houston-development

apartment rents dip

The cost of renting an apartment in Houston has fallen 2 percent over the last six months.

..

According to another data source, Houston-area apartment occupancies are at their lowest levels in at least 15 years.

heh

houston apartment update

Somebody should post photos of this place. It's hard to imagine an apartment complex with a cell phone tower sticking out of it.

the tower will be enclosed by the parking garage, though the top will be exposed. on paper, it should be difficult to notice, unless youre looking for it.

As Ashley, or Finger? Who is Rodney, and why would he be running Ashley? Very confusing...when is the announcement expected?

sorry. rodney finger, who took over fingers after his father passed away. no timetable on an annoucement.

hi travelguy and my pleasure

It looks like they're keeping the cell phone tower in the middle of the block - I think they should dress it up to look like a mini crown to bring a little bit of Memorial City flare to the area

farb didnt have any other option. he offered to move it, all expenses paid, but they declined.

as a side note, the pool will not be on top of the garage. its now located on the ground floor and the area will be spruced up resort-like with cabanas, grills, etc.

I don't think the Finger family is going to be involved, or allow the name to be used again.

incorrect, rodney will be running the show. just waiting for the noncompete to expire, along with some other things...

So I just drove by this place an can't believe how quickly these are going up.

its going up fast because (1) his grandfather pretty much started davis bros and (2) HUD pops the GC for delays. put just those two together and its pretty much a top priority.

They have one block of apartments on one side of Bagby, a parking garage on the other side (and it looks like they will surround it w/ more apartments), and then more apartments one block away from Bagby. The one thing I was wondering is what are they going to do about parking for the two blocks of apartments w/out a garage? I don't see anywhere they could possibly build a skywalk between the blocks.

the parking garage is for all 3 buildings and (or as of last time i saw the drawings) will be connected via skybridges.

Are people living on the 4th floor one block over going to have to walk across Bagby everytime they want to get to their car?

yes, unless they park on the street.

So I'm guessing that they sold their url to some town home development that's been existence for a good while...

http://www.willowickplace.com/

Is this development still on?

link

McCord Development has called off plans to redevelop the Willowick Court Townhomes - an apartment complex near West Alabama and Weslayan - into a gated residential community of multimillion-dollar homes.

"Due to the economic upheaval, this plan is not presently feasible," the company said in a letter to residents.

As outlined in the letter, McCord now wants to turn the 171-unit rental units into condos and sell them for between $235,000 and $295,000.

if they attempt to move forward on a conversion at those prices, in my honest opinion, it will be an inevitable failure. problem is, they significantly overpaid for the land. i underwrote the deal at $80k/unit and it barely made economic sense. i believe, but could be mistaken, they are in around $150k/unit.

hypothetically speaking, if the previous owners put in $10k to $15k / unit, could have sold out the complex for $130k to $180k and made a great return. a couple of years ago, top end may have gone over $200k but now, not so much.

so long story short: current owners overpaid, property is worth less than the debt (seriously doubt current cash flow comes close to covering nut), and their pricing structure is completely out of whack.

i smell a potential distressed opportunity within the next year or two...

so long story short, 221d4 loans are pretty much the only game in town. in previous years 9 out of 10 developers wouldnt touch the loan with their putz but with the credit markets frozen, there really are no other alternatives. developers that swore off d4 loans are now seriously considering them; though they will probably pass.

on the plus side: no personal recourse, 40 year am, zero rent restrictions, and thats about it

on the negative side: mip (which is comparable to the additional interest on a sub-prime loan), high reserves ($200 - $300 more / door), fighting over reimbursement of cap ex expenses, and a long and painful process to get the development loan closed.

as for my own personal opinion for this development... his all in costs are relatively low, a carp load of units are coming on-line, and we have lost over 100k jobs. if i was in his shoes, i would sit on the dirt for a couple more years. its not a "prime" midtown location but in the next few/couple years, assuming mix and the super block eventually build out, it could become "prime" real estate. today, not so much.

but thats just me.

So what's the catch? Why wouldn't other developers currently on hold pursue the same kind of solution?

Breaking ground on this now seems like terrible timing, but what do I know? There are already so many rental options in midtown, and Camden Travis will obviously open somewhat soon

there are a couple of catches (red tape, escrow, budgets, etc) but im headed out to lunch. ill gladly elaborate on my thoughts later and others (ie niche) may chime in as well.

there are some details that i cannot disclose but ill try my best to be as open as possible...

Yep, HUD is lower income. I guess they scraped their plans for high-end stuff and went the HUD route. I guess the service related businesses within Midtown will have a new workforce of people that they can hire from.

no, thats not the case at all.

the financing is via a hud 221d4 loan, which has ZERO restrictions. full market rents, full amenities, full everything. no one on the outside would know the difference...

farb has rate locked and im 99% sure he moves forward.

I don't think that the developer would have taken things this far unless it was confident of its ability to obtain financing.

egos can make some people do very irrational things.

I don't see a reason why they cannot get financing. Things are tough, but if they can put up a lot of collateral, they can get a loan.

well other than the usual suspects, keep in mind they reduced the number of units AND amount of retail, which kills the underwriting. deal didnt make economic sense before and it sure as heck doesnt now.

but hey, its their money and lifestyle; put up 75%, full personal recourse, and go for it.

i double.. no.. i triple dog dare ya!

I still want to know some details that keep being left out.

1. Who is the Architect?

2. Who is the Builder?

pfht! thats not important right now. what is important, on the other hand, is all of the excitement and buzz this is generating.

always trying to buzz kill with this technicality stuff. give me a napkin and some steel; ill build and design this sucker myself.

Correct my slow understanding of your story, but are you stating that Interfin broke a contract offering free rent for the restaurant?

it's called "renegging" or "retrading" and unfortunately, happens all of the time in our industry. theres usually either a loophole or not worth the legal fees / headache / etc forcing a party to their obligations.

Thanks for the effort of estimating a "fair price." Also, are you talking about a "strong buyer" wanting to develop a vertical project here, that the bank values the deal at 25% less than pro forma estimated value of the developed project? 40% SUCKS but I am surprised the development loan would be a recourse loan....

Does Borlenghi want to get rid of the land (anyone know?) or hold out?

with the exception of hud 221(d)4, 99.99% of all development deals today include recourse.

borlenghi will sell at the right price. unfortunately for him, i dont foresee anyone buying it.

for a little background, mandola got a really good deal when he purchased the property, even worked out of the back offices. when interfin offered terms where mandola could continue operating with free rent, figured it was too good to be true. which in hindsight, unfortunately, was the case.

interfin reneged, demoed the site, and now here we are.

Any valuation out there what "fair" price would be right now?

problem is, there really isn't a "fair" price because of the current lending environment and the huge gap between bid/ask. heck, mandola didnt want to sell but was made an offer they couldnt refuse. interfin overpaid and is now stuck holding the bag.

total hypothetical...

say a STRONG buyer wanted to move forward. to get a loan, they probably put down 40% equity of what the bank values the deal at (probably 25%+ less than what it would have been a year ago). top that off with personal guarantee on the outstanding loan. probably need to JV and use the land as collateral. if i were to guess, think a bank would put a value of $50 psf on the dirt today.

I go by there every day and it just seems like the sign is new. Oh well, eventually something will be developed there. It's really quite shocking to reflect back at where we were last year (regarding the economy) and how everything has changed so drastically.

the transwestern sign is new. been up for maybe a month or two..

good luck trying to sell that site.

1) they paid $95 psf pretty much at the market peak

2) the site is only suitable for a vertical development, especially because of the size and that price

im sorry, i was mistaken.

transwestern put up a marketing sign. transwestern told farb they had a buyer who could and would purchase the property. its on a non-exclusive basis and farb isnt paying a penny for marketing. if it was me, on either side, i wouldnt do it but thats another story.

imo - there is no buyer; they are only trying to get exposure and its a total waste of resources.

any buyer will be unable to justify his price to a potential lender.

but again, crazier things have happened...

on a somewhat related note, the PO at 401 Franklin is on the market. doubt anything will happen, though...

what if "his" price were to change? How likely is that?

very unlikely. his cost basis is low (all things considered), no debt, and his only carrying cost are taxes and basic insurance.

financially, doing fine since he has zero inventory of townhomes.

i guess, in theory, anything could happen but again, very unlikely.

Recent signage on McGowen @ Bagby seems to suggest that Farb is ditching the "Citiplace" idea and selling the properties (3) around this intersection. How about a nice big park!!!??? Unfortnately, the property is too valuable and that idea will surely not go through. I imagine, in the end, we will see townhomes there.

1) that sign has been up almost as long as he's owned it

2) he's discussing options with different lenders and the land is NOT under contract. if someone told you that, they are either (a) a liar, (b ) misinformed, or (c ) an attention whore

3) there's a perfectly good park down the street

4) no one will pay his price and build townhomes, its not economically feasible

5) and yeah, what niche said ^

i heard this weekend that some potential tenants are backing out. whole foods was not mentioned but other well known companies were..

unfortunately, due to the sensitivity of negotiations, i cannot disclose who they are.

So what are you trying to tell us?

if you or know someone with a cat, dont clean their litter box for a month. afterwards, stick your head in there and take a big wiff. then, throw some clean litter on top and see if it helped.

as a side note, i wouldnt be surprised if this deal fell through because the lender balks. wouldnt be the first nor last to back out at the last minute. not saying it is or isnt moving forward. today, nothing surprises me..

having said that, hypothetically if the lender bails, im willing to bet the developer has no recourse and is stuck holding the bag.

This barely (if at all) scratches the surface of the financial sector's problems

i attended a breakfast forecast the other week and the speaker gave a great analogy.

our current financial 'crisis' is like a cat litter box that hasnt been cleaned in over a month. all they are doing is tossing some new litter on top, while the excrement is still there. until someone gets their hands dirty and completely cleans the litter box, it will continue to stink and only get worse.