Texaco Building (now The Star) At 1111 Rusk Street

[swtsig]

yeah, i read that article this morning... great news. hopefully it transpires. downtown could use all the residential it can get.

[ricco67]

yeah, i read that article this morning... great news. hopefully it transpires. downtown could use all the residential it can get.

Agreed, I know I posted 1111 Rusk pics in the past, but mostly under different topics, so I took these new ones yesterday:

[Golyadkin]

If you look at the pictures from the bizjournal article, it appears they are also planning on constructing a new building in the vacant lot next to the old structures:

http://www.bizjournals.com/houston/print-edition/2011/05/13/efo-residential-to-transform-1111-rusk.html

[ricco67]

If you look at the pictures from the bizjournal article, it appears they are also planning on constructing a new building in the vacant lot next to the old structures:

http://www.bizjourna...-1111-rusk.html

While the pics look sweet, pity you couldn't give more of a rundown on it then the quick blurb before the HBJ asked for a subscription.

[KinkaidAlum]

Phase I-

240 apartments in the original buildings

commercial and retail space on floors one and two

heavy focus on 1 bedroom apartments

roofdeck, special events venue, and corporate housing will be offered

modeled after a successful project called Metro67 in Memphis but will be more upscale

rental rates expected to come in just under One Park Place

Phase II-

120 additional units in a new tower (no indication of size but rendering appears to be around 15 floors)

new parking garage

Project groundbreaking on phase I within a year.

[Jax]

Sounds awesome!

[KinkaidAlum]

Here's the place in Memphis. Looks nice. Hopefully this will go forward and the third time will be the charm (after the Ritz and Renaissance failed to materialize).

http://www.metro67.com

Edited May 16, 2011 by KinkaidAlum

[Golyadkin]

While the pics look sweet, pity you couldn't give more of a rundown on it then the quick blurb before the HBJ asked for a subscription.

I don't have a subscription there either, so all I could tell you is what is in that blurb.

[DrLan34]

2 new apartments in the plans for downtown houston in addition to old Texaco Building? I first saw the tip on skyscraper page then found this article.

http://mckenziedrakerelocation.com/2011/05/new-life-for-downtown-houston/

"Indeed, Laura Van Ness, business development director at Central Houston Inc., said the downtown organization is hearing rumblings from two other developers considering the downtown market for apartment projects.

“Now that One Park Place is open and successful and the credit markets have started to loosen a little bit, I think we’ll see more developers starting to ride that wave,” Van Ness said. “We are seeing other serious developers coming back and looking at the market.”

Van Ness, who would not elaborate on the pair of potential new projects, said that before the credit crisis hit a few years ago, there were two other apartment projects under consideration downtown. Both of those deals later disappeared off the drawing board, essentially bringing activity to a grinding halt."

But with One Park Place reaching 90 percent-plus occupancy, Bruce McClenny, president of Houston-based Apartment Data Services Inc., which tracks apartment activity, said a new wave of downtown apartments would likely be met with strong demand."

[photolitherland]

Wow, thats great that OPP has 90% occupancy, great news for enticing new development downtown. But, OPP also is on Disco Green so other apartments downtown or condos may not do so well...

[TheNiche]

Wow, thats great that OPP has 90% occupancy, great news for enticing new development downtown. But, OPP also is on Disco Green so other apartments downtown or condos may not do so well...

Post Rice Lofts and the Humble Tower are also doing well, and are much better indicators than One Park Place. The renovation of Houston House may destabilize the downtown market a bit, but if this project were to hit the market in another 18 or 24 months, they'd be able to bleed Houston House while it tries to renew leases without concessions.

[Houston19514]

They are doing some work on this building. Hopefully, it is the beginnings of the renovation and conversion into apartments.

[The New Juniper]

I hear it's investigative work to see what the old building can hold....

[TheNiche]

http://blog.chron.com/primeproperty/2012/02/proposal-to-revamp-texaco-building-includes-public-funds/#3104-3

This should prove controversial. An out-of-town developer wants a $52,000 / unit subsidy from the City to redevelop a building as federally-subsidized tax credit apartments.

[LarryDierker]

would the city not eventually make their money back through property tax and such?

[Texasota]

This seems unquestionable positive. The only way downtown can contine to improve is if people actually move there. This initial subsidy should pay for itself as long as the city continues to encourage development. On top of that, this is currently a derelict building that, once renovated, will become a gorgeous historic landmark downtown.

[TheNiche]

would the city not eventually make their money back through property tax and such?

What is proposed is an $82 million project of which the current taxable value is $16 million, so that any yield on investment would be the difference of the two, $66 million. However, if the project is not viable without $14 million of subsidy, then its contribution toward fair market value would be only $52 million. (Remember, the only value that is taxable is a building's fee simple fair market value, meaning that value of the building alone without any financial agreements such as leases, debt financing...or direct government subsidy, especially when that subsidy is a non-recurring event.)

The City's (and thereby the TIRZ's) current property tax rate is 0.63875%, so annual tax revenue would be $332,150. It would take 43 years to recoup the dollar amount of its investment. However, that does not account for the time value of money. If the City (or more accurately, the TIRZ) were willing to give up a dollar today for a riskless dollar and three cents a year from now (which given its cash-strapped budget and the undeniable fact that HCAD's appraised values are inherently risky and chronically below actual market value, seems unlikely) then a perpetuity of $332,150 would be worth approximately $11 million. But then...perpetuities can be sold for liquid cash. Direct one-time subsidies to developers in Dallas are forever!

The savvy HAIFer might rebut that the sales tax would make up a portion of the difference, however the TIRZ would be funding the subsidy and the TIRZ does not collect a sales tax. A differently-minded savvy HAIFer might also point out that 1) "workforce housing" is unlikely to spur any economic windfalls in the downtown area, and that 2) to a large extent, this expensive housing for poor people in the downtown area would only undercut the market for inexpensive housing for poor people in the rest of Houston, hurting the remainder of the City's tax base, not that the TIRZ would care, and nor should support this project in the first place for reasons previously stated.

[Houston19514]

What is proposed is an $82 million project of which the current taxable value is $16 million, so that any yield on investment would be the difference of the two, $66 million. However, if the project is not viable without $14 million of subsidy, then its contribution toward fair market value would be only $52 million. (Remember, the only value that is taxable is a building's fee simple fair market value, meaning that value of the building alone without any financial agreements such as leases, debt financing...or direct government subsidy, especially when that subsidy is a non-recurring event.)

The City's (and thereby the TIRZ's) current property tax rate is 0.63875%, so annual tax revenue would be $332,150. It would take 43 years to recoup the dollar amount of its investment. However, that does not account for the time value of money. If the City (or more accurately, the TIRZ) were willing to give up a dollar today for a riskless dollar and three cents a year from now (which given its cash-strapped budget and the undeniable fact that HCAD's appraised values are inherently risky and chronically below actual market value, seems unlikely) then a perpetuity of $332,150 would be worth approximately $11 million. But then...perpetuities can be sold for liquid cash. Direct one-time subsidies to developers in Dallas are forever!

The savvy HAIFer might rebut that the sales tax would make up a portion of the difference, however the TIRZ would be funding the subsidy and the TIRZ does not collect a sales tax. A differently-minded savvy HAIFer might also point out that 1) "workforce housing" is unlikely to spur any economic windfalls in the downtown area, and that 2) to a large extent, this expensive housing for poor people in the downtown area would only undercut the market for inexpensive housing for poor people in the rest of Houston, hurting the remainder of the City's tax base, not that the TIRZ would care, and nor should support this project in the first place for reasons previously stated.

Where do you get "housing for poor people"? These are slated to be approximately 1,000 square foot apartments renting for $2,200/month.

Edited February 15, 2012 by Houston19514

[jgriff]

Where do you get "housing for poor people"? These are slated to be approximately 1,000 square foot apartments renting for $2,200/month.

Poor is a relative term. Without the subsidy from the city the rent would have to be higher. If the city subsidizes the development of this project then they are helping to pay the rent for people who are too "poor" to afford a 1000sf apartment downtown. If people that can pay $2200 a month for an apartment downtown aren't poor then this is could be considered welfare for the "rich". It's too bad we can't all get help from the city with our rent or mortgage payments.

[TheNiche]

Where do you get "housing for poor people"? These are slated to be approximately 1,000 square foot apartments renting for $2,200/month.

Nancy stated that a tax credit developer was backing the project. I'm not trying to imply that qualifying applicants would be "poor", but they sure aren't rich.

As for $2,200/month on 1,000-square-foot units ($2.20 PSF), I'd be interested in knowing where you get that! That's very aggressive. Post Rice Lofts averages $1.51 and Humble Tower averages $1.72. The only redeveloped historic building that gets rents like you've described is 1414 Congress, which gets $2.22 PSF...but they're all 207-square-foot SRO housing units operated by a non-profit. True enough, Finger does better at One Park Place, but this is no One Park Place. Finger's market for tenants is altogether different.

[Houston19514]

Nancy stated that a tax credit developer was backing the project. I'm not trying to imply that qualifying applicants would be "poor", but they sure aren't rich.

As for $2,200/month on 1,000-square-foot units ($2.20 PSF), I'd be interested in knowing where you get that! That's very aggressive. Post Rice Lofts averages $1.51 and Humble Tower averages $1.72. The only redeveloped historic building that gets rents like you've described is 1414 Congress, which gets $2.22 PSF...but they're all 207-square-foot SRO housing units operated by a non-profit. True enough, Finger does better at One Park Place, but this is no One Park Place. Finger's market for tenants is altogether different.

I got the rental and square footage numbers from the Chron.

You have apparently jumped to the conclusion that the tax credit financing is for low-income housing. Not likely. It is almost certainly an historic rehabilitation tax credit.

Why have you assumed that this is "no One Park Place"?

Edited February 15, 2012 by Houston19514

[JJxvi]

My guess is he thinks this is no OPP because OPP is new construction and this is rehab of space and structure not originally designed for this purpose. Thats why he compared it to Rice, Humble, etc.

Edited February 15, 2012 by JJxvi

[Andrew Broadfoot]

My girlfriend and I looked at 1 bedroom floor plans at One Park Place and the prices started at $2500.00 month and up.

[TheNiche]

I got the rental and square footage numbers from the Chron.

You have apparently jumped to the conclusion that the tax credit financing is for low-income housing. Not likely. It is almost certainly an historic rehabilitation tax credit.

Why have you assumed that this is "no One Park Place"?

Thank you for posting the link to the full article. You may be right about the historical tax credit component, however some people may still see it as controversial that the City would provide subsidy to enable State-administered federal subsidy.

JJxvi nailed it as to why I don't think that this project can rely upon One Park Place as a rent comp. But in addition, I'd point out that One Park Place has better view corridors, a nice large new park that seems to flow from it, and that it is within an easier walking distance to the Houston Pavilions and the Park Shops. Its probably the best single-block site in all of Houston. I'd argue that Humble Tower and Post Rice Lofts have better locations too, one fronting Main Street and across from the Pavilions, the other nearer to Market Square Park.

So yeah, I think that the pro forma rents are too aggressive.

[Houston19514]

Thank you for posting the link to the full article. You may be right about the historical tax credit component, however some people may still see it as controversial that the City would provide subsidy to enable State-administered federal subsidy.

JJxvi nailed it as to why I don't think that this project can rely upon One Park Place as a rent comp. But in addition, I'd point out that One Park Place has better view corridors, a nice large new park that seems to flow from it, and that it is within an easier walking distance to the Houston Pavilions and the Park Shops. Its probably the best single-block site in all of Houston. I'd argue that Humble Tower and Post Rice Lofts have better locations too, one fronting Main Street and across from the Pavilions, the other nearer to Market Square Park.

So yeah, I think that the pro forma rents are too aggressive.

I never suggested it would not be controversial. No doubt it will be. (The Dallas developer may be surprised at that, since up in Dallas they just upon the city vaults for anyone who whispers the words "downtown residential".)

You may be right on the pricing. I have to agree the location is not quite as nice as One Park Place, but not so sure it's much lesser of a location than Humble or Rice (perhaps a little quieter location than either of those). Depends on what one is looking for. Finished out correctly, it could be a VERY attractive property, IMO.

It may depend on the amenities (which they are saying will be high-end) and finish levels. Probably a significantly different product than the loft-like Rice apartments and probably higher-end finsishes than Humber Tower.

[TheNiche]

A more up-to-date fit and finish and an amenity deck on top of the parking garage probably would make this a best-in-class property. Certainly, developers are willing to get creative to one-up the last property that got built. That said, I'm still having difficulty with the location. I don't think that people who want to lease apartments downtown are generally looking for quiet and solitude; if that's their preference then affluent renters-by-choice have many options.

Houston House (averaging $1.89/sf) is similarly constrained, even though it has some fantastic views, recently-redone amenities, and much smaller easier-to-lease units (averaging 665 sf). Granted, it is ugly to look at from the street, but I feel like their pricing is much closer to reality. I feel like $2.00 psf is a better place for pro forma rents. The only way I can figure that the developer would make it nice enough to support higher rents would be if they build it to condominiums specs with a conversion as their exit strategy...but that would be a bad idea, too, because 270 units would be too many condos in one place at one time. Fifty units might work at some point in an ill-defined future, but that doesn't seem like it would work here.

[ricco67]

I don't think this area is going to suffer from body clubs and such. The way I see it, it is a relatively quiet section on dt that has ready access to the med center, reliant, theater, employment centers, nearby arenas and some decent dining and entertainment.

Not everyone wants to have a bar across the street.

[TheNiche]

Not everyone wants to have a bar across the street.

Right, and those people move to the Museum District, where there is also a good selection of new and old housing stock (at better price points), a walkable urban environment, cultural amenities, fewer beggars, good proximity to all the regional destinations you just mentioned, etc.

My sense is that the typical person that wants to live downtown either wants to experience the hustle and bustle of urban grit...or that they just moved here and doesn't understand Houston's geography or housing market well enough to make a better decision.

[rsb320]

This is really close to where the new train station will be.

[Houston19514]

This is really close to where the new train station will be.

There will be a station (east-bound) directly across Rusk Street from this building and a (west-bound) station adjacent to the property on the Capitol side.

Edited February 16, 2012 by Houston19514