Houston City

Marlene Gafrick, the "lady in charge" was quick to bring up one of the more pertinent issues in Houston's real estate world: "no zoning" Yup, believe it or not, Houston does not have zoning! They have form-based code requirements, but no zoning. The up-side to this is that developers are able to change uses really quickly. Developers like to experiment here because there is an un-restricted reserve to build whatever you want!!
Brian Crimmons, the senior city planner who deals with parking, landscaping, and policy; Ryan Allbright, planner involved in hotel & motel; and Richard, discuss how the city gets involved in development. Houston is a developer driven city. Cheap fees makes it attractive to redevelop or develop within or without the city. They went on to discuss what Houston does about sprawl in their city. Development impact fees are higher for sprawling areas. Electrical and cable companies charge more the further out you go. Wastewater is paid for by the developer. Also developers have to pay for roads if there aren't roads already. They have to pay as they go. The city's goal is to create incentives for infill developments i.e. transit corridor incentives. They focus on "node" type development. Nevertheless, there are always people who are going to want to live outside the city. People who live in the city generally rent as opposed to owning their houses. The three discussed Ch. 42, and how it was a constantly changing set of rules, as developers tend to make the laws fit them!
Houston doesn't get into nitty-gritty such as height restrictions, or different types of residential, and Mutlti-family has no density limits.




The city does enforce deed restrictions however. The rail line is bringing new growth to the east side of town. There has been 5 M allocated to the West End to remediate brownfields. There are also incentives to build near light rail. Environmental issues: they prefer to lead with a carrot than beat with a stick. Houston's flexibility allows for development creativity.

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S.A. Day 4 Alamo Architects and Riverwalk Authority

The Alamo Architects building on 1512 is a great example of an adaptive reuse project. Reusing everything from the old concrete parking lot to old iron for decoration, and old wood for stairs, the building won the "silver" Leed certification. The area used to be the first light industrial area in San Antonio and the building itself was a trailer manufacturing plant. 95% of the materials from the old plant stayed there. Of course, they had to put in new electrical and cable trays, as well as HVAC, but all in all their Op Ex was 20% less than if they hadn't gotten LEED certified. They collect all condensate for reuse. They used natural lighting, and enjoy a beautiful outdoor area, all designed to foster a collaborative environment. Usually for Leed, they said, one could expect to pay between 1-7% higher on upfront costs.



The San Antonio River Walk Authority kindly led us on a 2.6 mile walking tour of the newest section of the Riverwalk. The community wanted to extend the riverwalk for decades, and finally the city was able to come up with enough incentives to make it happen. The most interesting feature of the river was their new "lock and dam" feature which allowed barges passageway into a higher section of the river. Gravity does all the work of lowering passengers gently to a lower level, while inward facing doors keep the water level even in a watertight compartment. The lock and dam feature also serves to prevent flooding. Another notable feature was the historical 1925 museum which had been remodeled and renamed the "Reach Museum." Riverwalk Architects used the building's interesting features as inspiration for insets in the sidewalk. TIRZ's (Tax Increment Refinancing) is one of the ways the cities garners interest from developers. Developers don't have to pay for the raising values of property taxes on the river for the next 15 years - all that money that would have been going towards taxes, is now being paid by the city for updates on city property alongside the river - hence alongside any new Riverwalk development.

San Antonio Day 4

Friedrich Air conditioning Warehouse
An old air conditioning warehouse is being converted into modern office space. Friedrich Refrigeration Company was a manufacturer of commercial refrigeration and room air conditioning equipment. The intricate facility evolved over a 32-year period to accommodate manufacturing functions to keep pace with changes in refrigeration technology. The building is 533,000 sq. ft, with only 20,000 being used at the time. The rest of the building is in a dilapidated state of disrepair. Parts of the building were sagging from water damage, nails on the wood floor were sticking up, and it stank of old mold. However, with great views of downtown, and a solid concrete frame, as well as wood and steel truss work, there is much potential. A great candidate for an adaptive- reuse development, the Friedrich building offers the potential for an incredible mixed-use urban community that could contain offices, loft residences, retail / restaurant and special event spaces. Looking at the converted office is like night and day. It has been completely retro-fitted, and looks first-rate. The wood floors have been refinished, and re-polished. Old machinery has been painted red, and modern furniture finishes it off.

The realtor thinks that when the building is finished, it could command up to $1.30 per sq. ft. for residential. However, it needs new mechanical systems selective demolition as well as asbestos abatement, removal of old transformers, removal of lead based paint, and façade upgrades. It is for sale for $8 Million. Fortunately, it is in San Antonio’s “Empowerment Zone” and tax credits are given for employees hired in an E.Z. Also, the building is in a TIF district. The motto the leasing agent left us with was “No good deed goes unpunished.” My guess is that the city sometimes makes it difficult even for worthwhile development projects.

San Antonio Day 3 City Officials

My impression of the City of San Antonio, and the common response I heard was "We're looking into that," "we're working on that." It seemed in many instances their hands were tied by developers who didn't have the vision of downtown revitalization, but were in the old school mind-set of "urban sprawl." David, one of the city officials, was tasked with working with the Fed. to destribute 3 M. One of his projects was a new Federal courthouse that would be placed in San Antonio and a public Safety building called the "Tower of the Americas." He also focused on the use of New Market Tax Credits, HUD funding, and C of O's (Certificates of Occupancies). Jesus, the next speaker specialized in planning for military bases, and in zonning for extraterritorial areas. He's in charge of the Geographic Information Systems for San Antonio, and he said that a lot of development in S.A. is beyond the current city limits, especially to the West. The city tried to implement codes that would direct growth to the urban areas, but after push back from the community, the codes became optional... and unfortunately, have not had great effect. The biggest barrier to urban growth, Jesus says, is the tourist driven economy, meaning hotels do best. A few successful projects such as the "King William" historical neighborhood, and the Vestana, have encouraged city officials. They believe historical areas will continue to do well and values will be maintained. Areas by the Riverwalk are also good investments. Generally, an investor is looking at $200 per foot for privately owned land off the Riverwalk.

Besides tourism, military, and biomedical are large industries in S.A. The city is concerned that urban sprawl is an issue as it is causing congestion issues.
Richard, head of Community Development Management, shared that the UTSC campus had a very positive impact on city growth, but the downtown campus was still in a small stage. Betty, former architect lamented the “Broadway” project in the “armpit” of S.A., which she said was badly managed, had no feasibility studies, and no market understanding – in contrast to the Vestana. The project basically went into bankruptcy, and Ed Cross bought the building in an auction. She described the historic method the city still used for chilled water. It’s chilled in one location and then sent out to the whole city. This can be bad because often buildings will have to have their own chillers to maintain building coolness. “Mission Verde” passed by a previous Mayor stated that all city buildings would follow sustainability guidelines. She felt that the only way there would be long-term viability of green resolutions would be to write it into code. Green building started in 1991 in Austin, and spread to San Antonio from there. Some of the efforts San Antonio has made to become more “green” include: solar panels, advanced lighting in buildings, planting of trees, public bikes, 91 hybrid sedans for city police, and 31 natural gas powered garbage trucks. Many of these advances were due to Federal Stimulus money in the form of an “efficiency and block grant” of 12.9 M, and another stimulus of 8 M.
The city inspector shared that code enforcement is complaint driven. Contractors have to have both a city and a state license. We discussed how difficult or easy it would be for adaptive re-use of buildings in terms of code. They understood what needed to be done for commercial buildings or residential buildings, but didn't seem to have flex codes for the adaptive re-use of a building from one use to another.

San Antonio Day 3 "Vistana"

This award winning building project is beloved by both the city and it's citizens. It is one of the best examples of classy downtown living in San Antonio. Developer Ed Cross gives us the tour as he details his experience both with this building and as a developer. Speaking of experience Cross says the "ability to use numbers is critical and how you apply them is important." He says San Antonio is generally "10 years behind everywhere else" in terms of development. His background is in office development, and he values the "war stories" he has gained. He describes his early investment style as "promiscuous" and bought up everything he could put his hands on! He discovered that offices and warehouses had much lower "cap- ex" than other investments, and "lower is better!" He found that parking garages had the lowest cap-ex and therefore started out Vistana as a parking garage project. He describes the complexity of vertical development because of the difficulty of column and elevator placement. There are four jobs of the developer, Cross says, "conception, negotiation of land, architecture, and finance." For the Vistana, Cross got "Fixed-Rate 6%, permanent, 35% down, 30 yr., 10 yr.term amortization" on his loan. His pro-forma gave him a 7.5% return, which was pretty low at the time. At the end of the prject, his numbers turned out very favorably with a 12% IRR. His total "all in" hard and soft costs came to 60 M. He feels good knowing that with the park view and historical buildings nearby, his values will continue to improve. He envisioned a true loft-style building, and found creative ways to find "focus groups" to discover what people were really looking for in a "modern loft" feel. I thought he did a good job. Personally, what I generally don't like about lofts is that they expose too much, leaving a very industrial feel. Cross left some, but painted over the ceiling, making the loft feel like home. Good balance, I thought.

Austin Day 2 - Texas Department of Agriculture

Judy Fort - the Economic Development Representative for Central Texas - described the importance of the rural community and what the state was doing to help and incentivise economic growth. She said that rural communities composed 20% of Texas' population. The main problem she ran into was cities wanting money, but having no organized cohesive plan. They also wanted big companies such as Dell to move there, but Judy pointed out that their sights were set too high. They need to focus on small manufacturing opportunities in areas such as aerospace, biotech, information science, and fuel. The state will pay for infrastructure if a town has a good plan. Many small towns also build up large scale developments hoping to attract large developers or companies - but much to their chagrin, large scale efforts generally move to large cities instead of rural towns.
A saddening example was of one small town whose livelihood came from raising turkeys. Big companies called them saying their was an oversupply and they didn't need any more turkeys. People could not afford to stop working because of their mortgage payments, so they had to drive out of town to find odd jobs to sustain themselves. The state will help them with things like writing resumes, finding jobs etc but it often takes time for the change of employment to materialize.

Sherri Barron, the Program coordinator for "Certified Retirement Communities" emphasized the value of baby boomers moving to an area. The retirees increase jobs by 2 for every household in the area - this is one of the best ways to increase employment. Texas has come out of the Great Recession smelling like a rose in many people's view. It has 5 of the 10 top cities to hold out through the economic woes, and has some of the best real estate opportunities in the country. Texas is a great place for retirees who are tired of the weather problems of Florida, and the costs of California. The number one reason they come to Texas is that "the people are friendly."

Austin Day 2 - Mueller Development

The Mueller Development is located on the same brownfield development as the Ronald Mc Donald House. It is 700 acres and is an intentionally mixed use development including retail stores such as Home Depot, places to work, a large hospital, and housing of every kind. Their goals included sustainability, diversity, and flexible zoning. Environmentally, their goal was to protect endangered "blackland forest" land. They intentionally left green spaces scattered throughout the development and a running trail around the edge of it to protect native land. They developed a " water detention pond" which prevents storm water run-off from getting into clean rivers. They used decomposed granite trails to allow rain to penetrate instead of running off as in a concrete trail.
In an interesting partnership with the city, the developer sold the land to the city, and would buy the land back whenever they had an arrangement with a builder. This way, the developer didn't have to pay taxes during the interim, but the city owned the land until a builder was found. Also, the city would get a current price for the land based on a up-to-date appraisal. The housing selection included condos, apartments, and homes - 25% of which were affordable (125 - 160K). The homes are built with a 3 star green rating using the city of Austin's green ratings.