Buffalo Heights District: Mixed-Use Development At 100 Waugh Dr.

[Ross]

I noticed a few public notice signs at the apartments at Washington and Waugh announcing an application to redevelop. Anyone have any idea what's up with that?

[Htowngirl]

I noticed a few public notice signs at the apartments at Washington and Waugh announcing an application to redevelop. Anyone have any idea what's up with that?

I think you are referring to the Archstone Memorial Heights Apartments. My friend is a landscape architect and he told me that Archstone is planning to tear the current apartments down and build some higher-rent apartments on that site to get more for their money. His firm bid on the landscaping for the new apartments. Seems a little strange to me, since those apartments are not that old and look nice. Apparently, Archstone hasn't told it's residents anything about it.

[KinkaidAlum]

I'll be glad to see those Archstone Apartments come down if they are the ones I am thinking of. They are completely wrong for that neighborhood. Way too suburban garden styled and way too many ugly gates. That thing looks like it belongs in Pearland, not Central Houston!

[htxred]

i actually live at archstone and was googling trying to find information about those signs. we saw the same signs around allen house apartments on w. dallas and dunlavy and now half the complex is gone.

These apartments are not that bad, ugly fences should be the least of worries for the inner loop. Plus the are the only affordable ones we can find that is south of i10 other then Memorial Club, which IS a horrible place to live.

It would be a shame if they did tear down the complex, that means i will have to relocate, again.

and no, management has not told us anything about it, i read the sign and the hearing was on 12/11/07.

Edited January 9, 2008 by htxred

[neal0411]

does anyone know or have any information about the high rise they just broke ground on right at Studemont and Allen Parkway (Memorial Court, actually). I noticed a lot of work around there and now an "office trailer" has been delivered. i'm talking about where the old Sacks Paper Recycling place was.

[HtownWxBoy]

There's also a crane up just northwest of the intersection of Memorial and Waugh... I drove by today and wasn't sure what they are building. I drove by this morning after picking up tickets to see Margaret Cho at the Laff Stop next weekend... I AM SO EXCITED!!!!! > But anywayz, anyone know what they are building?

[ChannelTwoNews]

does anyone know or have any information about the high rise they just broke ground on right at Studemont and Allen Parkway (Memorial Court, actually). I noticed a lot of work around there and now an "office trailer" has been delivered. i'm talking about where the old Sacks Paper Recycling place was.

Cool, looks like they're moving forward on the Legacy at Memorial highrise, which is supposed to be a 25 story apartment tower.

The one around Memorial & Waugh, I think is a project by Gables Residential called Memorial Hills. I drove by it on New Year's day and I saw the crane in a relatively decent sized excavation area. 4200 block of Scotland St or so?

Edited January 11, 2008 by ChannelTwoNews

[cottonmather0]

Those apartments are really out of place there and I expect something bigger and higher priced to be built eventually on that site.

But I do have a lot of personal memories of that complex: old friends, ex-girlfriends, pool parties, crashing after a late night at the Fab Sat (itself a loss)... it will be sad to see it go when it finally does.

[nativehou]

Wasn't the Archstone Apt complex one of the first new structures on Washington when it was built in the 90s? Could it be said that it helped start the renaissance of the area?

One funny story related to Archstone -- when I was going thru a divorce I looked at those apartments to move into. My child wasn't with me when I was there to tour. I asked the saleslady if there were many children in the complex and she said no, it was nice and quiet. Then I mentioned that I have a kid and would like a place with some other kids, and she suddenly changed her mind and said "Oh yes, we've got lots of kids here."

[Htowngirl]

My funny story about those apartments.... when my best friend moved to Houston in 2001, she was going to work downtown, and we looked at the Archstone and decided that it was a bad area of town for a single girl to be coming & going late at night/early AM. She ended up renting by the Galleria. 2003 - I moved (from Clear Lake) into the (AMLI) apartments across the street. 2005 - she moved into the (Siena) apartments across the street. 2007 - I bought a house less than a mile away.... I love how fast a "bad area" becomes up and coming in Houston!

[TheNiche]

http://houston.bizjournals.com/houston/sto...25/story10.html

Archstone-Smith is planning to demolish the 12-year-old Archstone Memorial Heights apartment complex to make room for a new mixed-use project.

The Denver-based owner is planning to redevelop 28 acres on Washington Avenue between Studemont and Waugh Drive where the 616-unit apartment building -- which is considered very young by industry standards -- currently sits.

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While members of SuperNeighborhood 22 support the redevelopment, they are concerned that the project's suburban design -- which calls for the back of the residential components to face Washington Avenue -- is hurting efforts to transform the avenue into a walkable, pedestrian-friendly destination.

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Archstone has suggested that concerned residents in the surrounding neighborhood visit the company's nearly completed Esplanade at Hermann Museum Circle project on Hermann Drive, which Archstone says is similar in scope.

[sowanome]

Thanks Niche!

This is a surprise for such a young complex, but I guess with all of the nationwide investment coming to Houston and specifically this area, something like this should've been expected. This will be a 7 minute walk to Regent Square and a 3 minute walk to the new development taking place between Yale and Heights. This should be interesting....Maybe this topic can be merged into the Washington Ave. Renderings section?

[houston-development]

they were never going to get their price (over $100k/unit) due to the fact it's their old inferior construction (ie 8ft ceilings, odd floor plans, etc).

at the time, probably only cost about $50k/unit (if that) and $10 psf for the dirt. the land is worth more that what they had into it and their net cost basis, after blowing away their original underwriting, is probably next to nothing.

great to hear.

[TheNiche]

they were never going to get their price (over $100k/unit) due to the fact it's their old inferior construction (ie 8ft ceilings, odd floor plans, etc).

at the time, probably only cost about $50k/unit (if that) and $10 psf for the dirt. the land is worth more that what they had into it and their net cost basis, after blowing away their original underwriting, is probably next to nothing.

great to hear.

Its kind of funny on account of that up until a few months ago I hadn't been at all familiar with the complex; I'd driven by but never noticed it. Then, one day, I was browsing Google Earth images and came across this anomalous low-density complex that looked relatively new but made very inefficient utilization of the land. At first I figured that it must be Section 8 or something like that, but I looked it up and it was Archstone. A few days before this story was released, I drove by the site by chance, remembered what it was, and thought to myself..."gee, I wonder how long until they tear it down."

...go figure.

[bpe3]

they were never going to get their price (over $100k/unit) due to the fact it's their old inferior construction

Didn't the Bayou Park Apartments just sell for around $80 PSF on the dirt? The Archstone tract seems superior given the tremendous amount of street frontage on three main thouroghfares. A $160,000/unit price tag for Memorial Heights equals $81 PSF for the dirt. If someone will pay $80 PSF for Bayou Park dirt, then $80 PSF for Memorial Heights dirt should be a no-brainer.

Whoever redevelops this dirt has a chance to do something really special. This property could be a trophy asset that anchors Washington Ave as it transforms into one the finest corridors in Houston. Instead, we get the same generic stuff that Archstone and everyone else is building all over town. It will certainly be an improvement over what there now, but an incredible missed opportunity none the less.

bpe3

[houston-development]

Didn't the Bayou Park Apartments just sell for around $80 PSF on the dirt? The Archstone tract seems superior given the tremendous amount of street frontage on three main thouroghfares. A $160,000/unit price tag for Memorial Heights equals $81 PSF for the dirt. If someone will pay $80 PSF for Bayou Park dirt, then $80 PSF for Memorial Heights dirt should be a no-brainer.

on the surface, it does appear to be a no-brainer.

problem is, that comes out to just under $100MM, not including demolition costs. you arent going to find any players, especially in this uncertain economic market, that will shell out that much for a speculative land play and knocking down a 12-year old product.

again, keep in mind that archstone's cost basis is probably next to nothing...

for them, it is a no-brainer.

for someone else, not so much.

[bpe3]

Archstone is not blind to opportunity cost. Although their cost basis in the land is far less, they know damn well that if they redevelop this land, they are, in fact, paying the market price for the dirt. The Bayou Park site and the Deyaar site have both sold in the last 60 days for $50+ million at land value. There were 29 bidders for Bayou Park. I don't think it's that big a jump to $100 million. There are a lot of deep pocketed investors out there who see Houston as a very attractive place to invest.

bpe3

[houston-development]

Archstone is not blind to opportunity cost. Although their cost basis in the land is far less, they know damn well that if they redevelop this land, they are, in fact, paying the market price for the dirt. The Bayou Park site and the Deyaar site have both sold in the last 60 days for $50+ million at land value. There were 29 bidders for Bayou Park. I don't think it's that big a jump to $100 million. There are a lot of deep pocketed investors out there who see Houston as a very attractive place to invest.

bpe3

im sorry but i dont follow your logic.

how are they paying market price for the dirt? they purchased the land for about $10, their rents have increased close to 50% (im guessing their original underwriting was for mid $0.80 psf), its inferior construction that no way cost more than $50k/unit to build, and the occupancy has consistantly been over 95%. assuming they just do one refi and they cash out all of their equity (and then some [understatement]) out of the deal.

thats a developer's wet dream right there.

as for thinking there isnt a big difference between $50MM and $100MM on a land play, well, i know many lenders and equity players that would strongly disagree with you.

[ricco67]

thats a developer's wet dream right there.

Real estate porn, eh?

I didn't follow the logic either, but this would be interesting to watch to see what happens. as the population increases in the area, infrastructure, as it currently stands, will be in dire need of improvement. It's almost there now.

[bpe3]

It doesn't matter what Archstone's (or anyone else's) basis is this property. If they develop this dirt, their investment inlcudes the value of the dirt, not what they paid for it. If they develop the property, they are foregoing the opportunity to sell the property and collect the value.

Example: Let's say you have a rich uncle. He dies and leaves you a beautiful 2-acre lot in River Oaks. Your cost basis in the lot is zero, although the market value of the lot is $1.5 million. You decide you'd love to live in River Oaks so you go out hire a builder and he builds you a 3,000 SF house on the lot. The cost to construct the house is $400k. If you short sightedly ignore the opportunity cost of selling the land, you may kick back in your house and think, "This is awesome, I have a brand new 3,000 SF house in River Oaks in River Oaks that only cost me $400k. This is a homebuyer's wet dream!" The fact of the matter is that that house actually cost you $1,900,000. If you hadn't built on that lot, you could have sold the lot for $1.5 million, chipped in $400k in cash and bought a different house for $1.9 million. At the end of the day, you've invested $1.9 million in either house.

We can debate the value of the land all we want. The fact is that if Archstone redevelops this site, they are foregoing the opportunity to sell the land to someone else. By forgoing the sale, they are actually investing that forgone profit into their new development.

bpe3

[bpe3]

On the subject of $100 million land plays, all I can say for sure is that I'm working on a $90+ million land deal right now (not in Houston) and there is a LOT of interest from a variety of developers. I can't quantify how many potential buyers may have passed on the deal becasue it was just too big for them to swallow. I can say that there are enough players at the table to make for a very competitive process.

Off the top of my head:

Angel/McIver scratched a check for $77 million to buy the Astroworld site without a development plan in place.

The Rouse Company paid $82 million for the land that is now becoming Bridgelands.

Maybe this dirt is worth $80 PSF, maybe not. We'll have to agree to disagree however, that a $100 million land deal is too big to make sense.

bpe3

[TheNiche]

as for thinking there isnt a big difference between $50MM and $100MM on a land play, well, i know many lenders and equity players that would strongly disagree with you.

I can't quantify how many potential buyers may have passed on the deal becasue it was just too big for them to swallow.

So we're all in agreement, then? Really big projects can and will be undertaken, but the higher the total price tag, the thinner is the market.

[houston-development]

your example is comparing apples to oranges but as you said, we can just agree to disagree on how you view the economics of the deal.

good luck on your sale.

[bpe3]

So we're all in agreement, then? Really big projects can and will be undertaken, but the higher the total price tag, the thinner is the market.

No. I don't think we are in agreement. Houston-development said...

you arent going to find any players, especially in this uncertain economic market, that will shell out that much for a speculative land play and knocking down a 12-year old product.

I think there are buyers out there for $100 million dirt, even in these uncertain times. I'm not sayinging Archstone's tract is worth $100 million. I am saying that a $100 million price tag won't scare everyone away.

Getting back to OP's topic though, at least we all seem to agree that Archstone's plan for this redevelopment is not the best option for this site. We are witnessing a possibly once in a lifetime opportunity to build something really special for the Washington corridor and make money at the same time. A generic gated apartment complex on this site is a waste. Assembling a similar tract anywhere in this submarket is next to impossible.

bpe3

[houston-development]

No. I don't think we are in agreement. Houston-development said...

I think there are buyers out there for $100 million dirt, even in these uncertain times. I'm not sayinging Archstone's tract is worth $100 million. I am saying that a $100 million price tag won't scare everyone away.

and i stand by my statement.

if there were capable and willing buyers, the deal would have sold because its been officially/unofficially on the market for a looong time.

another developer could not purchase the site with intention of redevelopment because their numbers will not pencil out.

but since archstone's cost basis is so low, they can knock down 12-year old product and redevelop the site.

which, what do you know, takes us full circle.... funny how that happens sometimes, eh?

having said that. maybe the announcement will give other developers a new outlook on the site and make archstone an offer they cant refuse.

unlikely but in theory, could happen.

Edited February 27, 2008 by houston-development

[TheNiche]

No. I don't think we are in agreement. Houston-development said...

I think there are buyers out there for $100 million dirt, even in these uncertain times. I'm not sayinging Archstone's tract is worth $100 million. I am saying that a $100 million price tag won't scare everyone away.

Getting back to OP's topic though, at least we all seem to agree that Archstone's plan for this redevelopment is not the best option for this site. We are witnessing a possibly once in a lifetime opportunity to build something really special for the Washington corridor and make money at the same time. A generic gated apartment complex on this site is a waste. Assembling a similar tract anywhere in this submarket is next to impossible.

On the one hand, the capital markets truely are spooked to the point that doing anything unproven gets difficult (and I'm not saying that developers aren't highly interested, just that its harder for them to close the deal), but on the other hand, a lot of investors in real estate are fleeing from shaky markets to Texas because our economy is more resilient than in other cities. And it may be that some investors willing to walk on the wild side could infuse a local developer with the kind of cash that makes a big transaction happen.

From my experiences, I'd say that houston-development has the edge on this argument. Term sheets aren't as favorable as they once were, even in Texas. Underwriting is done more conservatively, even in Texas. Texas is not immune to many financial issues affecting the broader market. The result of these challenges is that developers that actually want to get deals done aren't being very innovative. If Archstone's Esplanade was successful, they will do another Esplanade because they've got a great story that sells to prospective lenders or equity partners.

I think that players like Wulfe, OliverMcMillan, Angel-McIver, and Rouse did their big deals in a capital market that no longer exists. Things have changed, and if they were trying to start doing those same things today, the results would probably be very different.

[houston-development]

the niche is correct. i figured it was a given but guess some people need further explination.

and for clarification, i never disputed an interest level but at the end of the day, interest means squat; its all about who can perform. just because there was almost 30 offers on bayou park (or whatever its called) doesnt mean they all were in line with what the seller wanted. im positive ARA encouraged offers, regardless of price, just to say "hey, look how many offers we got on this asset while the capital markets are in the crapper. horray for us!". berkshire went in with the intention to run the apartments as is with the possibility to either renovate or redevelop. they probably put up more than 30% and made a deal with their lender that if they decide to redevelop, they get the financing. in the meantime, the property is cash-flowing and the lender is happy.

for an example about "interest level", there was a lot of interest in shriners. however, some prices came in $20 psf below the winning bid. and my information isnt from a friend of a friend of a friend nor what was printed in the paper; i saw john mcdonald and john olivarri opening the bids with my own two eyes.

as for astroworld, that happened a couple of years ago and would be willing to bet the same buyer could not perform in todays market.

finally regarding the dubia deal on richmond and post oak, again, i would be willing to bet they put up significant equity to appease their lender. they have a crap load of cash and wouldnt be surprised if they put up 50%.

in conclusion, big deals are still happening. lenders, equity players, and GPs can make deals work across the nation. however, the frequency of these types of deals actually closing is significantly less than before. there has to be a great story, soild numbers, and more importantly, the buyer has to be more than capable to perform.

developers today have to put their money where their mouth is more than before. doesnt mean deals arent going to happen, just significantly harder. because of archstone's cost basis in this deal is so unique, they can make the deal work while others cant.

whew.

[runner736]

There's also a crane up just northwest of the intersection of Memorial and Waugh... I drove by today and wasn't sure what they are building. I drove by this morning after picking up tickets to see Margaret Cho at the Laff Stop next weekend... I AM SO EXCITED!!!!! > But anywayz, anyone know what they are building?

There are 2 housing devlelopments being built: 1) the tower which was described several posts above on Studemeont/Montrose and 2) off of Jackson Hill St and Memorial behind the new Council on Alcohol & Drugs Houston (under contrsuction). According to the sign posted at the construction site entry (off of Jackson Hill St, directly in front of the Jackson Hill Apartments) its a Gables development called Memorial Hills. Foundations are being poured and cranes have been erected. Judging by the size of the foundation walls, it's going to be pretty big --- perhaps pretty tall given the size of the lot which is very small in comparison to other Gables developments around town.

[j_cuevas713]

I use to live there, nice to see the renovation, should be a great plus to the area.

[plumber2]

I use to live there, nice to see the renovation, should be a great plus to the area.

I used to eat the rice that was made there.