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C List

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  1. I believe a lot of real estate land speculators will continue to buy land along Westheimer between Sheppard and Bagby. In my opinion this corridor is ripe for redevelopment but there is one key structural issue holding it back. Walkability and traffic congestion. If/when the COH ever gets around to fixing this portion of the corridor I think you will see even more re-development and land prices will go through the roof.
  2. Yes, Jerry Jones has set the standard for this and his real estate plays are a big reason the Cowboys franchise's valuation has gone through the roof. While this is not the stadium, to do what he did at a practice facility is unreal. https://www.thestarinfrisco.com/
  3. Yes, new high-end apartments are increasingly featuring hotel-style amenities to include dry cleaning, housekeeping, and valet service. A local start-up, backed by local VC firm the mercury fund, has made great inroads with the big developers in Houston to offer these amenities. https://getspruce.com/ Spruce Overview Presentation.pdf
  4. Even better than giving the GC work to a friend is to keep it in house! The conflict of interest within this firm it out of this world
  5. Earning 6% a year does not equal a 32% rate of return, it equals 6%. That is why a bond with a coupon rate of 6% gives you a return of 6%, see below. To achieve a 32% return as a developer you have to create a tremendous amount of value at exit. Leveraging a property with two loans, a senior and mezz note, is one way to help you achieve this return. The downside is, when one thing does not go as planned then you can't cover your interest and the banks foreclose on your property (Banks do not like to foreclose on a property that is not complete, so they will work with developers but they will take 99% of the investor's money). Which it sounds like is happening below, they probably misrepresented to the two lenders who was a priority to foreclose on a property that was underwater, which is fraud. The 32% is not fraud it is just deceitful (edit). Returns on real assets (properties) over the past 10-years have come way down. Real estate is very competitive and asset prices are high. With 10-year treasuries so low investors are looking for anything with yield and are willing to pay higher prices which lowers overall returns. If you are not familiar with real assets than it is easy for you to see a 32% and say holy S$%t I want it, but in the current environment, there is almost no way you can achieve that return.
  6. There is definitely something fishy with how they conduct business and it starts with funding. They crowdfund their equity using unrealistically high returns with no mention of a hold period, not to mention they have a senior note and a mezzanine note to pay off. Their team is incredibly small and it doesn't look like they have any dedicated team members that work in Houston, so no developer on site. This group screams incompetence and I would love to get my hands on their prospectus, no doubt there are some upset people that saw their money vanish (Dolce Midtown). https://www.luxecrowdfunding.com/regalia-at-the-park-2/
  7. Skanska/Capital/BofA Tower and 609 Main are both looking to be sold in the next year, pricing in the neighborhood of $600-700 psf in both buildings. Buying 600 Travis at $300 psf (along with Cerebrus Capital who specializes in distressed assets) leads me to believe the building has major leasing issues and is in need of serious upgrades. I wouldn't be surprised to see a 8-9 figure capital injection to reposition the asset.
  8. They've continued to tear more of Richmond up, Westbound between Yoakum and Dunlavy and eastbound between Shepard and Kirby
  9. Not sure if this is the right place, or if it has already been mentioned, but the Zone d Erotica has been vacated
  10. Soil testing occurring at 610 and Westheimer
  11. https://www.wsj.com/articles/the-view-from-the-almost-top-11555600762?mod=hp_lead_pos11
  12. More information in the news on EB-5 -> With the amount of scrutiny on EB-5 I wouldn't be surprised if this project gets further delayed. https://www.bisnow.com/national/news/capital-markets/eb5-mastroianni-usif-brook-lenfest-doug-litowitz-defamation-lawsuit-chinese-97342?&utm_source=outbound_pub_68&utm_campaign=outbound_issue_772&utm_content=outbound_link_1&utm_medium=email And if you look here below you can find renderings for the Marlow, Hotel Allesandra, Kirby Collection, Arabella and more https://eb5projects.com/projects?utf8=✓&investment_type_id=-1&open=&verified=-1&state=Texas&name=&commit=Search&project_category_id=-1&regional_center_id=-1&size=-1&documents_available=-1&videos_available=-1
  13. To be completely honest, Midway does not own the property. They are the General Partner so they probably own 5% of the property and would not be putting up the majority of the capital for renovations, all they do is provide the vision and programming. It is up to the Limited Partner (Lionstone) to decide when and what actually gets funded. I know everyone likes to think designing, programming, and construction are the epicenters of buildings but I promise it is finance. I'm willing to bet that when the team got their hands on the property in 2012 and then sat through the downturn 2014, that the property needed a whole lot more money infused and that the returns weren't worth it. Sometimes you have to sit on a property and find the right time, sometimes you have to admit you got it wrong and sell. If it was easy to flip/build a property I'm sure you would be doing it yourself.
  14. TCR is a merchant builder, if the price is right they would sell as soon as the property is completed.....if not sooner
  15. You also need to understand how a project gets financed. The initial renderings are nothing more than marketing especially for a project like this. I'm almost 100% positive this is an EB-5 equity financed project, meaning the initial renderings are shown to thousands of wealthy Asian/African investors to draw them in. Under this program, the foreign national must invest $500,000 or $1 million in exchange for an expedited green card process, depending on where the project is located. So you are showing these renderings to nonprofessional real estate investors whose primary focus is not on their money but being allowed into the US. Now, this first phase is probably a 100-200-million-dollar project if not more, which means you have to find a LOT of foreign investors to put up money before a construction loan even becomes a possibility. Once the developer gets close to putting shovels in the ground he is 100% not going to build the marketing renderings; he has no incentive too. The great thing about EB-5 is the cost of equity is almost nothing, like a 2% return to the foreign investors with no definitive timeline on when that money will get returned. A developer like Hines or Hanover will have a cost of equity around 14-20%, a huge difference! So you over promise and under deliver, because if you can get anything built that looks halfway decent and leases up, you as the developer, will be swimming in money once you sell.
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