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Lease this entire building for $6/sf For more information, see page 9.
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TRACT 1: Aprrox. ±16 acres of land on McHard Rd. • ±1,110’ frontage along McHard Rd. TRACT 2: ±7.25 acres at the hard NWC of Ft. Bend Toll Rd. and McHard Rd. • ±400’ frontage along Ft. Bend Toll Rd. frontage Rd. and ±415’ frontage along McHard Rd. TRACT 3: ±11 acres at the hard NEC of Ft. Bend Toll Rd. and McHard Rd. • ±656’ frontage along Ft. Bend Toll Rd. frontage road and ±700’ along McHard Rd. TRACT 4: ±17.4 acres at the hard SWC of Ft. Bend Toll Rd. and McHard Rd. • ±300’ frontage along Ft. Bend Toll Rd. frontage Rd. and ±2,000’ frontage along McHard Rd. Properties lie within the City of Houston and Ft. Bend County Pricing: Contact Broker
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IN THIS ISSUE 8
23 K E Y M A R K E T M E T R I C S – 2 0 2 0 E X P E C TAT I O N S Annual growth rates, estimated for year-end 2020 vs year-end 2019. OFFICE Rental Growth Vacant Space Construction Levels Leasing Volume Investment Volume
HOUSTON EXECUTIVE SUMMARY • Positive job growth, low unemployment and increased population contribute to Houston’s healthy economy. • The metro’s industrial market is experiencing record construction levels with land prices prompting “out migration” from parts of the city. • Major retailers are expanding e-commerce operations into larger warehouse and distribution centers due to the area’s growing consumer base.
• Following a global developers Sales & Leases 1-3,trend, 5, 9,11, 15, 17, 21 are incorporating new technology into buildings as tenants seek both efficiency and amenities to recruit and retain top talent.
• Innovation and technology are
increasingly important Environmental 22, 35economic drivers as Houston’s research community
Fiber expands Solutions 7 in the healthcare and industries. Legalaerospace 11
Oil & Gas Invesing 1 Property Tax Management 17 AVISON YOUNG 2020 FORECAST | UNITED STATES
1031 Exchange/DST 13 Title Services 17
The industrial market remains Houston’s best-performing product type as big-box retailers such as Home Depot, Ross, Dollar Tree and various furniture companies like Rooms to Go and American Furniture Warehouse expand to satisfy increased consumer demand. Houston boasted the third-largest population gain in the U.S. during 2018, establishing the region as a distribution hub. Cited by the Urban Land Institute in late 2019 as one of six dominant U.S. markets for industrial supply, Houston has experienced record-level construction which will extend into 2020.
12 Houston’s 2020 commercial real estate market outlook is positive with a few challenges in the office sector. The metro’s economy continues to recover from a lackluster energy market amid a general slowdown of global trading; nonetheless, job growth should remain positive through 2020. Despite global trade stagnation, Port Houston, a major economic driver, reports increasing volume and value, which should carry over into 2020 to remain among the top ports in foreign and domestic tonnage.
Houston’s multi-family market will remain strong through 2020 as record-level construction and escalating rents endure. Occupancy levels should stay above 90% as climbing single-family home prices contribute to increased multi-family absorption.
The prevailing flight-to-quality office trend is evidence that new technology is appealing to tenants. Law firms are leasing the city’s 11,and 18,high20, 24, best offices with both efficient yet flexibleEvents working space class amenities to attract top-notch employees. Owners of older Social 23, 25, 27, 29 class A and B office buildings are recognizing that heavy investment in upgrades and amenities is a must to stay competitive.30–32 This healthy Bulletin competition among traditional class A and new class A properties puts tenants in the driver’s seat as occupiers lock in low rental rates and aggressive concession packages. Although new speculative development will be limited as demand warrants, the flight-toquality trend will continue to stimulate build-to-suit development.
I N D U S T R I A L S U P P LY A N D D E M A N D 20
26, 28, 36
Millions (SF) 0
Source: CoStar Realty Information, Inc.
Avison Young Dallas 2020 Expectations 10 Investment Intel 12, 13 Emerging Trends for 1031 Investors 14, 16, 17
CCIM November Luncheon 34 4
Avison Young Houston 2020 Expectations 8
c v p c
I a i 2
Houston’s retail market will continue to adapt to nationwide trends of increasing on-line commerce and
Houston’s economy will continue to prosper in 2020, fulfilling its 2019 Business Facilities’ fourth-place ranking for both economic growth potential among large metro areas and the nation’s best start-up ecosystem. Innovation is sparking excitement as technology start-ups and business incubators are attracted to Houston’s customdesigned work spaces. The world’s largest medical center is expected to break ground on a 36-acre research campus in 2020, while space technology development at NASA-Johnson Space Center sets up a 2024 moon-landing crew and the Houston Spaceport.
O o t u t
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OFFERING INCENTIVES FOR HOTELS, RESTAURANTS, RETAIL & ENTERTAINMENT. I-45 FRONTAGE Tap into the Galveston-Kemah-NASA tourism market. Federal Opportunity Zone & residential infill tracts. 15.33 percent city population growth since 2010. RTA population projection of 105,326. New schools, new neighborhoods, coastal lifestyle and citywide revitalization.
La Marque is Winning.
GATEWAYTO TOTHE THE GULF GULF GATEWAY
Letter from the Publisher
YOUR COMMERCIAL REAL ESTATE MARKETING SOURCE
PUBLISHER Ginger Wheless ginger@REDNews.com
ccording to Avison Young’s 2020 Expectation Reports, Texas’ primary markets should experience continued growth and expansion this year. With the exception of the office market in Houston, CRE is robust and the driving force is the Port of Houston, one of the top ports in foreign and domestic tonnage. According to Avison Young, innovation and technology are the keys to growth in all aspects of the CRE markets. Corporate relocations have become a fixture in Austin with continued growth anticipated and the only blip on the screen is housing cost concerns. Dallas is expected to be the most active construction market in the country. (Pages 8 & 10)
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Gavin Kam with Net Lease Realty Advisors led our panels of experts through the transactional opportunities at our Dallas Net Lease & 1031 Exchange Summit on December 11th. You can read a recap of a portion of the presentation beginning on page 12 regarding legal and tax updates as well as emerging trends for 1031 investors.
SALES Frank Biondo email@example.com Ginger Wheless ginger@REDNews.com
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March 12, 2020
Industrial / Manufacturing / Science
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Houston’s 2020 commercial real
estate market outlook is positive
with a few challenges in the office sector. The metro’s economy continues to recover from a
lackluster Kenergy market amid a EY MARKET METRICS
– 2020 Annual growth rates, estimated for year-e
general slowdown of global trading; nonetheless, job growth should
K E Y M A R K E T M E T R I C S – 2 0 2 0 E X P E C TAT I O N S Annual growth rates, estimated for year-end 2020 vs year-end 2019. OFFICE Rental Growth Vacant Space Construction Levels
Leasing Volume Investment Volume
remain positive Rentalthrough Growth 2020.
INDUSTRIAL Vacant Space Despite global trade stagnation, Port Levels driver, Houston, aConstruction major economic Leasing Volume reports increasing volume and
Investment value, which should Volume carry over into
2020 to remain among the top ports The industrial market remains Houston’s
product type as big-box retailers such as in foreign and domestic tonnage.
Ross, Dollar Tree and various furniture co Rooms to Go and American Furniture Wa The industrial market remains Houston’s best-performing to satisfy consumer demand. H Owners of older class A andincreased B product type as big-box retailers such as Home Depot, the third-largest population gain in the U Ross, Dollar Tree and various furniture companies like KEY MAR K E T M E T2020 R I C Scommercial – 2 0 2 0 E Xreal P E estate C TAT I market O N Soffice buildings are recognizing Houston’s establishing the region as a distribution h Rooms to Go and American Furniture Warehouse expand Annual growth rates, estimated forwith year-end 2020 vs year-end outlook is positive a few challenges in2019. the heavy investment Urban that in Land Institute in late 2019 as one o to satisfy increased consumer demand. Houston boasted EXECUTIVE SUMMARY office sector. The metro’s economy continues U.S. markets for industrial supply, Housto the third-largest population gain in the U.S. during 2018, upgrades and amenities is a must ial real estate market record-levelINDUSTRIAL construction which will exte to recover a lackluster energy market the regionfrom as a distribution hub. Cited by the OFFICE RETAIL • Positive job growth, low unemployment establishing
few challenges the • Positivein job growth, low to stay competitive. Houston’s multi-family market will remain Urban late as2one dominant general of global K Eto Y M A R KLand Eamid T Institute M aE T RinI C S 2019 –slowdown 20 0 EofXsix PE C TATtrading; IONS and increased population contribute Rental Growth economyunemployment continues U.S. markets for industrial supply, Houston has experienced and increased through 2020 as record-level constructio Annual growthnonetheless, rates, estimatedjob for growth year-endshould 2020 vs remain year-endpositive 2019. Houston’s healthy economy. record-level construction which will extend into 2020. er energy market contribute to escalating rents endure. Occupancy leve through 2020. Despite global trade stagnation, population changing consumer preferences with re-purposing Vacant Space above 90% as climbing single-family hom n of global trading; Houston’sPort multi-family market will remain strong driver, reports Houston, a major economic vacant mall space. Food halls, food trucks and various Houston’s healthy economy. • The metro’s industrial market is contribute to increased multi-family abso OFFICE RETAIL INDUSTRIAL should remain positive through 2020 as record-level construction and pop-ups compete as they deliver changing retail Construction Levels volume and value, which should increasing experiencing record construction escalating rents endure. Occupancy levels should stay concepts with occupancy also remaining above 90%. obal trade stagnation, Houston’s retail market will continue to a •T he metro’s industrial market is carry over into 2020 to remain among the top Rental Growth levels with land prices prompting “out above 90% as climbing single-family home prices Leasing Volume nationwide trends of increasing on-line c onomic driver, reportsrecord construction experiencing Investor activity in retail and multi-family slowed in 2019 ports in foreign and domestic tonnage. migration” from parts of the city. contribute to increased multi-family absorption. alue, which should after higher-than-average volume in 2018. Stronger investor Vacant Space levels with land prices prompting Investment Volume Houston’s economy will continue to prosper in 2020, fulfilling its Houston’s retail market will continue to adapt to interest should return to the nation’s fourth-largest city in main among the top 2019 Business Facilities’ fourth-place ranking for both economic • Major retailersfrom are expanding “out migration” parts of nationwide trends of increasing on-line commerce and 2020 amid low interest rates and stability in the energy sector. Construction Levels estic tonnage. growth potential among large metro areas and the nation’s best operations into larger thee-commerce city. The industrial market remains Houston’s best-performing start-up ecosystem. Innovation is sparking excitement as technology to prosper in 2020, fulfilling its I N D U S T R I A L S U P P LY A N D D E M warehouse and distribution centersLeasing due Volume Owners of older class A and B product type as big-box retailers such as Home Depot, start-ups and business incubators are attracted to Houston’s customace ranking forajor bothretailers economicare expanding • M to the area’s growing consumer base. Ross, Dollardesigned spaces. The world’s largest medical Tree andwork various furniture companies like center is expected
office buildings are 20 recognizing that heavy investment in 15 upgrades and amenities is a must 8% Owners of older class A and B to stay competitive. office buildings are recognizing 10 my continues top talent. U.S.15 markets industrialFurniture supply, Houston has experienced Rooms to Go andforAmerican Warehouse expand 6% class amenities to attract top-notch employees. Owners of older ffice isare evidence that new new technology record-level construction which will Houston extend into 2020. incorporating that heavy investment in gy trend market to satisfy increased consumer demand. boasted class A and B office buildings are recognizing that heavy investment changing consumer preferences with re-purposing ts. Law firms• areInnovation leasing the city’s and technology are the third-largest population gain in the U.S. during 2018, into buildings as tenants seek both bal trading; in upgrades and amenities is a muststrong to stay competitive. This healthy Houston’s multi-family market will remain upgrades and isvarious a must4% vacant mall space. Food amenities halls, food 5 trucks and t flexible working space and highte market 10 increasingly important establishing region as among a distribution hub. theclass A properties competition traditional classCited A andby new efficiency and amenities toeconomic recruit drivers remain positive through the 2020 as record-level construction and ch employees. Owners of older pop-ups compete as they deliver changing retail ges in the toconcepts staywith competitive. asretain Houston’s research community Urban puts tenants in 2019 the driver’s seat lock in low rental rates Land Institute in late as one ofassixoccupiers dominant recognizing that heavy investment and top talent. escalating rents endure. Occupancy levels should stay occupancy also remaining above 90%. de stagnation,
etro areas and the nation’s best Investment Volume e-commerce operations to break ground on Furniture a 36-acre research campus in 2020, while Rooms to Go and American Warehouse expand sparking excitement as technology I N D U S space T R I Atechnology L S U P P LYdevelopment A N D D E MatANASA-Johnson ND • toFollowing a global trend, into larger warehouse and developers to satisfy are attracted Houston’s customincreased consumer demand. Houston boastedSpace Center sets up a 2024 moon-landing crew and the Houston Spaceport. arecenter incorporating technology intothe s largest medical is expected distribution centers new due to the third-largest gain in the U.S. during 2018, The industrial marketpopulation remains Houston’s best-performing 20 estate market earch campus in 2020, while buildings as tenants seek both efficiency The prevailing flight-to-quality office is evidence establishing the region as a distribution hub.trend Cited by the that new product type as big-box retailers such as Home Depot, area’s growing consumer base. t NASA-Johnson Space Center to recruit and retain allenges inand the technology is appealing tenants. firms amenities Institute in late 2019to ascompanies one of Law six dominant Ross,Urban DollarLand Tree and various furniture like are leasing the city’s w and the•Houston Spaceport. best offices with both efficient yet flexible working space and highFollowing a global trend, developers
ontinues expands in healthy the healthcare and ust to stay competitive. This driver, reports ass A and new class A properties aerospace industries. • I nnovation and technology are market should sich occupiers lock in low rental rates increasingly important economic rading; ges. Although new speculative mong the top drivers Houston’s research ain positive emand warrants, the as flight-tonnage. AVISON YOUNG 2020 FORECAST | UNITEDin STATES community expands the mulate build-to-suit development. tagnation, er in 2020, fulfilling its healthcare and aerospace industries. er, reports g for both economic should and the nation’s best g the topas technology excitement ge. cted to Houston’s custom-
8 is expected medical center 020, fulfilling its pus in 2020, while both economic ohnson Space Center
aggressive concession packages. Although new speculative U.S. above markets forand industrial supply, Houston has experienced Millions (SF) 0 5 90% as climbing single-family home prices 2% developmentwhich will bewill limited as demand warrants, the flight-to2009 2010 Investor activity in retail and multi-family slowed in 2019 2011 record-level construction extend into 2020. contribute quality to increased multi-family absorption. changing consumer preferences with trend will continue to stimulate build-to-suit development. after higher-than-average volume in re-purposing 2018. Stronger investor Under Con Houston’s multi-family market will remain strong vacant mall space. Food halls, food trucks and variouscity in Houston’s retail market will continue to adapt to interest should return to the nation’s fourth-largest Millions (SF) 0 Source: CoStar Realty Information, Inc. 0% through 2020 2009 astrends record-level construction pop-ups compete as2016 theyrates deliver nationwide of2010 increasing on-line and commerce and 2011 2012 2013 2014 2015low interest 2017changing 2019 sector. 2020 amid and stability2018 inretail the energy escalating rents endure. OccupancyUnder levels should stay Completions concepts with occupancy Construction Net Absorption Vacancy also remaining above 90%. above 90% as climbing single-family home prices Source: CoStar Realty Information, Inc. Investor activity in retail and multi-family slowed in 2019 contribute to increased multi-family absorption. after higher-than-average volume 2018.| UNITED Stronger AVISON YOUNG 2020 in FORECAST STATESinvestor Houston’s retail market will continue to adapt to interest should return to the nation’s fourth-largest city in I N D U Strends T R I Aof L increasing S U P P LY on-line AND D E M A N D and nationwide commerce 2020 amid low interest rates and stability in the energy sector.
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into their operations. Within coworking specifically, WeWork received the most headlines for 2019 for all the wrong reasons, but their challenges do not represent the industry as a whole. Coworking in DFW will likely continue to expand through varied providers, the vast majority of which are smaller, local operators. WeWork itself only accounts for 17% of DFW’s 3.5-msf coworking inventory, with only 11 locations across the metro. If coworking provider expansion continues as it has across DFW, the metro could possibly overtake Boston and Chicago to become the 4th or 3rd largest coworking market in the U.S.
Dallas fundamentals remain solid. While no longer performing at the breakneck pace of 2016 and 2017, the market as a whole is still witnessing near-record levels in regards to construction, absorption and sales. Underlying threats that KEY MARKET METRICS – 2020 growth rates,include estimated for year-e will need toAnnual be addressed flight-to-quality patterns that are putting large supplies of 1970s Rental Growth and 1980s product at risk moving forward. Recent projects have shown that DFW of being Vacant Space craves walkable, mixed-use, experiential development obsolete if not renovated,with along amenities that cater to convenience for the user. AsLevels suburbs Construction with increases become more hip through thenotable creation cost-of-living of their own unique Volume “big-city” experience clusters, such asLeasing theto Legacy district that threaten make corporate in Plano or the Urban Center in Las Colinas, commercial Investment Volume relocations less appealing. assets in these areas will be positioned to perform well. In the If the energy and amenities experienceDallas one is likely nearmatch term,the however, can get in Uptown and Downtown while being located thanof 50the msftostrongest ofa commercial product set to remain one in a more affordable business hub much closer user’s The vast majority home, many businessesperforming will happily 2020. choose that to metros inspace the U.S.of these assets
buildings, which will fuel an ongoing f avoid hour-long commutes and other inconveniences. Another trend to watch in 2020 and beyond is the growing as more tenants move to occupy newe demand from office employees to work from home. As for basic amenities, the fight to gain competitive enda product. This trend poses a moder Companies are increasingly offering personnel the ability advantage will likely move to technology, convenience multiple fronts. Office absorption has s to work from home at least once per week, or to have more Dallas fundamentals remain solid. While no longer K E Y M A R K E T M E T R I C S – 2 0 2 0 E X P E C TAT I O N Sand cost-savings. Things like smart locks, in-building new and renovated product in recent y flexible office hours. Millennials Gen Z employees performing at the breakneck pacevsofyear-end 2016 and messaging, green tech to reduce energy usage and costs, Annual growth rates, estimated forand year-end 2020 2019. putting pressure on older buildings, w EXECUTIVE SUMMARY are leading the charge in these requests, and with Dallas and storage are the sorts of things that developers will 2017, the market as a whole is still witnessing abundance, and could create a unique leading the nation in Millennial relocations, this workforce to make their properties stand out. near-record levels in regards to construction, OFFICE likely need to considerRETAIL INDUSTRIAL • Dallas will continue to be one of the most which the market isn’t overbuilt per se perk will likely become more common. This trend could •D allas will continue to be one absorption and sales. Underlying threats that For retail, DFW has the potential to be a strong case soon be a glut of older, non-stabilized office K E Y M A Rsync K Ewith T Mworkplace E T R I C Sstrategy – 2 0decisions 2 0 E X Pfor EC TATleases I O NasS active construction markets in the country, Rental Growth of the most active assets. Certain will to be addressed flight-tocompanies continue tofor look for ways 2020 toinclude reduce their office rates,need estimated year-end vs year-end 2019. study in the reinvention of obsolete Within with more thanconstruction 50 million sf (msf ) ofAnnual growth the multi-family sector, luxury a major malls across the metro have either undergone footprint and overall occupancy expenses. If companies markets in the country, with quality patterns that are putting large supplies essentially the only class being built in commercial product delivering in 2020, Vacant Space In Plano, Collin to downsize their office space by of 1970s and 1980s product atmoving risk ofmore being or are undergoing drastic renovations. is putting price pressures on all DFW a more thanwith 50 million sf (msf )50 ofmsf in expected are willing along an additional Creek Mall is currently being demolished to become a workers to rotating hoteling options, the resultOFFICE could be a RETAIL INDUSTRIAL metro struggles to provide housing for obsolete if not renovated, along with notable Construction commercial product delivering in to take place. construction starts scheduled noticeable Levels decline in absorption as less space gets leased. $1 billion mixed-use project. In Southpopulation. Dallas, RedThis Birdhas Mallessentially created cost-of-living increases that threaten to make Rental Growth 2020, along with an additional 50 has been revitalized through public-private partnerships Increased demand from tenants for amenities will also of an affordability crisis in the metro, w Leasing Volume corporate relocations less appealing. In the near • Multi-Family will likely remain the investor impact DFW office, multi-family and retail development and aims to become an economic force for thetosouthern msf in expected construction starts potential make corporate relocation Vacant Space term, however, Dallas is likely remain one of darling as major population growth and the area’s cost of living becomes less c Investment Volume scheduled to take place. the strongest performing metros in the U.S. limited single-family availability continue affordable workforce housing will drive Construction Levels
to push area residents towards •M ulti-Family will likely remain therenting, Dallas-Fort Worth (DFW) will continue to be a hotbed of activity thus maintaining strong demand. Leasing investor darling as major population in 2020. The metro has consistently been a topduring performer in thanVolume 50 msf of commercial product set to deliver
INDUSTRIAL UNDER CONSTR
metrics such of as these construction, volume,DFW’s construction pipeline 2020. Thekey vast majority assets net areabsorption, “premium sales class” growth and limited single-family • Office will continue to see a flight-to-Investment Volume population growth and job growth. These performance indicators buildings, which will fuel an ongoing flight to quality availability continue to push 36.5 msf remains impressive, with more 67 quality, where newer and area renovated 40 are set to maintain their positive trajectories, even in the face Dist as more tenants move to occupy newer, more high34.2 msf residents towards renting, thus of slowing global growth and economic uncertainty. DFW has than 50 msf of commercial space witness the majority of absorption, The industrial market remains Houston’s best-performing end product. This trend100,000 posesjobs a moderate threat across 35 added roughly per year for the last several years. maintaining strong demand. putting more pressure on dated of older A and B product type asfronts. big-box retailers such ashas Home Depot, multiple Office absorption significantly favored Also of note, DFW has added more than 1 million peopleOwners sinceproduct set toclass deliver during id. While no longer product to refresh or get left behind. 30 Ross, new Dollarand Tree and2010 various furniture companies like April when the area’s economic recovery beganispost-Great renovated product in recent years. This trend •O ffice will continue to see a office buildings are recognizing ace of 2016 and 2020. The vast majority of these Recession. This explosive growth, coupled with DFW’s Rooms to Go25 and American Furniture Warehouse expand putting pressure on older buildings, which DFW has in welcoming flight-to-quality, where newer • Industrial will maintain the strong business climate and strong labor pool, will likely keep the till witnessing heavy investment to satisfy increasedand consumer demand. Houston assets are “premiumin class” could create a unique sortboasted of bubble in that andleasing renovated spaceitwitness the velocity has experienced for abundance, metro positioned for another impressive performance in 2020. 20 construction, the third-largest population gain in theper U.S.se, during 2018, could upgrades and amenities is a must which the market isn’t overbuilt but there the last years, keeping majority of two absorption, puttingvacancy more te market buildings, which will fuel an Within theascommercial property 2 establishing the region a distribution hub.markets, Cited byAvison the Young ng threats around that 5% despite recordsoon be a glut of older, non-stabilized properties. 15 expects DFW to see moderate rent growth across all asset W pressure on dated product to refresh nges in the to stay competitive. Urban Land Institute in late 2019 as one of six dominant ongoing flight to quality as de flight-tosetting construction activity. types, with industrial assets likely seeing the highest Within the multi-family sector, luxury apartments are ontinuesor get left behind. U.S. markets10for industrial supply, Houston has experienced percentage growth at roughly 4% year-over-year. g large supplies more tenants move to occupy 1% 4% essentially the only of class being built ininto the area, which construction which will extend 2020. market • I ndustrial will maintain the strong record-level Other Manufacturing changing consumer preferences with re-purposing construction pipeline remains impressive, with more isk of being is putting price pressures on all DFW apartments as the 5 DFW’s 723,000 sf 1.9 msf 706,000 sf 723,000 sf newer, more high-end product. rading; leasing velocity it has experienced Houston’s multi-family market willhousing remain strong metro struggles to provide for a rapidly growing vacant mall space. Food halls, food trucks and various Source: CoStar Realty In g with notable MSF ain positive through 20200 as record-level construction andthe beginnings pop-ups compete as they deliver changing retail the last two years, keeping population. This has essentially created eatenAVISON toforYOUNG make DFW’s population farther away fromabove the metro’s 2020 FORECAST | UNITED STATES escalating rents endure. Occupancy levels should concepts with occupancy also remaining 90%. urban tagnation, of an affordability crisis in the metro, whichstay has the around 5% despite record-5 aling. Invacancy the near centers, a trend that could shift demographic profiles abovepotential 90% as climbing single-family home 1970s 1980s prices 1990s if 2000s 2010s Total er, reports to make corporate relocations less desirable Investor activity in retail and multi-family slowed in 2019 setting construction activity. for recruiting in certain economic sectors, potentially emain one of contribute to increased multi-family absorption. the area’s cost of living becomes less competitive. A lack ofafter higher-than-average should Source: Realty Information, Inc. and inCoStar 2018. Stronger investor impacting the abilityvolume of businesses to find talent, os in the U.S. affordable workforce drive to a large segment ofinterest Houston’s retail market will housing continuewill to adapt should return towhere the nation’s fourth-largest city in g the top in turn changing they choose to locate. AVISON YOUNG 2020 FORECAST | UNITED STATES nationwide trends of increasing on-line commerce and 2020 amid low interest rates and stability in the energy sector. ge. be a hotbed of activity On the sales side, Dallas will likely continue to be a premier 10 FEBRUARY 2020 INDUSTRIAL UNDER CONSTRUC TION a top performer in investment market, with the liquidity and transaction 020, fulfilling its orption, sales volume, volume of a gateway market, but with product at a both economic e performance indicators significantly lower cost than can be found in major coastal ABSORPTION BY THE DEC ADES
Real Estate Council of Greater Fort Worth Annual Meeting April 2020
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Summit offers expert analysis of popular options All too often, you hear that commercial real estate is all about who you know, though any real industry expert will tell you what you know is far more valuable. That’s why REDNews has made it a mission to gather best-in-their-field panelists for our now-monthly summits. Most recently, we gathered in Dallas for the Texas Net Lease & 1031 Summit, covering legal and tax updates for tax-deferred transactions, the status of the current net lease market, understanding your lease and credit and emerging trends for 1031 investors which was moderated by Gavin Kam with Net Realty Advisors. In the following pages, we’ll cover some of the highlights and important details gleaned from our panelists and next month you’ll have a recap of current net lease market conditions in Texas also led by Gavin Kam.
Important Legal & Tax Updates for Tax-Deferred Transactions
Gavin Kam Net Realty Advisors
BY BRANDI SMITH
The effort is being led by the Federation of Exchange Accommodators (FEA), which says it is “heavily promoting taxpayer-friendly legislation,” an umbrella under which 1031 exchanges certainly fall. A 1031 exchange is a vehicle by which an owner can sell an investment property, then acquire another “like-kind” property while deferring capital gains tax. Otherwise, a federal tax of at least 15 percent is applied to your capital gains, along with a 3.8 percent surtax if your net investment income exceeds $200,000 and any state taxes. A simple concept in theory, it’s more complicated in execution. The code is filled with details that, if missed, can result in losing the intended benefit: capital gains deferral.
Attendees who joined us for the first panel of the REDNews Texas Net Lease & 1031 Summit got to join the discussion about legal and tax issues surrounding 1031 exchanges. Moderated by Corinne Iadonisi, managing director and counsel at Thomas Title & Escrow, the panel featured Greg Lehrmann, North Texas division manager and vice president of Asset Preservation, Inc.; David Fisher, founder of Creative RE Strategies; Joe Nugent, president and CEO of Effective 1031 Planning; and Brandon Balkman, senior vice president at Orchard Securities. 12
“... complicated in execution …” The most important nugget to come out of this panel was that no immediate changes to IRC Section 1031 (more commonly known as the tax code protecting 1031 exchanges) are expected in the immediate future. “The real estate industry will be heavily involved with members of all political parties in the 2020 campaign,” said Lehrmann.
The “like-kind” definition can be tricky. The asset being bought must be of the same type as the asset being sold. A property owner would not qualify for tax deferral if, for example, he tried to exchange a commercial space into a stock purchase. However, when selling and buying with an asset class, there is flexibility. That commercial property owner would be able to exchange that space for a multifamily property. Other options include investing in a triple-net property or a Delaware Statutory Trust (DST), depending on how engaged you want to be as a landlord. Another often overlooked detail is how to deal with replacing your debt. Section 1031 offers two options for property owners with loans, according to Nugent.
“You can replace that with cash out of your own pocket or you get a loan of equal or greater value to fully complete your 1031 exchange,” he explained. “If not, there will be taxes owed on whatever real estate is not replaced.” Timing is also an important element of a 1031 exchange. As soon as a property is sold, the investor has 45 days to choose a new investment property and 180 days to close on it.
have a qualified intermediary who knows how it’s done and can walk you through the process.” It’s worth noting that Section 1031 outlines some rules about who cannot be a qualified intermediary (QI). The list of disqualified persons includes family members and anyone who is considered your “agent,” such as accountants, attorneys or realtors. However, there is no licensing required to become a QI.
Nugent encouraged consumers to research the background of QI options and weigh a successful track record against what may be a higher fee. “In our practice, we’re singularly focused. We focus strictly on 1031 exchanges and making sure that the clients are educated and we provide the best option for them,” Nugent added. n
“They keep the market moving,” said Nugent, explaining that the legislation’s tight time frames encourage sellers to buy within a few months time if they’d like to defer taxes on their gains. “If you did have to pay those taxes, it would stagnate the market. People would just sit on their property and no one would sell. These 1031 exchanges allow the market to move and create inventory and jobs by moving money around.”
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While an investment tool that has only grown in popularity over recent years, IRC Section 1031’s existence has not always been a guarantee. “It disappeared from the new tax code in 2017 and there was quite a bit of lobbying in Washington, D.C. to get it added back in,” said Nugent. “It’s been around for almost a hundred years, so clearly it has a place. It’s beneficial to real estate owners.” Like Lehrmann, Nugent doesn’t foresee any changes to the code on the horizon, but he pointed out that the issue seems to come up each election year. The FEA, which bills itself as “The Voice of the 1031 Industry,” has the objective of promoting the preservation of Section 1031 because the legislation isn’t permanent tax code. It actively works to educate lawmakers about the value 1031 exchanges have in commercial real estate and the economy as a whole. As important as it is to educate the people who are writing and passing the tax code, Nugent said his company also strives to educate consumers. “The knowledge of 1031 exchange is not a very wide knowledge, but it’s extremely deep. There are a lot of nuances that could void your exchange if you don’t do it properly,” he said. “That’s why it’s important to
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Emerging trends for 1031 investors BY BRANDI SMITH Because of the increased interest in 1031 exchanges, we invited a group of industry experts to talk about the trends they’re seeing in the market, including trading into Delaware Statutory Trusts (DSTs) and how to exchange oil and gas.
“The swap-til-you-drop process, that’s over,” said Dobbs. “So the downside of the UPREIT transaction is that it does not secure your ability to continue to do an exchange. If you UPREIT, that opportunity is gone.”
“In that case, you establish what we call the substitute basis in the replacement property and start your depreciation schedule based on that new substitute basis,” said Brown. “You have to track the gain that you lost.”
“... you want the diversification …”
That’s why he emphasized how important it is to have that conversation with a client.
Another question frequently asked about taxdeferred investments is “How long do I have to hold it?” You may get a different answer depending on whom you ask, pointed out moderator Greg Lehrmann, North Texas division manager and vice president of Asset Preservation, Inc.
The first topic out of the gate was umbrella partnership REITs (or UPREITs). An alternative to 1031 exchanges, UPREITs offer a way for an investor who is looking to liquidate some real estate to defer taxes. You would sell or contribute that property to the REIT. “That REIT gives you operating partnership units, then you can control the liquidity. There are no taxes on that whatsoever until you transfer those operating partnership units to shares of the stock. Once you transfer that share stock, that’s not real property and you’re going to be taxed there,” explained Jay Dobbs, senior managing partner of Effective 1031 Planning.
“We make really sure that if we’re looking at an UPREIT, it’s an option that they are not forced to take,” Dobbs said.
“... defend that transaction …” The value of an UPREIT or 1031 exchange is that the property owner is able to defer capital gains taxes when a sale is made. Otherwise, they would have to turn over a huge chunk of any profit made compared to the acquisition cost. Answering a question from an attendee, Craig Brown, senior vice president and regional manager of IPX1031, offered an illustrative example. An investor goes out with fresh cash and buys
It’s important to clarify that mineral interest is different than royalty interest. In doing so, Dobbs said you’re basically creating an installment sale for yourself. “Maybe you want the diversification from your one property into the 50 or 100 properties that you have in the REIT. Maybe you want the diversification of the different sectors or geographic locations in that REIT,” he said. UPREITs do come with a warning from Dobbs, though. Once you pass your property to an UPREIT, you will not be able to do any more tax-deferred swapping. It is the end of the line, so to speak. 14
a piece of artwork for $100,000. He sells that for $500,000, deferring the $400,000 gains in a 1031 exchange, which he uses to buy a $1 million piece of artwork. The difference is $600,000, the basis for the new piece of art. “Now when I sell this piece of artwork, I have to recognize gains,” Brown explained. “If I sell it for $1,500,000, I have to pay taxes on the $900,000 gain.” The same is generally true for any kind of asset, real property included, but it can be harder to track if the asset has depreciated.
“That detail is not in the tax code, therefore it’s kind of nuanced,” he said. “All the facts and circumstances are relevant.” Brown echoed that, saying it really all boils down to intent. “As an example, we have a taxpayer who owns 10 properties. They’ve never sold a property in less than five years. They buy their 11th property, it’s consistent with all their other holdings. It looks like a property that they’re going to hold indefinitely. They’re not marketing the property for resale. Somebody comes along and knocks on the door three months after they acquire it and make an offer that they cannot pass up,” he said. “I think most tax attorneys are going to be pretty comfortable with that transaction because given the totality of the facts and circumstances, we feel like we’re going to be able to defend that transaction even though it’s only been three months.” The intent is important because, our panelists pointed out, it can be used by the IRS if the exchange is ever audited. That’s why Brown cautioned investors to be careful with any paper trail. “Don’t think out loud in writing. Have verbal conversations with your tax advisor because when the IRS sits down with you, they’re going to look at everything they possibly can to try to argue that your intent was not pure in that transaction,” he stressed. “Be very careful about it.” That’s something Lehrmann admitted to realizing Continued on Page 16>
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Emerging trends for 1031 investors: < Continued from Page 14
several years into his career. Although he is an attorney, if he’s helping facilitate a 1031 exchange, he’s in the role of a qualified intermediary (QI), which means emails are not privileged. “We are not an escrow company. We are not a fiduciary of the taxpayer. We are actually a principal in the transaction,” Brown clarified. “If you’re going to be on the margins, we have an obligation to protect our enterprises. We’ll say, ‘Listen, this is what we’ve seen. This is information that we have. You need to take this and go back to your tax advisor and work through these issues.’ Just be careful what you ask a party with whom you don’t have privilege.”
“... from active to more passive …” The bulk of the discussion was spent on DSTs, which provides an investment vehicle by which private investors can join a diversified, institutional fund with other investors to buy and manage real property. The IRS considers a DST “like-kind” in a 1031 exchange, a popular option for property owners who want a more passive role after being a landlord for years. The DST sponsor, not the individual investor, is responsible for managing the assets in a particular fund, including dealing with the tenants, making repairs, processing rent and paying taxes.
Digging into that timeline, specifically the 45-day limit for identifying a new property, Lehrmann offered some explanation of the three ways an investor can do that. The first is known as the “three-property rule”; if an investor only lists three properties, there is no limit on the value. If you want more than three choices, the “200 percent rule” allows you to identify an unlimited number of replacement properties as long as their total value doesn’t exceed 200 percent of the value of the sold. The third rule is less practical, he said. “The ‘95 percent rule" says if you don’t follow either one of the first two rules, you’ll still have a valid exchange if you are lucky enough to close on 95 percent of what you listed,” said Lehrmann. “That’s why that’s generally not considered our rule to rely on.” All of this becomes an issue when exchanging into a DST because of the number of properties in a given DST. “Some of the DST sponsors offer multiple properties inside of one DST. With each property, you’re deemed to acquire an undivided fractional interest in each one of those assets, so each one of those distinct properties takes up an identification slot on your ID list,” Brown explained. “If you have a DST that has multiple sites, you’re burning up multiple positions on your ID list, which creates a problem if you’re not paying attention to your 200 percent rule.”
“These are funds that are professionally managed by multi-billion dollar real estate sponsors. An investor can protect his gain, live off a really competitive income stream and not have the management headaches anymore,” said Brown. “For anyone who is looking to go from active to more passive real estate ownership, this is a great way to do that.”
While DSTs have a long list of benefits, Lehrmann suggested the biggest disadvantage of investing in one is the lack of control.
Unlike an UPREIT, an investment in a DST is not an end-of-the-road tax-deferred investment. Investors are able to exchange in and out of DSTs as long as the investments are like-kind, a new property is identified within 45 days and the deal closes within 180 days.
Because the management is centralized, there are also fees associated with DSTs, typically an asset management fee and a property management fee. Lehrmann said his research revealed that in 2019, those averaged out to 5.59 percent. His company reviewed 35 different DST sponsors in the past year, factoring in those fees, growth and a number of other factors.
“It’s not your call to say, ‘I want to sell this property.’ You own a fractional interest with other investors and you’re allowing the fund’s sponsor to make the call,” he said.
“We currently have approved 10 sponsors out of the 35. We’re probably about to go to 13 or so,” revealed Lehrmann. In the next breath he shared which assets have his attention at the moment: “We absolutely love oil and gas.”
“... a natural fit …” There are really two types of real estate, explained Dirk Todd, president of Oak Tree Minerals. Surface owners manage everything that happens above ground, such as buildings. Mineral owners control everything below the surface, such as oil. “What we do at Oak Tree Minerals is go out and buy the mineral interests that already have mature, more predictable production on it. Then we fashion that into portfolios that we sell off as 1031 exchanges,” he said. “It’s a very good niche product because we like to buy assets, aggregate them, recapitalize and sell off pieces of what we already own. 1031 investors are a natural fit.” It’s important to clarify that mineral interest is different than royalty interest. The mineral owner is an active role, acting as the executor with the right to enter a lease or develop the underlying resources. A royalty owner is entitled to a share of production, but isn’t a factor in executive decisions, making it much more passive. “My family has had royalties for years. It’s a great asset. It’s a great way to make money. It’s a great cash flow. You don’t do anything for it. You go to the mailbox,” said Jay Young, CEO of King Operating Corporation and author of The Upside of Oil & Gas Investing. His company is now assembling royalty-based DSTs, focused on the Permian Basin. “The DST allows us to take that product and build up value in a relatively short time, then I can sell it,” Young said. He pointed to one such project, for which King Operating aims to purchase an oil field with 10 million to 20 million barrels left. The goal is to
raise $100 million, then sell the project for up to $250 million in a matter of 12 to 18 months. “We like to get rigs and increase value,” he said in summary. For professionals like Lehrmann, oil and gas can be an option to help clients diversify their portfolios. “You’re getting in at a much more attractive price when you’re looking at oil and gas right now and I think it should be a part of what clients are doing with their exchange money,” he said. Along with the benefit of diversification comes the ease in exit strategy. There’s already a secondary market established for royalties. “Whether it’s traditional real estate or these mineral interests that we buy, you want to know what your potential for gain or loss is.” Todd said. “Obviously, if you’re buying an asset, when the commodity prices are at an all-time high, and they’re going to come back down to the bottom, it’s not going to look good for you. But you could have the opposite effect as well.” Any investment comes with a level of risk, as any investor is well aware. Knowledge of these trends and new options when it comes to 1031 exchanges is sure to help investors of all levels make more educated decisions about where to put their money going forward. n
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Industrial & Logistics
Summit: Houston February 25, 2020
Chief Commercial Officer Port of Houston
Associate Executive Director Baytown West Chamber
Partner Husch Blackwell
Vice President Duke Realty
SVP – South Region Logistics Property Company, LLC
Economic Development Coordinator City of La Porte, Texas
More Speakers to be Announced!
Topics Include: • 2020 Industrial Real Estate Market Overview • The State of Industrial Development • Emerging Trends in Logistics and Industrial Real Estate • Working with Local Governments to Build Lasting Products
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For Speaking and Sponsorship Opportunities Call: Frank E. Biondo Ginger Wheless email@example.com 248.670.2691
Jay r. young
214.420.3000 • www.jayryoung.com
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SCOOP The following pages contain a calendar of Texas CRE events, networking photos, and deals/announcements. For more updates, log on to REDNews.com
CENTRAL SOUTH TEXAS
5 Wednesday 6 Thursday 7 Friday
REDNews Newsletter [4:00pm]
BOMA Austin - Membership Committee Meeting *Invitation Only [11:30am - 12:30pm]
REC Austin - KnockOut Night [6:30pm - 10:00pm]
CTCAR - Commercial Day @ Texas REALTOR Winter Business Meeting [8:30am - 3:30pm]
CCIM South Texas - Networking Luncheon [11:30am - 1:00pm]
IREM San Antonio - Building Tour: SOTO [3:00pm - 4:00pm]
REDNews Newsletter [4:00pm]
ULI Austin -February Breakfast [7:30am - 9:00am] CCIM Central Texas - Luncheon: "Austin's New Zoning Code" [11:30am - 1:00pm] TABB San Antonio - Luncheon [11:30am - 1:00pm]
REDNews Newsletter [4:00pm]
IREM Austin - Luncheon [11:30am - 1:00pm]
REDNews March Issue Deadline [5:00pm]
BOMA Austin - Board of Director's Meeting *Invitation Only [8:00am - 9:30am]
CTCAR - Property Information Exchange & Breakfast: "How Measurements Increase Asset Value" [7:30am - 9:00am] ULI Austin - February Coffee Chat (South) [8:00am - 9:00am] BOMA Austin - Membership Luncheon [11:30am - 1:00pm] IREM San Antonio - Market Panel Luncheon [11:30am - 1:00pm]
REDNews Newsletter [4:00pm]
REC San Antonio - USAA: Will McIntosh & Square Mile - Tom Burns [11:30am - 1:00pm] TABB Austin - Luncheon [11:30am - 1:00pm]
President, trick, ard with Past Bo d an s er ic s, Cody Kirkpa stin Off Evan William z, de en 2020 IREM Au el M Kreutner. ard, Irene Kathleen Godd anda Raelene and Melissa Steven Rea Am , it no Be Adam
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
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
whatâ€™s going on
ULI San Antonio Luncheon with Spencer Levy, Randy Smith and Jenna SaucedoHerrera - What San Antonio needs to do to compete.
2020 CREW San Antonio Board of Directors!
Thank you to Ka
ty Lumpkin of Bickerstaff Hea th Delgado Ac from CREW Au osta LLP stin!
Cody Kirkpat rick! He'll be serving as IREM Austin's 2020 Secretar y
, CREW && CTCAR CCIM Central Texas' recent joint event with CCIM FEBRUARY 2020
3 Monday 4 Tuesday
REDNews Newsletter [4:00pm]
CCIM North Texas - CI 101: Financial Analysis for Commercial Investment Real Estate [8:00am - 5:00pm] REDNews Newsletter [4:00pm]
ULI North Texas - CFL Alumni/NEXT/WLI Joint Tour & Happy Hour: "Grandscape Residential Tower" [3:00pm - 6:30pm]
BOMA Fort Worth - Board Meeting *Invitation Only [12:00pm - 2:00pm]
Greater Fort Worth Association of Realtors - Realtor Night at the Rodeo [5:00pm - 7:00pm]
CCIM North Texas - Happy Hour [5:30pm - 7:00pm]
BOMA Dallas - Dart Tournament [3:30pm - 9:30pm]
REDNews - Forecast Summit: Dallas [8:00am - 12:00pm]
REDNews Newsletter [4:00pm]
BOMA Fort Worth - Luncheon [11:00am - 1:00pm]
IREM Fort Worth - Lunch & Property Tour [11:30am - 1:00pm]
TABB Dallas - Luncheon [11:30am - 1:00pm] REC Fort Worth - Panther Den [5:00pm - 7:00pm]
IREM Dallas - Luncheon with Millenials in the Workplace [11:30am - 1:00pm]
REDNews March Issue Deadline [5:00pm]
REDNews Newsletter [4:00pm]
BOMA Dallas - Real Estate Principal Member Breakfast [7:30am - 9:30am]
CCIM North Texas - Luncheon with Dr. Jim Gaines [11:30am - 1:00pm] CREW Dallas - Cocktails & Cowboy Boots, Celebrating 40 Years [6:00pm - 10:00pm] NAIOP North Texas - Comedy Night [6:30pm - 9:00pm]
Laughlin assie Mc 20 List K t c le E 20 dentAmericaÂ® llas Presi CREW Da e Best Lawyers in th named to
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€™s going on
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
Flashback Friday to CREW Fort Worth's 2020
Meet the IREM Fo
Board Retreat in Granbury!
ers! rt Worth 2020 Of fic
Nor th Texas CCIM in Congrats to CCIM Korea && pters! Cha er becoming Sist
For 10+ year
s ULI Nor th
Texas has of
BOMA Dallas fered the pe
rfect way to
2020 3 Monday
REDNews Newsletter [4:00pm]
ULI Houston - 13th Annual Development of Distinction Awards [6:00pm - 9:00pm]
CREW Houston - Luncheon: Impact of Gentrification [11:30am - 1:00pm]
CREMM - Lemon Laine: New Year, New Skin [6:00pm - 8:00pm]
BOMA Houston - RPA Course: Managing the Organization [8:00am - 5:00pm] REDNews Newsletter [4:00pm]
CORENET Houston - Joint Meeting with IFMA Houston [11:00am - 1:00pm] IREM Houston - Luncheon: Celebrating Diversity [11:30am - 1:00pm]
C.R.E.A.M. The Woodlands - Luncheon [11:30am - 1:00pm] REDNews March Issue Deadline [5:00pm]
BOMA Houston Foundation Casino Night Benefit [5:30pm - 10:00pm]
REDNews Newsletter [4:00pm]
FBSCR - Monthly Meeting [8:00am - 9:00am]
HRBC - Breakfast with CD-7 Candidates [7:00am - 8:30am] CCIM Houston/Gulf Coast - Commercial RE Forecast Competition [8:00am - 12:00pm] BACREN - Luncheon [10:30am - 1:00pm]
REDNews Newsletter [4:00pm]
IREM Houston - Budgeting, Cash Flow & Reporting for R.E. Investments (FIN402) [8:00am - 5:00pm] REDNews - Industrial & Logistics Summit @ Briar Club [8:00am - 12:00pm]
ACRP Gulf Coast - "Kick Off to Cook Off" Happy Hour [5:00pm - 7:00pm]
IREM Houston - Managing Maintenance Operations & Property Risks (MNT402) [8:00am - 5:00pm] CREN Gulf Coast - Luncheon: Featuring Lee Zieben [11:00am - 1:00pm] TABB Houston - Chapter Meeting [11:30am - 1:00pm] ULI Houston - Leadership Luncheon [11:30am - 1:30pm] IREM Houston - Executive Council Meeting *Invitation Only [3:30pm - 4:30pm]
CREN Gulf Coast - Property Information Exchange *Invitation Only [11:00am - 1:00pm] ULI Houston - Capital Markets Roundtable Hosted by Young Leaders [6:00pm - 8:00pm]
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.
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
NAIOP: naiophouston.org O'CONNOR & ASSOCIATES: poconnor.com SIOR: sior.com TABB HOUSTON: tabb.org/houston_chapter.php ULI HOUSTON: houston.uli.org
whatâ€™s going on
ULI Houston to
to at CREMM Holiday Par ty pho
le o f C o m un a unsel, SVO o r! C a l e ra y e n st e la rd in, G visory Boa r Brochste Meet Tyle He joined HRBC's Ad s. ie Propert
First IREM Hous
w's Nest urs the Swallo
ton committee meeting of the decade in the bo Let the advent oks. ure begin!
HBRC Breakfast at the Hou ston Junior League. FEBRUARY 2020
CENTRAL SOUTH TEXAS AUSTIN, TX
SHOPS AT WALZEM SELLS Shops at Walzem, the Gold’s Gymanchored retail center located at 7650 FM 78, sold to an undisclosed buyer. Gold’s Gym owned the property. JLL represented the seller & Mark Sher with KW Commercial represented the undisclosed buyer.
STONELAKE CAPITAL BUYS 25 INDUSTRIAL BUILDINGS Culture Map
Stonelake Capital Partners recently purchased six industrial buildings located at 9701 Dessau Road in Northeast Austin. The company has purchased a total of 25 industrial buildings in North Austin within the last eighteen months & reportedly plans to add more to their portfolio in 2020. Kenneth Aboussie & Cole Wilson with Stonelake handled the transactions. MOHR CAPITAL BUYS IN METCENTER Dallas-based Mohr Capital purchased five buildings in MetCenter Business Park totaling 404,800 sf for $100 million from Austin-based Zydeco Development. Boyd Messmann & Kyle Campbell represented the buyer & JLL represented the seller.
WORLD CLASS FILES CHAPTER 11 PETITION
KKR BUYS RIATA CORPORATE PARK
Nate Paul’s World Class Holdings filed for Chapter 11 bankruptcy protection for the 1.3 million sf 3M campus located at 6801 River Place Blvd. World Class purchased the 156-acre property from 3M in February 2018.
Partners Group AG & Accesso Partners LLC have sold the eight building office campus known as Corporate Park located close to US 183 & Parmer Lane to New York-based private equity firm KKR & Co. Inc. Total square footage of the project is 688,100 sf & CoStar indicated the sales price was $258 million.
DREES BUILDERS LEASES 10,733 SF Drees Builders Inc. leased 10,733 sf at 11305 Four Points Drive in Four Points Center. Garett Gibbons, Jr & Lucas Kay with Newmark Knight Frank represented the tenant.
PFLUGERVILLE, TX www.Loopnet.com
HISTORIC HOSPITAL TO BECOME HOTEL
ALASKAN INVESTOR BUYS INDUSTRIAL FACILITY A California-based private investor has sold the 60,000 sf industrial property located at 4905 Winnebago Lane to an undisclosed Alaskan investor. Stan Johnson Company represented the seller. AFFORDABLE SENIOR HOUSING UNDERWAY Amtex Multi-Housing LLC has broken ground on a 223 unit, affordable housing project at 7011 McKinney Parkway. The project will be reserved for seniors earning 60% or less of the area’s median income & is scheduled for completion fall 2021. ALPHA OFFICE BUILDING UNDERWAY Shorenstein Properties has broken ground on a 210,500 sf office building located at 1900 Aldrich Street within the Mueller Business District. The project will include 26,000 sf of groundfloor retail space & is scheduled for completion first quarter 2021.
Los Angeles-based Prospect Medical Holdings has sold the Nix Medical Center located at 414 Navarro Street to InnJoy San Antonio LLC which company is associated with a Rio Grande Valley hotel operator. The building is 24-stories with 310,000 sf.
MID-RISE OFFICE FOR 701 RIO GRANDE B&Z Development principals, Jason Berkowitz & Diana Zuniga, are developing a 120,983 sf office building at 701 Rio Grande which will include about 12,000 sf of retail & restaurant on the first floor. They will be demolishing the building that is currently on the site. UNIVERSITY TOWERS DEMOLISHED The University Towers, located at 801 W. 24th Street, has been demolished to make way for a 15-story, student housing project with 281 housing units and 975 beds. Floor plans will range between studios to six bedrooms & is being developed by Athens, GAbased Landmark Properties who also has another student housing project underway next door.
AMAZON PLANNING NEW FACILITY Amazon is reportedly planning to build a 2.8 million sf logistics/ distribution center on 94 acres of land at 2000 E. Pecan Street less than a mile from SH 130.
SAN ANTONIO, TX SABOT TO BUILD CLOSE TO PEARL Austin-based developer Sabot Development is planning to build a 10-story multi-family & retail tower located at Euclid Avenue & Locust Street which will include 325 residential units, 400 underground parking space & 14,000 sf of retail space.
Ryan Chambers has joined Transwestern as Director in the companyâ€™s consulting services group.
Ryan Thornton & Eliza Bachhuber with CBRE represented the seller.
STERLING BAY BUYS DEEP ELLUM SITE
Source: Texas Live!
TEXAS LIVE! EXPANDS Baltimore-based The Cordish Cos., along with its partners, Loews Corp, the City of Arlington & the Texas Rangers, have received TIRZ approval to proceed with plans for an $810 million second phase of its entertainment district which will include 200,000 sf of office space, an 888-room convention hotel with 150,000 sf of meeting space, 100,000 sf of additional restaurant & retail space, 280 apartments & an additional 2000 parking spaces.
Chicago-based developer, Sterling Bay, purchased a vacate 70,000 sf building on 2.5 acres located at 301 N. Crowdus from Charlotte-based Asana Partners. Speculation is that the company will renovate the building for office space. PILLAR COMMERCIAL SELLS OFFICE BUILDING Addison-based Lilium GVP LLC purchased the 120,000 sf office building, 6500 Greenville, located at Greenville Avenue & Northwest Highway from Pillar Commercial.
HIGH-RISE APARTMENTS PLANNED Charlotte, N.C.-based Crescent Communities plans to break ground on a 20-story, 206-unit, high-rise apartment building on Irving Avenue near Turtle Creek. Moveins are expected to begin by early 2022. KPMG PLAZA BUILDING SOLD
KRAFT HEINZ FOOD COMMPANY EXPANDING A $25 million expansion project for Kraft Heinz Food Company has been approved under the Texas Enterprise Zone Program. The company is increasing its 266,000 sf facility located at 2340 Forest Lane & plans to add 250 new full-time jobs to its current 843 workforce. OFFICE/INDUSTRIAL COMPLEX SOLD
Los Angeles-based Cohen Asset Management purchased a four-building, 353,300 sf industrial portfolio located in Valwood Industrial Park from Temecula, CA-based land & real estate investment management company, The Garrett Group, in an off-market transaction.
CARROLLTON/ COPPELL/DALLAS, TX NEARLY $1 BILLION INDUSTRIAL PORTFOLIO SOLD
Shreveport, LA-based Sealy & Company sold a 106-building portfolio to New York City-based DRA Advisors. The properties are located across the US including 977,000 sf located in Carrollton, Coppell & Dallas. The price for the entire portfolio was $908.5 million. After selling this portfolio, Sealy purchased a 19-building, 1.6 million sf portfolio in Arlington & Dallas from Miami-based Rialto Capital Management & New York City-based Wafra, Inc. Jonathan Bryan, Randy Baird,
Source: Kaizen Development
FIELD STREET DISTRICT PLANS REVEALED Kaizen Development Partners, Woods Capital & Dundon Capital Partners, the three developers behind the $1 billion Field Street District project, have released renderings which include 1.2 million sf of office space in two buildings, a hotel & two residential towers which will include retail space. The project will be built on six acres of parking lots southwest of Field Street between McKinney Avenue & Corbin Street. Once an anchor tenant has been secured, the developers will break ground on the project.
Cawley Partners purchased the threestory, 169,179 sf office building located at 5501 Headquarters from an undisclosed seller. The buyers plan to renovate the building for multi-tenant usage.
Masaveu Real Estate US purchased the 450,000 sf, 18-story, KPMG Plaza on Ross Avenue from Korean investment fund, Civitas Capital Management LLC.
CAWLEY PARTNERS BUYS OFFICE BUILDING
An affiliate of LBA Realty sold the 200,000 + sf office/industrial complex located at 5931 Campus Circle Drive West to a company represented by KKR & Company.
FORMER BLOCKBUSTER WAREHOUSE SELLS The 697,149 sf former Blockbuster warehouse has been purchased by private REIT, Fenway Capital Advisors. The building is located on Rosebud Blvd near Highway 75.
PARAGON HEALTH LEASES 67,000 SF Paragon Health leased 67,000 sf in the Apex Building located at 3033 W. Bush Turnpike from Champion Partners. Paragon will relocate 275 employees from its current Dallas location to the new building by 2021. Transwestern represented the landlord.
CAMPUS AT LEGACY WEST FORECLOSURE Beal Bank has filed to foreclose on the Campus at Legacy West which is owned by Silos Harvesting Partners & Dreien Opportunity Partners.
RICHARDSON, TX BH PROPERTIES BUYS OFFICE BUILDING Los Angeles-based REIT, BH Properties, purchased the 60,000 sf, 4-story office building located at 2021 Lakeside Blvd. from Citadel Partners. JLL represented the seller.
ABNEY INDUSTRIAL WAREHOUSE SELLS A private investor, represented by Marcus & Millichap, sold the 39,621 sf warehouses & office located at 316 West Simonds Road. The building is situated on four acres.
Grant Walker has joined Lee & Associates as a Senior Director to oversee the companyâ€™s new retail division.
ALIEF, TX ALIEF NEIGHBORHOOD COMMUNITY CENTER PLANNED A mixed-use community center is scheduled for construction early next year which will consolidate a health center, library & community center into one facility at 11903 Bellaire Blvd. The facility is being built adjacent to the 37.3 acre Alief Community Park located at the corner of Bellaire Blvd & Kirkwood.
AVERA BUILDING 644,000 SF Avera is constructing a 644,000 sf industrial project called Cedar Port Logistics located on the Grand Parkway near I10. Completion is scheduled for second quarter 2020.
AMERICAN FURNITURE BUILDING MEGASTORE American Furniture Warehouse purchased 30 acres at I45 & River Plantation Drive for the construction of a 443,000 sf megastore, a 150,000 sf showroom & 293,000 sf of merchandise storage space. AFW also has locations in Webster & Katy. Ben Brown with Baker Katz represented AFW & Mark Terostra with Caldwell Company represented the seller, Gross Land Fund I. FIVE BELOW INC BUILDING DISTRIBUTION CENTER Philadelphia-based Five Below Inc is planning to build an 860,000 sf distribution center on 70 acres which is reportedly located on FM 3083 about 2 miles east of I45.
HARMS ROAD BUSINESS PARK SELLS A partnership of Finial Group & Senterra LLC has purchased the 124,000 sf industrial park located on 9.4 acres at 72004-7214 Harms Road from United Equities. JLL & NAI Partners marketed the property for the seller.
KIEWIT ENGINEERING LEASES 171,286 SF
214 ACRES SOLD FOR INDUSTRIAL PARK
COMMON DESK LEASES 30,000 SF
Kiewit Engineering Group Inc leased 171,266 sf at Energy Center I located at 585 N. Dairy Ashford. Louie Crapitto with JLL & David Kimball with Savills represented the tenant & Eric Anderson, Tyler Garrett & Katy Gragg with Transwestern represented the landlord.
The Texas General Land Office sold 214 acres located at Beltway 8 South & MLK to Investment & Development Ventures for the development of an industrial park. Dave Ramsey & Brad Elmore with NewQuest Properties represented the seller & the buyer was represented by Tyndall Yapp with IDV.
Common Desk leased 30,000 sf at 3040 Post Oak Blvd. Ryan Barbles & Mathew Volz with Stream Realty Partners represented the landlord, MetLife Investment Management.
KING & SPALDING PLANS $11 MILLION UPDATE King & Spalding plans to renovate 70,500 sf in suites 4000, 4100 & 4200 at 1100 Louisiana where they renewed their lease in May 2019. Chip Colvill & Paula Bruns with Colvill Office Properties represented the landlord. BLUE RIDGE INDUSTRIAL PURCHASES FIVE BUILDINGS Dallas-based Blue Ridge Industrial purchased a five-building Class A industrial park that includes 15110 & 15120 Northwest Freeway, 10041 & 10055 Regal Row & 6961 Brookhollow West Drive. The project is located near US 290 & Beltway 8. The building contains a total of 185,850 sf. FOUNDERS DISTRICT TAX ABATEMENT APPROVED Houston City Council has approved a $6 million tax abatement for the Founders District, a mixed-use project located at 1260-1336 Brittmoore Road for growing startups & small businesses. The project will include 180,000 sf of office space, 250+ multi-family units & 180,000 sf of restaurant, retail, commercial & community events center space. 229 AFFORDABLE HOUSING UNITS APPROVED Houston City Council has approved $232 million in federally back loans for two affordable housing projects including a 115-unit Gulfton project at 5612 S. Rice Avenue for the Brownstone Group & a 114-unit Heights project located at 900 Winston Avenue for Crossroads Housing Development.
JUSDA SUPPLY CHAIN LEASES 62,261 SF JUSDA Supply Chain Management Corporation leased 62,261 SF at 8801 Fallbrook Drive from Liberty Property LP. Newmark Knight Frank represented the tenant. INDUSTRIAL OUTDOOR VENTURES BUYS 104 ACRES Industrial Outdoor Ventures purchased a 104-acare improved yard site at 11022 Mesa Drive for $10.5 million from Traylor Brothers Inc. HIGHRISE DEVELOPMENT AT 1661 HERMANN DRIVE Nitya Capital & Tema Development LLC are developing a 295-unit high rise project at 1661 Hermann Drive. The 32-story building will break ground first quarter 2020 & is scheduled for completion winter 2022.
MISSOURI CITY, TX
DN COMMERCIAL SELLS 5.5 ACRES DN Commercial represented an undisclosed seller & buyer in the sale of 5.5 acres at Cartwright & Brightwater.
SENIOR LIVING PROJECT UNDERWAY Frontier Management has broken ground on The Landing at Augusta Woods, a 120-unit senior-living community located at 7727 August Pines Drive. The project will include 75 active adult units & 45 assisted-living units & is scheduled to open early 2021.
TEXAS CITY, TX
$1 BILLION GULF COAST AMMONIA PLANT The $1 billion Gulf Coast Ammonia plant is underway which will produce 1.3 million tons of ammonia per year. Completion is set for 2023.
TARANTINO MANAGING & LEASING 2100 WEST LOOP SOUTH Tarantino has been assigned leasing & management of 2100 West Loop South. Peggy Rougeou, Director of Leasing, will oversee leasing & Patrick Frese, EVP Commercial with Tarantino will spearhead property management.
advertiser index AA Realty Company............................................. 15 ABCO Enterprises................................................1, 9 AT&T..........................................................................7 Bearden Investments...........................................11 Berkadia.............................................................. 2, 3
CCIM Houston...................................................... 20 CRESA...................................................................... 17 Fuller Realty Partners.......................................... 21
Kay Properties & Investments.......................... 13 King Operating Corporation..............................19
La Marque EDC........................................................5
February 27, 2020 Topics Include: • Retail / Restaurant / Hospitality - State of the Market • Industrial Real Estate Update – State of the Market • Office Market Update – State of the Market • Apartment Market Overview – State of the Market
More Information and Registration
Lane Property Tax Advocates............................ 17 National Environmental Services, LLC.............35
Brookhaven County Club
3333 Golfing Green Dr, Farmers Branch, TX 75234 8:00 AM-12:00 PM 4 Hours of Real Estate Continuing Education Credits Has Been Applied for with the Texas Real Estate Commission TREC Provider # 10163 • TREC Instructor # 4153
Phase Engineering................................................22 Showalter Law Firm..............................................11 The Real Estate Council Greater Ft. Worth..................................................11
For Speaking and Sponsorship Opportunities Call: Frank E. Biondo Ginger Wheless
The Real Estate Council - San Antonio........... 20
Thomas Title & Escrow........................................ 17
Worth Associates.................................................. 15
ray’s buzz BY RAY HANKAMER firstname.lastname@example.org
CCIM NOVEMBER LUNCHEON SPEAKER: Ralph Bivins, Editor Realty News Report Note: Bivins is a long-time Houston real estate writer, originally with The Houston Chronicle, and now publisher/owner of the Realty News Report. Bivins has won numerous awards in journalism.
“Ambition and audacity are in Houston’s DNA as a city”. Houston is a city by real estate developers and for real estate developers and promoters. Beginning with the Allen Brothers, who bought and promoted a swampy site at the confluence of Buffalo and White Oak Bayous, Houston has continued to attract businessmen and businesses with big ideas, and people who made the city what it is today. “The Astrodome is the soul of Houston”. This closed stadium, more than any other building now standing, represents the kind of ‘big idea’ which made Houston famous, and which symbolizes what we stand for. Realizing that Houston was ready for major league baseball, former mayor Roy Hofheinz realized that crowds would not sit and watch baseball in the heat and mosquitos, so he dreamed big: an indoor airconditioned stadium with a roof span big enough to allow baseball under it. It had never been done before. Just the thought of such a thing was audacious, but he and a group of insightful developers and promoters made it happen. They had a vision. They did not give up in spite of political opposition by people thinking small. Then, when it was built, the grass died because not enough sunlight was getting to it. The development team took this as a challenge and thought out of the box. The result was…Astro-turf. Do we still have the talent, the ambitious and audacious thinkers and doers who made the Astrodome happen? Who is going to take the lead to re-purpose the Astrodome into something people will once again want to come to? TxDot’s plan to tear down the Pierce Elevated and move I-45 to the north and east of the Central Business District is audacious, as is sinking below grade the new combined I-45 and I-69 on the east side of downtown
and covering them over with a 5 acre park. TxDot is well underway in planning this change, which will remove the barrier between the CBD and Midtown. The city’s heart will be able to expand. Valuable new sites will be developed overlooking the new freeway park on the east side, and on the some sixteen blocks which are currently covered by the Pierce Elevated. Current high CBD land values will spread eastward and southward as these barriers are removed. High-rise living has come to Houston, and downtown is now a destination day and night, with residential, office, restaurants, and returning retail. Dallas, with a similar park over the Woodall-Rogers freeway has created highly valuable residential real estate. Discovery Green in our CBD is a good example of how park land in a CBD can inspire and facilitate successful high-rise residential, hotel, and other development. We have 51 million SF of vacant office space that needs to be filled, and the space is growing, not shrinking, while DFW attracts hoards of new companies and corporate headquarters. Who in Houston is making ambitious and audacious efforts to compete for these companies, jobs, and office occupancy? We need big relocations to Houston now. DFW is “kicking our butt”. We should be making some noise here in the commercial real estate community to find out why Dallas and Ft. Worth are winning out over us. Let’s revert to the DNA that founded Houston to get back in the race to attract companies to Houston. When will our community leaders realize we are falling behind, and what strategies can we develop to continue what was started so many years ago by the original dreamers who created Houston, the Allen Brothers?
NATIONAL ENVIRONMENTAL SERVICES Houston, Texas • Redlands, California
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• Phase I Environmental Site Assessments (AAIs-ASTM E 1527-13)
• RSRAs (Records Search with Risk Assessments)
• Indoor Air Quality/Mold Surveys (Licensed Mold Consulting Agency)
• Transaction Screens (ASTM E 1528-06)
• Phase II Subsurface Investigations*
• Asbestos & Lead-Based Paint Inspections (Licensed Texas Asbestos Consulting Agency)
• Remediation and Corrective Activities*
• Underground Ground Storage Tank Testing Services*
• Soil, Water, and Air Testing Services
* Performed in Texas in partnership with Terrain Solutions, Inc.,Texas Geoscience Firm Registration # 50018
National Environmental Services 5773 Woodway Dr, Suite 96, Houston, TX 77057: Phone (281) 888-5266 700 East Redlands Blvd, Suite U618, Redlands, CA 92373: Phone (951) 545-0250 Toll Free: (833) 4-Phase1 www.nationalenv.com • www.gabrielenv.com
POSTMASTER: PLEASE EXPEDITE TIME SENSITIVE MATERIAL 5909 West Loop South, Suite 2537 S. Gessner, Suite 135, Bellaire, TX 77401 Houston, TX 77063
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Publication contains commercial real estate-related articles, properties, service advertisements, event calendars and converage of events.
Published on Jan 20, 2020
Publication contains commercial real estate-related articles, properties, service advertisements, event calendars and converage of events.