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Posts posted by fernz

  1. Most of the northern edge of this property is at a different grade than the frontage road. Does the NW corner of this land have access to the feeder, or will it have to be accessed via the Kroger and/or Summer St?

    Given that this is surrounded on all four sides by big box retail, freeway and railroad, those expecting walkable mixed use may want to temper their expectations.

    City Center is in a similar island, yet they made walkable design work.

    • Like 1
  2. Just adding to what I said above... a 20-30 year lease with an AA tenant at $30/sf could sell at a 6 cap. Once the lease is done, Shorenstein could sell this building for $600 million, which would be a record for a Houston office building. If it's a gross lease with landlord paying expenses, that could knock it down to around $500 million, still tying the record.

    Someone correct me if I'm missing something. Just unbelievable.

    You are missing something. First of all, capping $30M at 6% gives $500M, not $600M.

    But more importantly, you should be capping net operating income, not gross income. To those $30M you need to deduct debt service, real estate taxes, maintenance, and expenses ( which will vary greatly depending on the type of lease)

  3. Oil may have dried up for a bit, but there is still the Keystone pipeline project which will benefit Houston.

    That will benefit the refining side of the business (and I guess all downstream overall), but that is not much help. That side of the business is booming right now with low oil and gas prices, but for whatever reason you don't see it impacting the city's economy...

  4. Sh alright, thanks. I guess I'm just thinking of Pelicans condo tower going forward because they are footing the bill themselves?

    Skanska is another developer in town doing the same. There are benefits to this strategy, obviously, but most developers would still prefer to borrow money, even they had the cash, so they can leverage the borrower's money and make higher returns.

  5. For those who don't check the Arts sub forum.. The Menil Collection is bringing back exhibitions at the "Byzantine Fresco Chapel".. Sans the frescos of course. (I wonder if they are going to change the name of the building or if it's "stuck") a really neat sounding spacey exhibit kicks off the year long run of exhibitions in the chapel starting on saturday..

    Awesome news; thanks!!

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  6. Hanover has been pumping a lot of money into Houston lately.. Post Oak tower, Montrose tower, Rice Village high rise, I'm sure im leaving out others.. I don't think they are ready to quit Houston just yet, probably just waiting to see how quickly the new stock of units will fill up when they hit the market.



    "Meanwhile, Hanover is setting its sights on other major markets nationally, like Boston and California. The company has four new apartments breaking ground in Atlanta this year.

    "We've got plenty of other projects we're working on," Bowden said."



  7. I'm not sure you all are disagreeing that much. If a retailer needs $10 to make a profit, and is only getting $8 based on normal traffic then he fails. Now if he has a hotel and residential tower over him he makes $7 extra dollars. So now he is very profitable ($15). Of course if all he had was the hotel and residential ($7) then he would still fail, but with both the normal traffic and the hotel/residential he becomes profitable.

    Disclaimer, I'm assuming you are talking about a place like greenstreet, and not a subsidized deli shop:

    Depending on the type of retailer, its market is anywhere between 1 to 10 miles radius (or even larger for destination locations). Assuming best case scenario, the market the retailer needs to capture is about the size of Downtown Houston. So in your example above, a retailer makes $8 by drawing in people from all the office towers and apartments in Downtown. Adding two more buildings to the mix is not going to almost double the income, not by a long shot.

    Put another way, if, say a restaurant, needs $10 to turn a profit (my disclaimer still standing) there is no way the people from 300 apartments will consistently spend $10 over a sustained period of time. You would get less than $1, on average.

    Now, if your tower has 5,000 apartments, it might be a different story.

  8. backpedal~backpedal~backpedal

    Also, I noticed you said nothing about Phoenicia or the retail under Post Midtown Square.

    In you're original post, as htowman already pointed out, you said retail period. Now you're changing it to "national chains", which is still besides the point, because that would be saying that Greenstreet couldnt be occupied by any local stores like Cocos crepes or Russos Pizzeria or Cyclone Anayas, which is clearly not true as they already have a Mia Bella, an Andalucia and Guadalajara.

    Its irrelevant that the retail is local or National, as my point still stands.

    Yes, I'm sure you're right.

  9. fernz, you said that "the retail component of any mixed-use project must be viable without its built-in demand to be successful," and then Howard gave you an example of a retail component of a mixed-use project that lived on its built-in demand. Now you're throwing out the qualifier that it must be national retail. But I thought you said "any mixed-use project"???

    You're absolutely right, that is an important distinction. Obviously a small, low cost shop has a different market from a national retailer. I probably should've pointed that out, but I was in the mindset of Greenstreet, and the type off establishments it has.

    My clarification in the subsequent post was to illustrate the difference, and make a case that they are not comparable.

    For clarification, many buildings have small delis that rely on the building occupants exclusively, but in many cases they are subsidized in the form of reduced rents, they are considered an amenity of the building.

  10. Like I said, I know that "if the retail cant survive on its own, it wont survive in a mixed use complex" is a rule that developers go by, I heard Ric Campo use that line as to why he was not building ground floor retail space in the Camden Superblock project, which is insane.

    I know his record as a developer, but not yours. I would guess he is the expert of the two.

  11. Its not a "fallacy"

    There are quite a few retail on bottom apartments in Houston that almost certainly depend on the residents for its success.

    Sure its an unspoken "rule of thumb" in real estate, we all know Ric Campo abides by it, but that doesnt mean there are not several projects in Houston that have successful retail because of the tenants above.

    And we arent just talking about apartments at Greenstreet. Were talking about a high rise hotel, plus high rise apartments, plus the office building, which as of now Id bet the farm that the office building in the middle of Greenstreet that houses NRG is one of the main reasons the pavilions was able to squeak by with 90% of their tenants making all their money on the office worker lunch crowd.


    I'm sorry to disagree with you - and again your logic is off: I'm sure there are several successful retailers in Houston with tenants above, but that does't mean they are successful BECAUSE of the tenants above; there have also been several unsuccessful retailers in mixed use projects with tenants above: (rice lofts, west ave, bbva compass tower...)


    This is not an "unspoken rule of thumb". I first heard of this as a follow-thru comment from a market share lecture. Basically, you only get a small fraction of a market's residents - the market "share" - because (to put it very simply) a.) you will only get a few people  to change their purchasing habit, b.) only some of them need/want your product, and c.) only a few people of that subset chooses your brand. This is why the market is usually based on 1, 5 or 10 mile radius, depending on the product (you need a big market in order to get a decent share). For a store like Forever 21, or Books-a-million, you would look at a 10-mile radius market. That means that those stores, in Downtown Houston, need to capture enough market share from ALL of the inside the loop population to be viable. Do you really think one more apartment building and office building nearby will make a difference? For a small grocery store, which would look at 1-mile radius market, you are talking about all of Downtown's population. This is why you need density for retail to start making sense. And this is why you don't rely on your project's built-in population, you need to look at the larger market.


    I keep hearing this idea that a tower in a mixed-use building will support the retail, but it just doesn't make sense when you look at the numbers. People who are in the businesses understand this, and maybe that's why you think it's a unspoken rule of thumb - but it's just math. I heard this explanation during a market research lecture from Patrick Phillips, who was teaching at Johns Hopkins Carey Business School, back when he was president of ERA (Economic Research Associates), a very well respected market research firm (it has since been acquired by AECOM, and Patrick Phillips moved onto become the Global CEO of the Urban Land Institute) - so I assume he knows what he's talking about.


    Finally, we all have our opinions of Ric Campo, but he has built what is arguably one of the most successful RE development firms in Houston (and maybe the US). So I would tend to believe the rules he abides by...but that's jut my opinion, you don't have to listen to him, or to Mr. Phillips. We can all continue spouting our beliefs in an anonymous forum while they run their very successful Real Estate businesses. 

  12. I beg to differ.

    If they had built the original plan, none of the retail would be empty.

    With a hotel, office building, and apartment building directly above the pavilions, they would have had a built in comsumer base around the clock.

    Im sure the reason the retail failed was lack of foot traffic, coupled with every business that tried to make it there failed, and also, they picked some really lame retail (Books-A-Million anyone?)

    Well now, as one of our HAIF posters pointed out a while back, they are basically building the original plan, with Alessandra to the west and the Marlow flanking greenstreet to the east.

    So lets see what happens after Marlow and Alessandra build out, Im sure at that point it will be far easier to lure reatilers in at that point....

    That's a fallacy. The retail component of any mixed-use project must be viable without its built-in demand to be successful. That's pretty much a rule of mIxed-use projects.

  13. Serious question, but why do you think that?

    The original plan called for a mid-range hotel and an apartment tower. Those apartments, judging by the downtown market, would have been full, especially with the loss of the Humble Tower units just down the block. Additionally, the hotel would have beaten the Embassy Suites, Homewood Suites, and Hampton Inn out of the ground. From everything I've heard, the Embassy Suites has been happy with the market.

    Additionally, I cannot imagine having 200 hotel rooms and 150-200 apartments would have done anything but HELP the rest of the development.

    The project opened in very difficult times. But even if the hotel and apartments had been very successful, they would've generated enough cash flow to cover their share of the loans, but not enough to make up for all the empty spaces in the mall and office buildings. But since the entire thing was owned by one entity, the whole thing would've gone bankrupt. And it would have been harder to find a new buyer for the larger, more complex building.

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