The New Juniper

I hear it's investigative work to see what the old building can hold....

No, Nothing out just yet.

You can thank Rudy Giuliani for that. He instituted something called the "piss and beer patrol." Actually I think the official title was closer to "Quality of life task force." It did something revolutionary in 20th century America: It actually enforced the city's rules on public drinking and public urination.

Lots of people (including some on HAIF) say why harass people for minor crimes? Shouldn't the police be chasing down murderers? Well, it turns out that many of the people committing these minor quality-of-life crimes are also wanted for major crimes like murder, rape, and assault. Once you've killed someone, you're not too worried about taking a whiz on a lamp post.

The result of the piss and beer patrol was an increased quality of life for the rest of New York, a severe drop in crime, and the clearing of a lot of old crimes that were never solved.

I've been to New York about six times in the last three years, and it's never looked better. People are nicer. Streets are cleaner. The city doesn't have most of that horrible stench and funk it once did. It's just a better place to live. I was born in New York City and at the age of 17 promised I'd never go back. But now.... maybe.

Very, very well said.

And, just so we're on the same page for some posters, "Broken Window" is a theory that doesn't necessarily refer to a specific window....

And to Redscare, you are right. It is not all doom and gloom. There are even isolated blocks of Main that are quite pleasant. However, i was downtown this weekend to see a friend of mine who lives on Main in a high rise and we saw (not heard a story about) but saw, a homeless (i assume homeless) man peeing in a vestibule on Main. If i had a camera and we could suspend decorum for me to make a point, i would have photographed it and posted it on the site.

TNJ

To the point about demonstrating that the HPD budget is up, down, sideways, adjusted for inflation, CPI, the weather, etc. I am not sure that it matters.

It is a mess downtown and i am told by two friends of mine that live downtown that the off duty cops they employ in their buildings confirmed for them that there will fewer cops on patrol on Main Street. So, quoting stats is great, but evidently some supervisors must be driving new interceptors or have shiny new guns. B/C it appears the money is not putting more cops on the street.

Eliminate crime. How? Greater police presence. Zero tolerance for any law broken. More light. Create an environment that feels safe and it will ultimately become so. Criminals will be around always. We just need to create an environment that deters the criminals from coming around.

Not only are we not providing a deterrent, we are actually attracting it.

Light rail, retail, parking garages all have one thing in common: They all die without the consumer.

Fix the problem, not just the symptoms.

Everything else is window dressing and shifts the hard decisions to someone else.

TNJ

OK. Couple of things:

First, thanks to all for the spirited debate.

Next: Just b/c Houston used to be a complete disaster and now is only 3/4 of a disaster is no reason to celebrate. That argument is the equivalent of "sure there are a lot of murders, but at least rape is down". Broken is broken. Once we tolerate this type of sub-standard behavior and environment in any meaningful way, we are, in essence, approving all of it.

And Jax, I generally agree with you, but here i diverge. Creating more public toilets for the homeless to urinate in just A: Throws more money at it; B: Ignores the underlying problem; and C: puts a bandaid on a bullet wound; and D: Allows some public official to feel better about himself.

Clean up the streets and sidewalks. This i mean in its most literal sense. Scrub it. Wash it. Keep it clean. If people are sleeping on the street, it is AGAINST THE LAW. Give people pride of ownership of Downtown. If something looks nice, people take care of it.

"Oh Juniper you heartless bastard. How can you refer to these people like they are not human? They are someone's mother/father/son/daughter????"

EXACTLY! Are we doing them favors by allowing them to urinate and defacate on the street??? How is enabling this behavior somehow the compassionate approach?

Fix the broken windows. Enforce the laws, no matter how trivial they may seem. This is all or nothing.

And, for those who want more information on the Broken Window, please read the Tipping Point. This does as good a job explaining as i have ever seen.

I'm not Giuliani's biggest fan, but this was his approach and it is hard to argue results.

TNJ

The Honorable Bill White

Mr. Mayor:

Let me preface my comments with a couple of statements: I have been a supporter of yours since the get go. I admire what you have done and continue to try to do for our wonderful City. I believe you to be a City Official with a business mind and one who has taken great strides to encourage economic growth here in Houston.

However, what has happened to downtown Houston on your watch is shameful. Let us get past the stadiums and the new development by the Toyota Center. The private sector development moving in at the newly announced mega-development is great. My hat is off to those developers, especially when you consider the state of the remaining 90% of downtown.

One need look no futher than the streets. There is no street level retail of significance downtown. This could be, in large part, due to the success of the tunnel system. Who wouldn't rather travel in the comfort of conditoined air, given our typical weather here? But it is deeper than that.

Just take a walk down Main Street in downtown. It is littered with filth. One cannot travel one city block without being accosted by a panhandler, seeing the homeless sleeping in doorways, or smelling the lovely aroma of human urine and feces. I feel for these folks who are down on their luck and evidently have no other recourse but to live in the streets. However, I have personally witnessed the same man begging for change at the same intersection for more than 3 years. Three years? How can we ask restaurants and residential projects to come downtown when we absolutely don't do anything to provide them an environment where patrons will feel safe?

Please read the many books and articles written on "The Broken Window Theory". If we allow the small crimes such as panhandling, sleeping and defacating in public, or vandalism to go unchecked, it sends the message that A: we condone such actions, B: nobody is watching, or C: nobody cares. Any of these three very logical conclusions leads to further crimes. And, they are just that: crimes.

Perhaps the straw that broke my proverbial back was hearing that further budget cuts in the HPD will cause fewer police to be patrolling downtown. I cannot imagine the balancing act you and your staff perform when doling out the city funds. However, pulling what few cops are downtown out of the area will kill what retail and residential that has managed to survive thus far.

On behalf of those who own residences, businesses, or work downtown: Please clean up the streets. Get the panhandlers off the streets and out of the vacant buildings. We have many shelters designed to provide for these folks. I understand you may take some heat from those that for some unexplained reason believe it is heartless to move these people to shelters and out of doorways, but you have shown in the past you will take on challanges and this is another opportunity. Please provide more lighting and more police.

There must be creative ways to accomplish this. I will not pretend to know enough about the City machine to tell you how to do your job.

Please don't ignore downtown any more. Clean it up. Taking small steps is the only way to make a large difference.

With absolute respect and deference,

The New Juniper

15-story tower on Mid Lane

Highland Tower

Seeing that picture is quite a relief. I was worried it was going to be a vanilla, pre-cast, EIFS, punched opening, totally lacking imagination design. Whew!

No wait, that is exactly what it is.....

Come on, surely we can do better than that.

TNJ

Theory adopted by Giuliani in NY. We could learn here in Houston......

Article titled Broken Windows by James Q. Wilson and George L. Kelling, which appeared in the March 1982 edition of The Atlantic Monthly:

"Consider a building with a few broken windows. If the windows are not repaired, the tendency is for vandals to break a few more windows. Eventually, they may even break into the building, and if it's unoccupied, perhaps become squatters or light fires inside.

Or consider a sidewalk. Some litter accumulates. Soon, more litter accumulates. Eventually, people even start leaving bags of trash from take-out restaurants there or breaking into cars."

I am new to this thread and haven't had the luxury of reading the entire thing. So, i apologize if i repeat something here. But to me, the downtown club issue has nothing to do with black/white. It has everything to do with people feeling safe. if for some reason the blacks and whites feel like they cannot hang out in the same clubs, there is more than enough room and club space for everyone to have a good time.

No race has cornered the market on the criminal element. I would guess you have an equal chance of getting mugged by a black, white or mexican. The problem is not who is committing the crime, the problem is that the crime is being committed.

If i am white, do i feel any safer knowing the potential rapist around the corner is white also? Of course not.

Get the criminals out of downtown. Put more lights. Put more cops. Everything else is rearranging deck chairs on the Titanic.

Sales office tells me that abatement has already begun on the building and that demolition should start in the next two weeks.

Also, just because the City could have gouged LaMesa (not Davis by the way) on the sale of the street doesn't justify it doing so. City has to have an appraisal done and treat it as an arm's length transaction.

The approach seemingly condoned above is called extortion.

TNJ

I have heard, stress heard without factual backup, that the folks at Palm Palisades are having some construction issues. Has anyone heard similar of know absolutely different? If anyone from the developer sees this, please respond.

Thanks.

TNJ

Make sure your title insurance is solid. Lots of cobwebs in that closet i hear....

Couple of things: First, (and you guys know i don't go out of my way to create a love-fest), but Niche's point about brand consistency is absolutely right on. They want you to walk into any one of their hotels and see absolutely no difference. Read: Chris & Harry Pappas. They are masters of this at their restaurants.

you don't say..

link

If you believe the man that owns HV, the W is all but done on the above referenced site. My source is nowhere near as credible as the bathroom attendant at Treasures....mine is the doorman at Ricks

Thank you Niche for the synopsis of my post. Well said.

I agree that it still seems odd that these same circumstances apply to all four hotels...but of course, unless someone on HAIF is good enough to go through the tax accounts and see whether any of them have indeed been sold, it isn't conclusively proven that all of the original owners are still around. It may be that there has been a change, even if not outwardly perceptible. And while you were typing your response, I anticipated your suggestion about joining a chain. See the 'EDIT' above.

Yeah, I'm still not very sure where that figure came from. I don't doubt that renovation costs are substantial, but $50k per room sounds a bit much unless there's something we're leaving out. TNJ, any comment?

Assume a hotel has 200 rooms at that number. You'd get a total upgrade of $10,000,000. To me, that is not a tremendously high number when talking about a full upgrade. Although, included in that number are all of the upgrades to the public areas including meeting rooms, back of house, lobby, hvac systems, etc. If you were to consider converting say the Alden to a Marriott: Marriott would send its operations guys down here, its architectural and finish standards guys, and most expensively, its life saftey guys.

They would make any owner address: Computer systems (this alone is about a $500,000 issue) in hardware, software and licensing fees; beds - each chain has specific mattress specs to meet; casegoods and softgoods in the rooms - armoirs, chairs, etc. - again chains don't look at quality as much as they look at whether they meet specs; bathroom fixtures; carpeting; wall paper - most chains now will not allow wall paper or wall vinyl b/c of mold problems; signage (at least $150K here; meeting rooms - all banquet chairs, tables, etc. have exact standards to meet. And lastly, smoke evacuation and stair pressurization. Conforming to these standards (and Hilton and Marriott will not bend even a bit) would be the lion's share of the cost.

When the total cost is spread across guest rooms, $50K a room for conversion from boutique to flag is certainly well within reason. But, i won't beat that to death b/c i don't want to be accused of just arguing with Houston19514.

Also, I would suggest that their willingness to continue the never-ending operating losses rather than taking a capital loss suggests that the operating losses may not be as bad as some have suggested. I mean, if things are truly as bad and hopeless as has been suggested, those capital losses are going to start looking better and better; get out and get it over with.

This statement makes sense. However, i would submit that the reason people don't is because they always feel like success is "just around the corner". Hotels sell based on a trailing 12 months of NOI (basically) and the statement (I believe Niche made) about the debt is exactly right. The hotel is valued off cash flow before debt service which allows a seller to show some positive cash flow and for the buyer to discount the fact that the debt service is drowning the property. Given this, the Seller thinks "if we can just put together a good 6 month run, my numbers will improve, and i can get another $2MM or so for the property." Numbers will vary, but this is the general idea. Also, no one wants to admit failure.

The same ego that caused many of these boutiques to get built stands in the way of drawing the very logical conclusion

above.

On the Inn, Fertitta can afford to ride it out. He is a long term guy. Just like some of the big apartment guys in town: they will build knowing that they may be 5 years too early to market. However, since they are in long term, they will ride out the storm until rents catch up. They do this especially in an environment where they believe land will continue to escalate. If you wait for rents to validate your land purchase, the cost of land and construction may have already priced you out of market.

That is why Finger has been so successful. But i digress....

TNJ

Alas indeed. Thanks for finally throwing out a not entirely unreasonable response to ONE of my questions... But I must say, it is quite amusing that the result you predicted some time ago (hotel closures) is now deemed so unlikely that one who asks why the hotels don't close is pompously branded as very clearly lacking real world experience.

Enjoy. Peace.

I feel like Bill Murray in the movie Groundhog Day. No matter what i do or say, i read the same statements over and over again each time i check the forum.

You clearly do lack real world experience, certainly as it relates to hotel development, financing, and operation. You may be great at, say, tennis and for this reason, i will shy away from debating you on the reasons that Roddick cannot win Wimbledon.

On this topic, however, i have limitless patience and will be happy to review the reasons for my statements.

I do not take your challenge to my statements personally or do i view them as pompous. Just like i do not believe your lack of real world experience with hospitality properties makes you a bad person. In fact, i would wager that the owners of the aforementioned properties downtown wish today they had no real world experience with them either.

In any event, i will take your advice and enjoy the peace.

TNJ

I just spoke with the listing agent. One bedrooms overlooking Main Street are priced at $204,900 on the third, seventh and eighth floors. Not a bad deal. 1,191 sq. ft.

Reiterating what Baker said above, no parking. That is what i have always understood to be the problem here.

No parking. Buy a unit, lease a parking space. Maybe acceptable to you, but re-sale will be a nightmare b/c you will never be able to guarantee long term parking to anyone.

My two cents.

Been out traveling for a bit and finally made it back to my post here.....

Took me a while to catch up on my reading, but alas, here i am.

First, Houston Development, thank you for 'having my back' so to speak. Not needed, but certainly appreciated.

The statements made to refute my industry facts do nothing but emphasize my point.

Q: "why would a hotel that is losing money year after year continue to stay open?"

A: When it is cheaper to lose money each year than it is close when you are on loan guarantees.

Bottom line: My good friend 'Houston90210' or whatever very clearly lacks real world experience. I will leave it at that.

On to W. And for the sake of peace and goodwill towards men & women, i will put the economics aside....

Glad to see the recent rash of postings. My concern is this:

Everything seems to be speculation still. Once they land, I will assume they will want a splash when the decision is made. It will still be a year before they begin construction, maybe two.

Just ready for this saga to end.

Peace.

TNJ

: applause :

well said tnj!

hopefully, people will take your post as gaining insight rather than looking for a way to be overly critical of your real world experiences.

and edited to add:

i am personally not aware that W closed and funded a sight.

engcons hasnt directly answered my questions, for whatever reason.. however, not saying he's right or wrong.

i just dunno...

Thanks houston dev.

The end game here is a sharing of info. Enough "i heard this" and "i heard that" eventually leads to the truth. No one person is the sole repository for all facts. I share what i know. I share what i heard.

If, from time to time, we have a spirited debate, then so be it. Opposing views are what make the world go 'round. Discussions, even arguments, should be reviewed carefully and learned from.

You are quite right that lowering the rates does not necessarily mean that a sufficient number of hotel customers will be induced to stay there, etc. But you know as well as I do that it is quite likely to do so. Especially when we can all see that they do lower their rates on the weekends to induce demand.

Your brainstorming list is interesting and most are possible. None are likely, especially in the combinations required to come up with three or four hotel/owner situations.

There are plenty of chains of various levels not currently represented in downtown Houston. None of Starwoods chains are there (W, Westin, Sheraton, Aloft, and more). Fairmont. Raddison. Omni. Marriott has several chains not represented. Intercontinental Group has several chains not represented. (and it's highly unlikely that the agreement with Courtyard/Residence Inn would not allow a Marriott, Rennaissance, Ritz-Carlton or other Marriott property.)

Yes, chains have certain standards. But, the properties we are talking about have all been recently built/rehabbed and are all well-done to pretty high standards. In most cases, the required remodeling would probably not be huge. As to owners' willingness to undertake such expense, you are sort of stepping on your message. On one hand you tell us they are willing to continue to bleed huge losses year after year. On the other hand, you suggest they would not be willing to spend money necessary to stanch those losses. In general, these people probably didn't become rich by being economic fools.

I suppose it's always possible the owner is in it for his ego. But, again, is it really reasonably likely that we have 3 or 4 such owners operating hotels in downtown Houston? Seems unlikely. And even if they are doing if for their ego, wouldn't their ego get just as much stroking from a profitable hotel? I don't know, maybe not... As I said earlier in this thread, I know a lot of rich people with large egos. NONE of them enjoy writing checks.

It's very difficult to imagine what could possibly be in the agreements with the city that would make affiliation with a chain difficult. That just makes no sense. It's in everyone's interest for the hotels to succeed.

My skepticism of our resident insiders' claims of rivers of red ink for all downtown boutique hotels aside, the more important point is this. It has almost no relevance to the question of whether or not a W or Ritz-Carlton or Mandarin Oriental or other such uber-high-end hotel might be built downtown (or for that matter other high-end hotels). This is so for several reasons. 1. The market is pretty healthy, even if certain individual hotels are not. 2. All of those mentioned possible hotels are affiliated with strong chains. 3. Any of those hotels would also have (presumably profitable) condos associated with them.

OK. I apologize in advance for the posting, but i can only take so much.

I will not tell you that i know everything about the future of Houston real estate. But, I do know more than most. Don't believe me, just stop reading here.

I will not tell you that i know everything about the economics of hotel development. But, I do know welllllll more than most. Again, same admonition regarding leaving the post at this time.....

However, anyone who uses the logic (<- term used loosely) that hotels should merely lower their rates to increase demand knows NOTHING about the hotel business). It was at this point in the previous post that hopefully most of you hit the "back" button on your browser. Hotels have certain fixed costs and certain variable costs. By way of a very basic example, hotels would MUCH rather sell one room for $100 than 100 rooms for $1 each. Same amount of revenue generated, but much higher variable costs per room on the 100 rooms. So, a novice might say, "Well, if you can't fill your rooms at $150 per night, sell them for $75 and you'll be full." Half right. You'd be full. BUT, you would actually be worse off than if you closed the doors completely. Nice hotels such as Alden, Icon, Lancaster, have high fixed and variable costs.

Their staff per occupied room is very high. (Thus the difference between full service and limited service - but that is a story for another day). Turning a room (transitioning from one guest to another), by way of example, in a limited service should run about $35 - $40 per room. In a full service boutique, it may be twice that. So, selling a room for $75 is actually a money loser just on that alone. Then figure in the staff that you wouldn't have to pay if you were not full of $75 per night guests, and it furthers the problem.

Lastly on rate. Few things in the hotel business are as studied and cherished as rate integrity. You have to build rate up and condition your customers to expect to pay a certain amount. Then, slowly, you can bump rate up without much push back. However, drop your rate drastically and here is what you get: business conditioned to pay $75 per night (money loser) that will jump ship the minute you try to push rate up again. Oh, and those that were paying $150 and happy to do so, resent the lowering of the rate, realize there is a problem, and go to the Four Seasons. The knee jerk reaction to declining occupancy is to dump rate. Biggest problem/mistake in hotel management. GM's want to be able to show owners that they have 85% occupancy and to heck with the ADR. HUGE problem if not caught early. It is a vicious, downward spiral.....

And, while i'm at it. Making a call on Wednesday to get a hotel room downtown and learning your hotel is full is not exactly a leading indicator of the hotel market in CBD. Business travelers are the bread and butter of downtown hotels. Staying full Tuesday, Wednesday and Thursday evenings is not the problem. It is the other four nights that kill these places.

Making the decision between losing $1MM per year and spending another $10MM to upgrade with the prospect of STILL losing money is not as easy as you make it sound. Just consider if it were your money. And, while i'm on it, your statement of "the remodeling costs would not be huge" is equally as baffling. Have you ever recarpeted 250,000 sf of floor? How about new wallpaper for 150 rooms? Nevermind, let's say, just new bedding, towels, sheets. How about upgrading the HVAC system? The hot water delivery system? All of these things would help the guest experience but are VERY expensive.

Staying full for business travel and/or special events is easy. It is the other days that bankrupt a property.

Downtown, unflagged hotels lose money. Period.

I am certain of very few things in life. This one i know.

I don't want to go off on a rant here Dennis Miller style, but goodness gracious.

Sorry if the post skipped around a bit. However, just too much to address for one monring.

If I'm wrong, I'm wrong. Happy to admit it. However, at least prove me wrong based on some, reasonable, sound, based on some sort of reality, logic.....

Respectfully,

TNJ

I think it's fair to point out that, according to you, a good number of the downtown hotels were supposed to have gone under by now. But, amazingly, not a one has closed.

This type of dialogue is what is great about the site.

I will say it this way, the hotels are struggling. The reason they haven't closed is because the owners are writing checks to keep them afloat. Unnamed hotels have had to go to their banks and restructure and negotiate long periods where no payments are made b/c none can be afforded. Not interest only payment, NO payments. Some very wealthy people own huge chucks of these hotels downtown and are all, all, all are writing checks.

I remember the Juniper's predictions. It was dire. 2 to 3 of the boutiques would most likely be closed within a few years and the Hilton was going to wreck the market.

I would love to be wrong. But I am not.

In the hotel business, the fact the door is open is not representative that they are doing well or are even justified. In many cases, they are open b/c the banks would rather have an asset back that generates some cash as opposed to none.

Now, before anyone freaks out and accuses me of saying these hotels are in bankruptcy blah blah, I'm not. They do not make money. They don't. Period. If the owners want to continue to write checks b/c it makes them feel better, they don't want to admit failure, they can't afford not to write the checks b/c the alternative is even worse....makes no difference to me.

But, anyone who believes the fact that somehow the existence of a property justifies the construction and development of it is in the wrong business.

The W or Ritz will be built in Houston for one of two reasons: First, the condos will be tremendously profitable. Secondly, to stoke someone's ego. That is it. There is no set of projections John Keeling can produce that will justify the investment.

But, it will get done. The first owner of the hotel will bask in the glory of owning the highest profile hospitality project to ever hit Houston. It will do well for a bit after opening. Then, with the tremendous backing of the Starwood name, it will settle very nicely into a business traveler niche and generate great cash flow. Only the cash flow won't be enough to cover the debt and it will be sold. Then, the second guy will struggle and keep it going until he realizes it is never the profit center he thought. The second guy will struggle between spening money on deferred maintenance (replacing furniture, carpet, etc. ) in the building which will cost $20MM or so. He will say, "how can i justify spending the money if i don't make any currently"? Finally, in year 10, someone will buy the hotel, put the cost of the deferred maintenance in his purchase, fix it up, and by then the rates will carry it and he'll make money.

If you don't believe me, go ask the group that started Four Seasons. Ask them how much they made.

Happy July 4th.

TNJ

I'm in the industry for one. I have a friend who is the catering director at the Lancaster. My other friend recently left his position as a manager at the Icon because he said its falling apart.

Yes, but aside from that....

I agree completely with the above. A slight bit back on topic, any W Hotel (and the numbers are only more severe if you discuss Ritz, Mandarin, etc..., must get $300+ in ADR to keep its head above water. No hotel, that is 0/none/zip, in Houston currently gets that on a yearly ADR.

Generally the highest in the city has been the Houstonian and it is only mid $200's....

That is why the condos are so important to the equation....

being from california I don't consider galveston beaches to be ugly. Yes florida has beautiful beaches, California decent beaches, but better rugged coastlines. Couyld galveston look better? Probably. But consider it's convenience to Houston I think it nice for them to have galveston. The beaches work and some people just plain like them. If they were so bad beach front homes wouldn't be renting year after year for thousands of dollars per week. Galveston is just a neat spot to me. Not just a beach.

The two issues you address above can and should be addressed separately IMO.

First, Galveston has a lot to offer in terms of land amenities and historic value.

Second, the beaches are crap for the most part and I believe something should be done. Back in the day, and i'm talking about in the 70's & 80's, the beaches were "planed" to remove the seaweed and to give the fresh look. Evidently, (and I have been accused of being many things, but Marine Biologist or Coastal Conservationist are not among them), the seaweed helps fight erosion so they leave it.

Problem is, leaving the seaweed is helping some of the sand stay, but forcing the people to leave (or more accurately, not come at all). I fail to believe, try though we may, there is anything we can do about the less-than-desirable appearance of the water. However, i have to believe we can do something about the way the beaches look that wouldn't threaten the coast line. It has to be possible.

For now, Galveston must sell itself IN SPITE OF its appearance. It seems within reality to sell itself BECAUSE OF its appearance, as well as other attributes....

Speaking of downtown, I was wondering why 'downtown' wasn't an option on the poll. Those with inside info must think it's out of the running, too bad.

Added as an option (with a bit of opinion added)

Marquette hotel decision postponed

By Leigh Jones

The Daily News

Published June 21, 2007

GALVESTON

W Hotels are to today, like what Hard Rock Cafes/Planet Hollywoods were to the 90's. Every city wants one to show how cool they are, but when every city has gotten one...none of them are cool. It's all just 'keeping up with the Jones'.

The comparison to Hard Rock and Planet Hollywood is great imo. "Trendy" is very hard to make profitable in the long run. Big splash followed by endless discussion of "man, have you seen the new XYZ? It's great! So crowded. Then, check the financials on the hotel in 3 years. Trendy only lasts so long. Za Za????