Gateway Station: 3-Hotels, Retail Above METRO Transit Center For The TMC

[MontroseNeighborhoodCafe]

EXCLUSIVE REPORTS

From the January 28, 2005 print edition

First effort calls for mixed-use project over transit center

Jennifer Dawson

Houston Business Journal

The 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 ideas

The 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 sharing

Commercial 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 ahead

Market 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."

[kjb434]

I hope these types of ventures push forward. I'm glad to see metro take the position of working with developers to attract development in the area. Developers are much more likely to develop a potentially risky project if incentives from agencies of public are available. Also, since metro is being run more and more like a competent business instead of a public agency, it looks good for the future.

[UrbaNerd]

http://www.chron.com/cs/CDA/ssistory.mpl/business/3114670

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[YakuzaIce]

I hope that Metro releases the proposals to the public when they get them on Monday.

[Talbot]

That is excellent news. I am glad that metro is now trying to get more TODs built, hopefully if it works out they will try to build more.

[2112]

I wish they would do someting like this around the Wheeller station.

[The Great Hizzy!]

Well, since Wheeler Station is the proposed terminal connection for the Westpark-Uptown extension, I tend to doubt that anything major will go up there before that new segment is built. At that point, it probably would make an excellent site for a major mixed-use development.

First things first, though: the Camden development on the superblock needs to get started so that the idea of implementing new residential and retail along the rail line will gain even more steam.

[ssullivan]

METRO owns a lot of land at the Wheeler station and near it. They've said in the past they'd be exploring development options for that property as well, but I think it's considered to be a lower priority project than the TMC Transit Center project.

[LTAWACS]

About time someone does something.

[houstonsemipro]

Oct. 20, 2005, 11:27AM

Metro gets in on Med Center hotel-office project

The Metropolitan Transit Authority said it will form a joint venture with Houston-based Transwestern Commercial Services to build a $105 million real estate development above the Texas Medical Center transit center at Fannin and Pressler.

The multi-use project, which is expected to break ground mid-to-late 2006, will include a 175-room hotel, 30 condominiums, 168,000 square feet of medical office space, a 15,000-square-foot wellness center and 35,000 square feet of retail space.

Local architecture firm Kirksey is designing the project.

Link to story... http://www.chron.com/cs/CDA/ssistory.mpl/front/3405620

[kjb434]

Glad to see this project moving forward. I know it's been in the pipeline.

And with only 30 condo units, they won't have to rely on presales to get the project moving.

[UrbaNerd]

If anyone got the paper today, there is a rendering in the Business section, as well as a more in-depth update.

[sevfiv]

interesting looking...and the article mentions that metro wants to do something similar near the wheeler station...hmm

[kjb434]

Can anyone put the picture on here or at least direct me to a link with it?

I don't get the Barnicle.

[sevfiv]

http://www.chron.com/cs/CDA/ssistory.mpl/business/3406561

article, but no rendering!

[kjb434]

I like the part about another development near the Wheeler station where the East-West line will cross.

[YakuzaIce]

Can anyone put the picture on here or at least direct me to a link with it?

I don't get the Barnicle.

Let me find it and I will take a picture of it.

[YakuzaIce]

Edited October 21, 2005 by YakuzaIce

[kjb434]

Nice,

Thanks for the pic,

i'm sure we'll be seeing more in the future.

I will fill in the southern portion of the TMC nicely.

[Talbot]

It's good that were hearing something new about this and it didn't just disappear. I saw in the HBJ today about the wheeler station, or maybe it was this one and they were just talking about the wheeler station, I didn't get long enough to read into detail.

[eelimon]

The Metropolitan Transit Authority has chosen Transwestern Development Co to develop this mixed use projects. I for one cant wait for the rest of the opportunities for mixed use development to come to fruition here is the story as told by HBJ:

http://www.bizjournals.com/bizspace/housto...tory_id=1180195

[woolie]

It's good that were hearing something new about this and it didn't just disappear. I saw in the HBJ today about the wheeler station, or maybe it was this one and they were just talking about the wheeler station, I didn't get long enough to read into detail.

I'll see if I have a "daytime" version around. This was from my old lab.

I'll take a couple more aerial pics when I'm over that side of the TMC.

Also found this image..

[Talbot]

Amazing, there are tons of projects.

Thanks for the aerial of where the projects will be.

[Montrose1100]

Redstone projects? I'll probibly getting some prochures in the mail from the Houstonian... I got a bunch of c.r.a.p. when the redstone was* building a condo building on the Houstonian complex. Infact, I still have the tube-o-renderings and posters of the building.

[houstonsemipro]

There will be no more parking spaces left at TMC.

[houstonsemipro]

What are the Redstone projects?

[YakuzaIce]

Look at the picture Ian posted, they are listed between the two projects in red.

[houstonsemipro]

Yeah, but what type of project Redstone is? Anybody have renderings?

[SMUrban]

According to the above link and article from Oct. 24 2005, construction is scheduled to start in 4Q of 2006. Has anyone heard anything? By now, or very at least soon, we should see plans or more definite plans at least.

[lockmat]

Mixed use complex

To be constructed over light rail facility

Located in the Texas Medical Center

Construction cost of $105 million

In a joint development with Transwestern Development Company and The Metropolitan Transit Authority (Metro), Kirksey is designing the new mixed-use complex that will be constructed over an existing light rail transit facility on Fannin in the Texas Medical Center. Under the agreement, Transwestern will lease air space from Metro above the transit center for 99 years. Estimated at $105 million, the development will house hotel, residential, retail and medical office components and will connect by a skybridge to the surrounding Medical Center.

http://www.kirksey.c..._transit_center

[roadrunner]

Yeah I don't see this happening.

[kylejack]

Cool.

[kylejack]

Yeah I don't see this happening.

I don't know if they'll find the financing, but there are a lot of unserved needs in the Med Center because square footage is at such a premium. I could see this working.

[lockmat]

culturemap confirms that at one point it was planned to happen:

A deal has been struck between Transwestern and METRO to develop the space over the bus bays with a hotel and office space. This will require extensive rebuilding of the facilities, but when it happens, the station will be quite the statement.

http://culturemap.com/mapdetail/metrorail-tmc-transit-center/

[TheNiche]

Mixed use complex

To be constructed over light rail facility

Located in the Texas Medical Center

Construction cost of $105 million

In a joint development with Transwestern Development Company and The Metropolitan Transit Authority (Metro), Kirksey is designing the new mixed-use complex that will be constructed over an existing light rail transit facility on Fannin in the Texas Medical Center. Under the agreement, Transwestern will lease air space from Metro above the transit center for 99 years. Estimated at $105 million, the development will house hotel, residential, retail and medical office components and will connect by a skybridge to the surrounding Medical Center.

http://www.kirksey.c..._transit_center

Yes, the Transwestern/Kirksey team was one of the final four selected by METRO from dozens of applicants to present competing plans. In 2006, I think it was. After each of these firms had spent gobs of money to plan a development that only might have been selected (which is your cue that METRO was fully planning on selling the land below market value), an engineering report came out that determined that METRO's seven-figure expenditure to over-engineer the transit center so that a highrise could be built directly on top of it without interrupting service was wholly inadequate to that purpose. All of the proposed projects were too tall and too heavy to be feasible on the site. By that time, however, the point was moot. METRO had not communicated their intent to build an under-parked highrise with the Texas Medical Center, Inc. (per a written agreement) and so the TMC exercised their right to veto the project.

Edited January 12, 2011 by TheNiche

[Mister X]

Houston needs another oil boom. A big one.

[LTAWACS]

Yes, the Transwestern/Kirksey team was one of the final four selected by METRO from dozens of applicants to present competing plans. In 2006, I think it was. After each of these firms had spent gobs of money to plan a development that only might have been selected (which is your cue that METRO was fully planning on selling the land below market value), an engineering report came out that determined that METRO's seven-figure expenditure to over-engineer the transit center so that a highrise could be built directly on top of it without interrupting service was wholly inadequate to that purpose. All of the proposed projects were too tall and too heavy to be feasible on the site. By that time, however, the point was moot. METRO had not communicated their intent to build an under-parked highrise with the Texas Medical Center, Inc. (per a written agreement) and so the TMC exercised their right to veto the project.

Is there anything - ANYTHING - the Metro cannot bungle?

[Trae]

Houston needs another oil boom. A big one.

I think it's coming with the way they're talking about gas prices going up.

[mfastx]

This would be spectacular. But I would rather focus on building the Intermodal Terminal/light rail lines first.

[ricco67]

This would be spectacular. But I would rather focus on building the Intermodal Terminal/light rail lines first.

Normally,i would agree if this was proposed any place else, but the med center is starved for space.

[fatesdisastr]

Hey, at least the rendering looks nice. lol

[Jrnavid]

It could happen. If the funding is provided, I see this place being leased and used quickly. The TMC is much more in demand than some CBD areas. And a somewhat of an Intermodal (not really) station here would look nice. More like exactly what its called, a transit center.

[editor]

Hopefully this happens.

The transit companies in a lot of big cities use their transit property to build real estate, and then use the real estate money to run the transit operations.

Think about the World Trade Center in New York -- owned by the NY/NJ Port Authority.

MTR in Hong Kong has a bunch of developments with thousands of apartments and offices. One of the more recent ones includes a 120-story building.

If it keeps Metro from having to beg the voters/taxpayers for more money, then I'm all in favor of it getting into the real estate business.

[Sparrow]

What ever happened to this project? It's still on kirksey's website.

 

www.kirksey.com/project/metro_transit_center

[alternativemike]

Good question! I'm assuming this has either been scrapped or put on indefinite hold, since this was a pre-economic slowdown project - but with the Houston market booming like crazy the last few years, maybe this project will see the light of day?

[LarryDierker]

This would become one of my favorite developments in the city. But after 9 years, seems like zero chance it gets built.

[ZKB9]

Forgive me if there is a topic for this already, but does anybody know what this is?



From Kirksey's website:
 

 

Houston, Texas

65,000 sf

Mixed use complex
To be constructed over light rail facility
Located in the Texas Medical Center
Construction cost of $105 million

 

[august948]

http://www.houstonarchitecture.com/haif/topic/24292-metro-transit-center-in-tmc/

[Luminare]

From what I know this project died with the recession.

[Triton]

Yea super old and gone. Kirksey seems to be the company that keeps ancient dead projects on their website and elsewhere.