MontroseNeighborhoodCafe Posted January 31, 2005 Share Posted January 31, 2005 EXCLUSIVE REPORTSFrom the January 28, 2005 print editionFirst effort calls for mixed-use project over transit centerJennifer DawsonHouston Business JournalThe Metropolitan Transit Authority's first venture into stimulating real estate development along light rail is geared toward putting a mixed-use project on an existing transit center.Todd Mason's initial mission as a recently appointed Metro vice president is to identify private developers who might be interested in constructing a high-rise project for possible retail, restaurant, condo or medical office tenants over the TMC Transit Center at Fannin and Pressler. The Texas Medical Center site doubles as a combination light rail stop and terminal where buses pick up and drop off passengers.Mason plans on sending a request for qualifications to hundreds of developers within the next two months. His goal is to find a list of prospects with the capability and experience to handle such a significant project on the 4.5-acre site.Metro gained full-time access to Mason's services by signing a five-year, $2 million contract with McDade Smith Gould Johnston Mason + Co.The real estate firm's name principal and chief financial officer occupies an office in Metro's new downtown headquarters, where his duties include promoting commercial development on or near Metro properties and handling all of Metro's real estate holdings.Mason's description of his job would apply more to a for-hire contractor than a full-time employee."Metro has outsourced their real estate department to me," Mason says. "The primary goal is to take their transit centers and park-and-ride lots that have real estate value beyond a parking lot, and get them into the private sector for joint venture-type deals."Open for ideasThe inaugural effort to put a mixed-use project on a Medical Center transit hub could determine the feasibility and direction of future Metro real estate development.While hundreds will receive requests for qualifications, Mason expects to be dealing with a select few."What I hope is we can narrow it down to six or less truly qualified developers," he says.Metro would then conduct one-on-one negotiations to see what sort of deals could be structured with various developers. Mason hopes to make a final selection for the project by June.The TMC Transit Center project is wide open for development ideas at this point. Metro may do a ground lease or sell air rights to a developer, Mason says. Or the transit agency could enter into a joint venture with a developer on the project.One likely prospect is the Morgan Group Inc., a Houston-based apartment builder with experience in developing transit-related projects in California.Company CEO Michael Morgan says the Metro project sounds interesting, but unless incentives are offered it might be difficult to turn a profit."The Med Center is a good market, but everything is rent-sensitive," Morgan explains. "Land prices have gotten so high that it's very hard to make apartment numbers work any more."Mason points out that Metro may be able to help make the numbers work because the transit authority has other revenue potential from the deal.In addition to receiving lease payments, the development would funnel money to Metro through increased ridership and an expanded tax base, Mason says."I don't have to get nearly as high of a return on real estate as a traditional land owner," Mason says. "In many ways, it could save on what the cost of land is."Rising demand in one of the city's hottest sub-markets also could affect financial arrangements.Paul Layne of Trizec Properties says he is not familiar with Metro's plan, but suggests a high-rise project makes sense because the Med Center area has nowhere to go but up."I think the idea of going vertical in the Texas Medical Center has proven to be a logical element of life because of the incredible density they have there," Layne says. "That's smart business."Fee sharingCommercial developer David Wolff came up with the idea of retaining private real estate professionals following his appointment as Metro board chairman in 2004.Wolff and Metro President Frank Wilson interviewed several firms before hiring McDade Smith, Mason says."We'll make Metro a very business-friendly, forward-thinking entity," says Mason. "I think I can create value for them."For $400,000 a year, Metro gets Mason on a full-time basis, as well as McDade Smith broker Jeff Lindenberger and an administrative person."We had to have the base fee if I was going to devote all of my time to the account," Mason says. "We worked out a compensation package that incentified me."As Metro properties are bought and sold, McDade Smith will attach regular brokerage fees to the transactions. Metro will receive 75 percent of the commission revenue until the agency's $400,000 investment is recovered in any given year.If brisk real estate activity pushes the amount past the $400,000 mark, the brokerage fee revenue will be split 50-50 between Metro and the real estate firm, Mason says.The transit authority also gains access to the experienced McDade Smith team as part of the contract."Two heads are better than one. Fifteen heads are better than two," Mason says.Estimating income from development deals along rail lines may be difficult at this point, but Mason's status as Metro's real estate czar provides access to other revenue streams.A big share of the brokerage team's earnings could come in divesting Metro properties, an activity that has received little attention in the past.Metro owns some 1,500 sites around Houston, and it's Mason's job to help determine the worth of each one.Looking aheadMarket demand and Metro's ownership of the property made the TMC Transit Center a logical place to test the real estate development waters.But existing design factors also attracted Mason.The center consists of a series of bus platforms and stairs that climb to a skybridge and link to the light rail stop on Fannin. The skybridge one day will connect to a University of Texas M.D. Anderson Cancer Center building scheduled for construction.Instead of building upon an existing base structure, a developer would have to design a project that could be constructed above the platforms and moored to the ground."It's already designed to be able to build a high-rise on that site with the transit center below it," explains Mason. "They put the footings into the ground to be able to build a high-rise above the transit center."Mason envisions more than one tower being constructed, possibly a high-rise and a midrise.With the wheels set in motion, Mason already is looking at a second possible development site -- the 6.7-acre Wheeler-Blodgett station.Mason says he won't move forward until the Federal Transportation Administration makes a recommendation as to whether another rail line could eventually intersect and increase the site's value.Somewhere down the road, other development possibilities may include strip retail centers at various park-and-ride lots or multifamily developments on or near them, he says.Switching to his sales agent hat, Mason says one site that may soon be declared surplus Metro property could attract quite a bit of attention from buyers. The 12-acre tract occupied by an underutilized park-and-ride is located next to a Wal-Mart north of Interstate 10 and west of the Beltway.Mason's goals over the next five years are to maximize Metro's real estate holdings and capitalize on transit center land values."It's an opportunity to do something really neat for the city of Houston," Mason says. "If we're successful, I think we can put some things on the map." 1 Quote Link to comment Share on other sites More sharing options...
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