CREW Houston - Luncheon: Economic Opportunity Zone Panel [11:30am - 1:00pm]

20 Tuesday 21 Wednesday

FBSCR - Monthly Meeting [8:00am - 9:00am] CREN Gulf Coast - Property Information Exchange *Invitation Only BOMA Houston - 5G Technology Forum [11:00am - 1:00pm]

22 Thursday

CREN Gulf Coast - Luncheon [11:00am - 1:00pm]

CREMM - Hard Hat Tour [6:00pm - 8:00pm]

26 Monday

REDNews Newsletter [4:00pm]

REDNews Newsletter [4:00pm]

28 Wednesday

CREW Houston - Member-Guest Style Show [6:00pm 8:00pm]

29 Thursday

TABB Houston - Chapter Meeting [11:30am - 1:00pm]

CCIM Houston/Gulf Coast - Luncheon [11:30am - 1:00pm]

REDNews September Issue Deadline [5:00pm] C.R.E.A.M. The Woodlands - Luncheon: Montgomery County 911 [11:30am - 1:00pm] Finacial Power Hour - Happy Hour @ Armadillo Place [4:30pm - 6:30pm]

15 Thursday

BACREN - Luncheon [10:30am - 1:00pm] IREM Houston - "Goal Getter" Seminar & Mixer [3:00pm 6:00pm]

19 Monday

REDNews Newsletter [4:00pm]

ACRP Inshore Invitational Tournam

ent 1st Place Winners

28

AUGUST 2019

The events listed are confirmed at the time of printing. Please make sure to check with the event host for any changes. For the full listing of events, visit REDNews.com.

ACRP: acrp.org BACREN: bacren.us BOMA HOUSTON: houstonboma.org CCIM HOUSTON: ccimhouston.org CETA: cetalliance.com

CORENET HOUSTON: houston.corenetglobal.org C.R.E.A.M.: creamtx.com CREN: crengulfcoast.com CREW HOUSTON: crewhouston.org FBSCR: fbscr.com

GREATER HOUSTON PARTNERSHIP: houston.org HAA HOUSTON: haaonline.org HRBC: houstonrealty.org HREC: houstonrealestatecouncil.org IREM HOUSTON: iremhouston.org

whatâ&#x20AC;&#x2122;s going on

on Featuring CREN Gulf Coast Lunche

NAIOP: naiophouston.org O'CONNOR & ASSOCIATES: poconnor.com SIOR: sior.com TABB HOUSTON: tabb.org/houston_chapter.php ULI HOUSTON: houston.uli.org

kels, Kelly laban, Donna Ec Caradec, Erica Ba d Rutledge bu ne se ay Ro W s s, or m ct Dire Hunt, David Abra ld ro BACREN Board of Ha i, an w on Budh Hutchinson, Sulem

Sandra Morgan, Owner

of The Network Chefs

go Title's Steve Sapio at HRBC's Recent

Riverway Title's John Hammond with Chica

CREMM White Hot Summe Jack Belt with the Fort

Bend Economic Develop

ment Counci

Ray Lopez l with FBSCR President

r Soiree of 2019 Sponsored

Breakfast Meeting

by Madison Marquette

AUGUST 2019

29

CENTRAL SOUTH TEXAS ARANSAS PASS, TX PORT BAY RANCH SELLS Port Bay Ranch, a 779 acre property located in southern Aransas County, with more than 1.2 miles of frontage on Highway 188 & a mile of shoreline on Port Bay, sold to an undisclosed buyer. The seller was a family partnership represented by Janae Evans with Evtex Companies & the buyer was represented by Mark Grosse with Mark Grosse Real Estate.

AUSTIN, TX

ALTAQUIP LEASES 19,280 SF Altaquip leased 19,280 sf at Techni Center Business Park located at 6002 Techni Center Drive. Matt Fain, Ryan Wilson & Stephen Pannes with Equitable Commercial represented the landlord & Zane Cole with JLL represented the tenant.

THE MUSE COMPLETES & ANOTHER BEGINS Austin-based Parallel Company is completing The Muse, an 18-story, 502-bed student housing project in August & plans to start construction on another 18-story, 154 unit/555 bed project at the same time.

DANIEL CORP BUILDING SECOND APARTMENT COMPLEX Birmingham, Alabama-based Daniel Corp is developing its second Austin apartment complex on 20 acres on East William Cannon Drive near McKinney Falls State Park. The developer recently sold Brezza, the project they built at 10600 Brezza Lane in South Austin.

Source: Endeavor Real Estate Group

“JENGA" TOWER COMPLETED CIM Group & Aspen Heights Partners have completed construction of The Independent, the 363-unit high rise residential tower located at the corner of W. Third & West Avenue.

MUELLER COMMUNITY’S FIRST OFFICE BUILDING Shorenstein Properties LLC plans to begin construction on a six-story, 235,000 sf office building on Aldrich Street in the Mueller community which is the site of the former Robert Mueller Municipal Airport.

ENDEAVOR RAISES $300 MILLION INVESTMENT FUND Austin-based Endeavor Real Estate Group LLC has created an investment fund called Endeavor Opportunity Partners II LP which has raised more than $300 million for the purchase of commercial properties & land over the next four years. Investors to date are friends, family & Endeavor employees.

TOWER PROPOSAL ABOVE YORK RITE LODGE A development team has proposed to build a 30+ story tower above the historic Masonic Lodge located at 311 W. Seventh Street. The interior would be excavated with the walls braced for the construction of the tower. The Masons would still own & control the site.

30

AUGUST 2019

4,711 SF RETAIL CENTER SOLD Parmer Lane Properties LLC purchased a 4,711 sf retail center located at 2406 W. Parmer Lane from 710 W. 34th LTD. Tim Allen with JLL represented the seller.

CEDAR PARK, TX

ROBINSON-ROSNER BUILDING SELLS The estate of Clyde R. Littlefield sold the 8,174 sf Robinson-Rosner building located at 504 Congress Street to 504 Congress LLC. The building was built is 1854 & is the oldest standing building on Congress Avenue. Logan Reichle & Bradley Bailey with CBRE represented the seller. $800 MILLION MASTER PLAN FOR EAST $800 MILLION MASTER PLAN FOR EAST AUSTIN PARK AUSTIN PARK The City of Austin’s Park & Recreation The City of Austin’s Park & Recreation Department have proposed an $800 million Department have proposed an $800 million master plan for Walter E. Long Metropolitan master plan for Walter E. Long Metropolitan Park in East Austin. The park includes Park in East Austin. The park includes

SAN ANTONIO, TX

HINES BUILDING 576,800 SF INDUSTRIAL PARK Hines is building a four-building, 576,800 sf industrial park called Corner Ridge Crossing within Cornerstone Industrial Park.

The project will have access to I10 & Loop 410 via Ackerman Road. Space will be available beginning first quarter 2020.

WESTPARK PROFESSIONAL UNDERWAY The Kalantara Group is developing a 44,168 sf four-building office project located at 120 S. Lakeline Blvd. The development is scheduled for completion by year end.

CORPUS CHRISTI, TX

PADRE COMMONS RETAIL CENTER SOLD Padre Commons sold the 19,851 sf retail center located at 1502 Airline Road to an undisclosed buyer. Micha van Marcke & Chace Henke with EDGE represented the seller.

Source: ConnectMedia.com

Source: Loopnet.com

Source: Clayton & Little / Rhode Partners / Stone Development Partners / DCI Engineers

3,700 acres including a lake with 2,500 acres available for recreation. The council with vote on the project in August.

bulletin

SINGLE-TENANT OFFICE BUILDING SELLS A Texas-based developer sold the 51,307 sf single-tenant office building located at 4201 Greenwood Drive to an undisclosed buyer The property is leased to the State of Texas & occupied by the Texas Department of Family & Protective Services. Brian Corriston with Stan Johnson Company represented the seller.

LAKEWAY, LAKEWAY, TX TX

7,119 SF OFFICE BUILDING SOLD 7,119 SF OFFICE BUILDING SOLD A 7,119 sf office building located at 308 S. A 7,119 sf office building located at 308 S. Meadowlark Street sold to an undisclosed Meadowlark Street sold to an undisclosed buyer. The building has since been leased buyer. The building has since been leased to Claim Consultant Group. The seller was to Claim Consultant Group. The seller was represented by Scott Studzinski & Grant represented by Scott Studzinski & Grant McConnell with Elevate Growth Partners & McConnell with Elevate Growth Partners & the buyer was represented by Patrick Hill the buyer was represented by Patrick Hill with NAI Partners. with NAI Partners.

Source: Clayton & Little / Rhode Partners / Stone Development Partners / DCI Engineers

QUADRANT INVESTMENTS BUYS BUILDING Quadrant Investment Properties purchased the 71,342 sf building located at 1220 E. Commerce Street that was utilized by The RK Group as their headquarters. The purchaser plans to build an office/retail project on the five acre site.

AFFORDABLE HOUSING APARTMENT PROJECT UNDERWAY Cleveland-based NRP Group has started construction on a 323-unit apartment project called Acero which is located along San Pedro Creek. The project will have one-three bedroom units of which there will be a mix of market-rate and affordable units.

Source: Pross Design Group

EASTGROUP DEVELOPING 369,000 SF INDUSTRIAL PARK EastGroup Properties is building a fourbuilding, 369,000 sf industrial park called Ridgeview 35 which is located across from Brooke Army Medical Center between I35 & Loop 410 along Binz-Engleman Road.

The construction of the first two buildings is expected to begin in September with completion by May 2020.

NORTH TEXAS DALLAS, TX

MoxieBridge purchased three industrial properties which include seven buildings on 35 acres with a total of 560 trailer spaces & 354 fully leased tenant suites.

The projects include Manana Drive inside Stemmons Freeway near I 35 with 67,000 sf, Mark IV with 67,000 sf & High Prairie in Grand Prairie near DFW IAH with 33,000 sf.

DFW AIRPORT, TX Source: BOKA Powell

NEW VICTORY PARK BUILDING UNDER CONSTRUCTION Hillwood Urban & USAA Real Estate are developing a 15-story, 365,000 sf office building called Victory Commons on Victory Avenue.

Construction completion is scheduled for fall 2021.

BACCHUS CAPITAL LEASES 9,328 SF Bacchus Capital Trading LLC leased 9,328 sf at 5151 Belt Line Road. Robbie Baty & Shannon Nehrig with Cushman & Wakefield represented the tenant & Trae Anderson & Kathy Permenter with Younger Partners represented the landlord.

WORKSUITES LEASES 30,000 SF WorkSuites leased 30,000 sf at 4131 NCX. John Dickenson & Brandon Avedikian with Holt Lunsford represented the landlord & John Pelletier with esrp represented the tenant.

DALLAS/LANCASTER, TX

Source: 4343 Sigma/Loopnet.com

INDUSTRIAL PROPERTIES SOLD A 66,000 sf industrial property located at 4343-4345 Sigma Drive in Dallas sold & the 126,000 sf Stericycle facility located at 945 E. Pleasant Run Road in Lancaster sold. Adam Abushagur with Marcus & Millichap & Chad Albert with NAI Robert Lynn handled the transaction.

DALLAS/FORT WORTH /GRAND PRAIRIE, TX

MOXIEBRIDGE BUYS 168,000 SF OF INDUSTRIAL SPACE Private equity real estate investment firm

THREE NEW HOTELS IN THE WORKS There will be three new hotels near DFW IAH in Avion Business Park including EVEN, Staybridge Suites & Avid.

Together the hotels will have 320 rooms with completion expected by the end of 2021.

EULESS, TX

64,700 SF INDUSTRIAL BUILDING SOLD CJM2 Properties LLC purchased a 64,700sf building located at 1801 S. Airport Circle from 1801 Partners LLC. Brett Carlton with Mercer Company represented the buyer.

FAR WEST TEXAS

bulletin GARLAND, TX

Source: Loopnet.com

NORTHGATE BUSINESS PARK IV SOLD Merritt Industrial Dallas LLC sold the 58,193 sf Northgate Business Park IV located at 2010 Merritt Drive to China-based AQS Corporation. This will be the buyer’s second location in the U.S. D. Greg Cagle with Coldwell Banker Commercial represented the buyer & Brian Pafford with Bradford Commercial Real Estate Services represented seller.

GRAND PRAIRIE, TX

J&Y CYCLES BUYS RETAIL BUILDING J&Y Cycles purchased an 8,000 sf retail building located on 1.74 acres at 1290 West Pioneer Parkway. Josh Meraz & Jim Ferris with Bradford Commercial represented the buyer.

IRVING, TX RUMBLEON LEASES 45,172 SF RumbleOn leased 45,172 sf in VARISACE Las Colinas located at 901 Walnut Hill Lane. Dean Colliins & Jason Dodson with Cushman & Wakefield represented the tenant & Chris Taylor & Johnny Johnson, also with Cushman & Wakefield, represented the landlord.

Source: CBRE

TEXAS GENERAL LAND OFFICE SELLING OVER 23,000 ACRES The Texas General Land Office is selling more than 23,000 acres of Permanent School Fund land in far West Texas. Proceeds of the sale will go toward public education in Texas. The property is being marketed by CBRE.

FORT WORTH, TX

ALLIANCE TEXAS EXPANDS WITH 600 ACRES Hillwood purchased 600 additional acres in the Alliance Westport section which is anchored by BNSF Railway’s intermodal facility. The acreage is directly connected to Fort Worth Alliance Airport. With this purchase the company can now connect parts of their development to one another.

HAFELE AMERICA LEASES 72,709 SF HAFELE AMERICA LEASES 72,709 SF Hafele America Company leased 72,709 Hafele America Company leased sf in Centreport II located at 4565 72,709 sf in Centreport II located at 4565 Centreport. Dean Collins & Mark Collins Centreport. Dean Collins & Mark Collins with Cushman & Wakefield represented with Cushman & Wakefield represented the tenant & Steve Koldyke with CBRE the tenant & Steve Koldyke with CBRE represented the landlord. represented the landlord.

180,895 SF LEASED IN LIBERTY PARK Expeditors International of Washington Inc leased 180,895 sf in Liberty Park GSW North Building 2 located at 951 Valley View Lane. Jeff Kernochan & David Ginther with Fisher & Company represented the tenant. Kurt Griffin, Nathan Orbin & David Eseke with Cushman & Wakefield represented the landlord.

EVOQUE DATA LEASES 10,302 SF Evoque Data Center Solutions leased 10,302 sf in Riverside Commons located at 5000-5040 Riverside Drive. Clay Vaughn with CBRE represented the tenant & Johnny Johnson & Trey Smith with Cushman & Wakefield represented the landlord.

NORTH RICHLAND HILLS, TX FORMER HOME DEPOT BECOMES GUN RANGE Weby Corporation purchased the 94,218 sf former Home Depot design center located at Highway 26 & Interstate 820 which they will partially utilize as an indoor gun range. Two gun ranges

will be connected to a 10,000 sf retail storefront that 1800GunsAndAmmo will occupy & about 20,000 sf will be utilized as a distribution warehouse. Weitzman represented the seller, Total Shooting Sports, & esrp represented the buyer.

PLANO, TX WEWORK LEASES 53,000 SF WeWork leased more than 53,000 sf which includes two floors at Legacy Town Center located at 6800 N. Dallas Parkway. This will be WeWork’s third Plano location.

RICHARDSON, TX NATURICH LABS RELOCATING FROM GARLAND Naturich Labs plans to build a 100,000 sf headquarters office & a 50,000 sf warehouse & manufacturing facility on nine acres located at 3200 Research Drive The company will relocate from their current facility in Garland to the new location by late 2020.

ROCKWALL, TX

TAX CONSULTANT COMPANY BUYS 10 ACRES National tax consultant firm KE Andrews purchased 10 acres overlooking Lake Ray Hubbard for the development of a 3-story, 80,000 sf corporate facility. The company will be relocating from a 30,000 sf building at 1900 Dalrock Road when the building is complete in late 2020.

SACHE, TX

Source: PMD Capital

PMB BUILDING MIXED-USE PROJECT PMB Capital Investments is constructing a $250 million mixed-use development called The Station in Sache, which is a suburb of Dallas. The project will include multi-family & single family homes, restaurants, retail, office & entertainment. The project is being funded by a public-private partnership between the developer & the city.

SULPHUR BLUFF, TX

TWO RANCHES RANCHES SOLD SOLD TWO The contiguous contiguous Hageman Hageman Reserve Reserve & & The Sulphur Bluff Bluff Ranch Ranch,with withaacombined combined Sulphur total of of 14,500 14,500 acres acres,sold. sold.The Theproperty property total was listed for $84 million & the sales was listed for $84 million & the sales price was not revealed. The property price was notwith revealed.

The is improved a 65,000 sf property multi- is improved with a 65,000 multi-purpose purpose structure which sf includes a structure whichwith includes hunting hunting lodge guestasuites & alodge full with guest suites & a full service spa. service spa.

AUGUST 2019

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SOUTHEAST TEXAS

bulletin

TRAVIS RODGERS has joined NAI Partners as an executive vice president

CLEVELAND, TX Jaehne Family LP purchased 350 acres on Hwy 105 east of Cleveland from AG Services. Keith Jaehne with General Property represented the buyer.

Parkway to Lichtgitter USA, Inc. Bruce Fehn with Newmark Knight Frank represented the buyer.

NAI PARTNERS MOVING TO FOUR OAKS PLACE Houston-based NAI Partners is relocating to a 20,000 sf full floor in Four Oaks Place located at 1360 Post Oak Blvd. They are sub-leasing the space from BHP Billiton Petroleum.

CROSBY, TX

59 ACRES SELL Jaehne Family LP & KCJ Properties LLC purchased 59 acres on FM 2100 from the Dorothy Justice Estate. Keith Jaehne & Brandon Jaehne with General Property represented the buyer.

HOUSTON, TX

Source: : Houston Spaceport Facility Development Strategy

SPACEPORT PROJECT GROUNDBREAKING The Houston Airport System celebrated the groundbreaking of Phase 1 of the $18.8 billion spaceport project located at Ellington Airport at 13150 Space Center Blvd. Including infrastructure, Phase I will include the construction of 53,000 sf of lab & office space.

HUNTSVILLE, TX Source: Loopnet.com Source: Apartmentfinder.com

HOGG LOFTS SELL Austin-based Kline Properties purchased the 79 unit, 8-story Hogg Palace Lofts Building located at 401 Louisiana from Randall Davis Company.

Chip Nash & Bob Heard with JLL & Jim Hurd & Bishale Patel with Houston Income Properties handled the transaction.

TWO ENERGY CORRIDOR OFFICE BUILDINGS SELL An affiliate of Houston-based Fuller Realty Partners purchased Parkview I & Parkview II office buildings from LNR Partners. Parkview I contains 110,480 sf & is located at 330 Barker Cypress Road. Parkview II contains 65,220 sf & is located at 333 Cypress Run. Combined, the two buildings were 11% leased at the time of sale. Rick Goings, Rudy Hubbard & Kevin McConn with JLL represented the seller.

20 GREENWAY PLAZA BUILDING SELLS Los Angeles-based Stockdale Capital Partners purchased the 10-story, 433,132 sf Class A office building located at 20 Greenway Plaza from Principal Real Estate Investors. The seller was represented by Dan Miller, Trent Agnew & Wally Reid with HFF. 9.9 ACRES SOLD ON FM 249 KCJ Properties LLC, et al, sold 9.9 acres on Big John @ FM 249 to Fernando Matias.

Keith Jaehne & Brandon Jaehne with General Property represented the seller.

HINES TO BUY CHASE TOWER & CHASE CENTER Hines & New York-based private equity firm Cerberus Capital Management LP are reportedly buying Chase Tower & Chase Center in downtown Houston for approximately, $627 million.

CLAY DEVELOPMENT SELLS INDUSTRIAL BUILDING Clay Development & Construction sold a 48,000 sf industrial building in Sheldon Busines Park located on North Lake Houston 32

AUGUST 2019

KATY, TX

FINAL 17.25 ACRES IN WEST TEN SELLS The remaining 17.25 acres in West Ten Business Park on I 10 & Cane Island Parkway sold to an undisclosed buyer. John Simons & Holden Rushing with NAI Partners represented Parkside Capital, the developer of the project.

TOMBALL, TX RELIANT PEST MANAGEMENT BUYS BUILDING Reliant Pest Management purchased an 11,000 sq industrial building in Tomball from Nelson Protector Services LLC. Doc Perrier & Gerald Leveritt with Finial Group represented the buyer & AJ Williams & Travis Land with NAI Partners represented the seller.

9.61 ACRES SOLD IN TOMBALL Boudreaux 11715 Properties LLC purchased 9.61 acres at 11715 Boudreaux Road from 3M Company. Mike Speaks & Cameron Hicks with Lee & Associates represented the buyer & David Marshall with Dosch Marshall represented the seller.

WEST OAKS CENTRE SELLS The 13,484 sf West Oaks Centre located at 2673-2699 South Highway 6 sold to an Austin-based investment group. Evan Altemus & Brett Levinson with Weitzman handled the transaction.

SWC EDLOE & WEST ALABAMA SELLS 3000 Alabama Court LLC purchased 35,000 sf of vacant land at the southwest corner of Edloe & West Alabama from St. Luke’s Methodist Church Foundation, Inc. Mark Kidd Sr & Mark Kidd Jr with M Kidd Properties Inc represented the seller.

CAMP STRAKE’S NEW HEADQUARTERS UNDERWAY Houston-based KDW expects to complete 66 structures on the 2,800 acre property of Camp Strake’s new camp headquarters by the end of 2019. The new campus broke ground in October 2016 & is expected to open for summer camp 2020.

WALLER, TX

Source: JLL

BRAUN ENTERPRISES SELLS NORTH TRIANGLE SHOPS Braun Enterprises sold the 16,060 sf, fully leased, single-tenant pad buildings including two-strip buildings, to a local private buyer in an off-market transaction.

The center is located on 2.59 acres at the southwest corner of FM 1960 & I45.

Ryan West, John Indelli & Ethan Goldberg with JLL Capital Markets handled the transaction.

Source: Berkshire Residential

VARGOS ON THE LAKE SELLS Berkshire Residential Investments purchased the 276-unit Vargos on the Lake complex located at 2411 Fondren from Hunington Properties, Inc. Ryan Epstein & Jennifer Ray with Berkadia represented the seller.

NRG MANUFACTURING RELOCATING TO 144,500 SF NRG Manufacturing, Inc., a division of AFGlobal Corporation, is relocating to an existing 144,500 sf manufacturing, warehouse & office facility located on 14.6 acres in Waller County.

Archway Properties is building a state-of-theart component manufacturing & testing facility totaling 94,400 sf on an adjacent 16 acres for the company. The new campus will allow NRG to consolidate a number of other facilities.

advertiser index AA Realty Company ........................................... 13 Berkadia ................................................................. 3 Bettencourt Tax Associates................................19 Equity Secured Capital....................................... 17 General Property & Services ............................ 15 Greater Houston Commercial Real Estate..... 17 Greenberg & Company ..................................... 17 JD Woodruff......................................................... 15

Join us for the 2019 Panther City Dodgeball Tournament!

Keller Williams Signature................................... 13 La Marque EDC ..................................................... 7 National Environmental Services, LLC.............35 Phase Engineering............................................... 22

This fall marks the 8th Panther City Dodgeball Tournament - an event organized by REC of GFW's Young Leaders Steering Committee as a way to raise money to support education in Tarrant County.

Last year's proceeds went to help the Fort Worth Literacy Partnership's Classroom Book Drive Campaign.

Randall Davis......................................................... 2 Showalter Law Firm ........................................... 21 Texas Funding Corporation ............................. 15 The Real Estate Council - Greater Ft. Worth. 33 Waller County EDC ............................................. 21 Winkler & Associates Inc..................................... 5 AUGUST 2019

33

ray’s buzz

BY RAY HANKAMER rhankamer@gmail.com

CCIM July Luncheon Speaker: Adam Schiller, Managing Principal-Streetlevel Investments

Takeaway: Schiller and his group are redeveloping the 192 acre former Texas Instruments (TI) site on US 69 in Stafford into a mixed-use development along the lines of The Domain in Austin (an old IBM campus that was re-purposed) or The Pearl District in San Antonio or City Centre here in Houston. Excellent road access on all sides, a 340,000 daily car count, and affluent demographic, and growing county (Fort Bend) should ensure the success of “The Grid".

● TI built the site fifty years ago as a ‘self-contained city’, with its own water, drainage and retention, and other utilities. TI invented the hand-held calculator on this site, as well as the DSB chip which led

to miniaturization of many kinds of consumer electronics. The

developer has spent $19 million on fresh new infrastructure alone. ● Fitness amenities are being added, and in some cases, landlords are providing .

The site was TI’s first large site outside of Dallas ten or fifteen years ago. TI left the site as a result of corporate restructuring.

● 750,000 SF of former TI buildings will be restored/repurposed.

● The Grid multi-use development will keep some of the industrial installations from TI days, similar to how The Pearl District has kept some brewery apparatus, so that the site will ‘tell a story’ to future visitors-this suggestion, courtesy of Gensler Architects, will combine history with continuity.

● Given the unique former owner of the site and its former self-sufficiency from Stafford City utilities, the entitlement process with the City of Stafford and with Ft. Bend County was long and difficult.

● The development will have light industrial in the back, plus retail, restaurant, hotel, multi- family, office, and other components, with the central focal point being a ‘green square’.

● The hundreds of oaks and other trees planted 50 years ago by TI are beautiful and create a park-like, ‘established’ atmosphere; dog parks, walkability, and other amenities will appeal to users of all ages. ● Among tenants will be Whiskey Cake, Torchy’s, Outback, Pluckers, Lazy Dog, a dine-in cinema, and many other cutting edge concepts; the entire frontage along US 59/Interstate 69 is currently under construction.

● 60 acres will be devoted to 1,800 multi-family apartments, and 750 units will be complete in 18 months; the first phase of this 750 is now 40% pre-leased.

O’Connor & Associates Hotel Forecast Luncheon

Speakers: Nick Massad, Jr.- President American Liberty Hospitality and Cindy Decker, V.P. Marketing Strategy, Houston First Corporation Takeaway from Nick Massad: The demand generators for hotel room nights in Houston has diversified and American Liberty has responded with carefully chosen hotels, following their Hilton Garden Inn on Sage Road in the Galleria: an Embassy Suites and a combo Hampton Inn-Homewood Suites and the Sam Houston hotel in the Convention District; a planned combo Hilton Garden Inn / Home2Suites by Hilton in the Medical Center; an under construction combo Staybridge Suites / Holiday Inn Express on Loop 610 between San Felipe and Westheimer; a beachfront Holiday Inn Express in Galveston, near their existing DoubleTree on the Seawall. The company owns and operates other hotels in the area and a resort in Louisiana. ● The Massad family has been a major donor to and is heavily involved with the Hilton College at UH; they have been hoteliers for 45 years. ● They have no large institutional investors, but instead family and friends who supply equity as needed. ● Houston hotel demand has stabilized and is steady, and hotels have a wider variety of guests than just those associated with oil & gas. ● Harvey brought mixed blessings-a bump of business due to dislocated homeowners- but damage to the cultural heart of Houston, including Jones Hall and the Wortham Center, which were shut for an extended period. ● A hotel is not ‘land and a building’ but an operating business which has to lease up every night; hotels require highly focused professional management. ● Houston was slammed with 44% occupancy in the ‘80s, and many hoteliers lost their hotels since the market stayed depressed for about 8 years; slowly O & G came back and other sources of room nights developed, such as IAH, Med Center, conventions. ● Nationally, hotel occupancies and rates have seen about 8 years of uninterrupted expansion, as room demand exceeded room supply overall.

● Hotel statisticians must remember that submarkets within a major market each have their own supply/demand issues and each must be treated separately or developers can get burned…example: Energy Corridor and CBD in Houston. ● Hotel rooms hovered at 1,800 in CBD for years, then surged to 8,000, causing many existing hoteliers to fear their business being sucked away…but the new large hotels brought Houston to the next level as a convention city, and most were pre-booked by the time they opened, and everyone benefited. ● The Hilton of the Americas with 1200 rooms and the Marriott Marquis with 1000-each with 100,000 SF of meeting space and each connected to George R. Brown Convention Center with 1 million SF- brought Houston to the next level and now we can compete for huge conventions with almost any other US city. ● Now Houston is attractive to tourists and leisure travelers-not just business travelers-and we have attracted Super Bowl, World Series, Final 4, international soccer teams, and much more-these events fill hotel rooms. ● The 1200 room Marriott Marquis reached stabilization in just two years-remarkable for such a huge hotel.

Takeaway from Cindy Decker: Professional marketing of Houston, plus liberal financial and tax incentives by the City of Houston to the two convention center hotels were necessary to bring them to fruition, once it was clear that the convention center could not draw the big meetings without corresponding hotel supply connected to it. The huge hotels, with their combined 2,200 rooms and their management by Marriott and Hilton Corporations turned the tide, and now Houston is on the circuit of many of the country’s national conventions. The existing hotels in the CBD have been helped, and not hurt, by the arrival on the scene of these monster hotels. ● The proximity to not only George R. Brown, but also to Toyota Center, the Dynamo Stadium, Minute Maid Park, and the Theatre District has made ‘selling Houston’ as a convention destination much easier-not to mention the existence of the many first-class hotel rooms now available to conventioneers. ● Conventions prefer hotels large enough for the entire convention to fit into one hotel. ● Restaurants and amenities have come into the CBD in response to the growth in convention traffic.

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AUGUST 2019

● Annual Houston tourism revenues reached $18.6 billion in 2018, best year ever. ● NASA is a huge draw to leisure visitors to the area, and also our Zoo, which is now the second-largest in the nation after San Diego’s. ● Houston is about to be the 3rd largest city in the country, passing Chicago and remaining behind L.A. and N.Y., but so far our hotel rates are far lower than theirs, making a convention in Houston way more affordable.

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