METRO Buys Land To Sell To Developer At Later Date

[Jax]

I hope this isn't too off topic, but does anybody know how Taco A GoGo Sig's Lagoon, and the Continental Club exist when virtually all of the rest of the metro line though midtown looks like a ghost town? I really like that one block, there are actually normal looking people walking around and a few cool places to hang out. I bet if somebody opened another bar/shop next door it would be successful if only due to patrons of Sig's / Taco A GoGo.

Anyways my question is - if one block is full of successful businesses, the why is the rest of main street in midtown relatively deserted? Everybody says its too expensive to build there, but why is the land so expensive if everybody is afraid of operating businesses/living there? It's like the area is extremely undesirable, yet expensive. I know it has potential but there's still something weird about that.

Also, do you guys think that area will ever be developed, or is it always going to look like a war zone?

[Houston1stWordOnTheMoon]

Being locked in has nothing to do with it. Most of the new MRT developments are on other islands. Contrary to popular belief, there's lots of available land in Hong Kong (and Hong Kong SAR is more than just one island). Also, New York wasn't nearly as dense as it is today when the PANYNJ started the WTC back in the 60's. The land that eventually became WTC was virtually worthless. And the fill from the project became Battery Park City.

Let me expand a bit.

This isnt NYC or HKG as i said earlier. We are Houston with ample amounts of land. People here are reluctant to spend more money and get less for it, unlike NYC and HKG. If the goal is density, the city and METRO are going about it the wrong way. You dont use tax payer dollars to purchase property inorder to drive up the value to create density. Only an idiot would subscribe to that mess when theres tons of beautiful land to be had elsewhere in the city for cheaper prices. The low prices will be the key to creating density, not over inflated prices caused by bad business transactions from METRO, the organization whos primary focus should be mobility.

[musicman]

I hope this isn't too off topic, but does anybody know how Taco A GoGo Sig's Lagoon, and the Continental Club exist when virtually all of the rest of the metro line though midtown looks like a ghost town? I really like that one block, there are actually normal looking people walking around and a few cool places to hang out. I bet if somebody opened another bar/shop next door it would be successful if only due to patrons of Sig's / Taco A GoGo.

Anyways my question is - if one block is full of successful businesses, the why is the rest of main street in midtown relatively deserted? Everybody says its too expensive to build there, but why is the land so expensive if everybody is afraid of operating businesses/living there? It's like the area is extremely undesirable, yet expensive. I know it has potential but there's still something weird about that.

Also, do you guys think that area will ever be developed, or is it always going to look like a war zone?

well....sigs and the taco place are somehow related because they used the same credit card machine (or at least used to). they get their most business when continental club is open. most of the day there aren't that many customers. that's when i used to go there. the operation is small and simple which makes things easier to pay bills. big top gets traffic from cont club as well. the facilities were existing so it is easier to take a chance. wasn't a lot of startup overhead. richard's antiques across the street changed their hours over the summer because business wasn't good and they have a long reputation in the area.

i think the problem is that people who build something new are doing it to make a profit i.e. mainly speculators. if a company built a private building (home/business) then they know what they are getting into because they actually plan to stay. at this point in time, the business longevitiy isn't stellar along main. there are surprisingly few restaurants south of downtown all the way to the fannin station because people just didn't live there to be honest. julia's which is in the same shopping center is holding on but when i've been there during lunch, they don't ahve anywhere near capacity crowd. in the evenings the crowds are not there. i personally have to give them credit for hanging in there.

[marc]

I can understand your point however do you understand that METRO does not have the money to make an appreciable difference in the density of houston? it would be just too expensive and the money they do have should be used for transportation purposes only. i laugh at your statement "mass transit profitable"

Yeah i know......."mass transit profitable". I was playing Devil's Advocate, remember?? >

[Montrose1100]

Being locked in has nothing to do with it. Most of the new MRT developments are on other islands. Contrary to popular belief, there's lots of available land in Hong Kong (and Hong Kong SAR is more than just one island). Also, New York wasn't nearly as dense as it is today when the PANYNJ started the WTC back in the 60's. The land that eventually became WTC was virtually worthless. And the fill from the project became Battery Park City.

I thought the fill from the project became the International Finance Center (+The Winter Gardren) & Marina?

[TheNiche]

I know where you are coming from- BUT......let me play Devil's Advocate for a moment.

So, METRO provides mass transit in Houston. Yes. BUT, Houston could eventually spread 100+ miles from NSEW, so the cost of transporting masses of people accumulates to billions. It only stands to reason that METRO would invest in real estate closer to the Houston cluster and involve themselves in a collective vision of urbanizing the inner Houston area to make mass transit profitable.

Makes sense to me. Any thoughts???

m.

METRO's service area only encompasses the City of Houston, its ETJ, and a few other small municipalities. It is not responsible for providing transit outside of its service area, where with the exception of NW Harris County, is where most new residential growth is taking place. So it is unlikely to bear such a great cost.

Also, there is a matter of geometry. It is about 50 miles to Galveston, and just a tad under 50 to Angleton, Sealy, and Cleveland, and a tad more than 50 to Anahuac. Suburban-style growth as driven by Houston hasn't even hit those cities yet and it will be many many years before it does. But just to give you an example, we'll assume that it has filled a 50-mile radius. The area of that circle is 7,850 square miles. The area of a 100-mile radius circle is 31,400 square miles, or four times larger--subtract out the built-out circle, and you'd have to increase Houston's suburban and urban populations by three times over (and assume that density would not increase with population growth, which is absurd) in order to fulfill your 'what if' scenario. By the time that were to happen, I don't think that we'd still be dealing with the same technologies. Even if we are still using cars, the costs associated with all forms of transport will probably have either declined, or at the very least our incomes (and thus our opportunity costs of time) will have risen to the point at which we're willing and able to pay massive sums in order to save time.

Antoher thing to consider: households locate with commute times in mind in the short run, and in the long run, firms locate to be central to a labor pool of adequate size to support their operation. So rather than have a monocentric city where every household that locates at the far suburban boundary has to place a greater and greater burden on central city transit, it becomes the case that the further out that a household locates, the less likely it is to place a burden on urban infrastructure. In fact, this long-term growth pattern gives rise to reverse commuters (like myself), which ensure that existing transportation infrastructure is fully utilized (as opposed to EVERYBODY going one direction in the morning and EVERYBODY going the other direction in the afternoon, which is wasteful of land and resources).

Finally, you should bear in mind that the purpose of transit is not to be profitable, but to save peoples' time. In an ideal world, that could best be accomplished by charging user fees to all forms of transport such that not only are the costs of the infrastructure covered, but that the marginal cost of congestion is also internalized to the users. That is not politically viable, however. So in the mean time, the only realistic outcome is that mass transit needs to be subsidized so as to try and keep an approximate equilibreum that is as close to the social optimum as possible.

[TheNiche]

The land that eventually became WTC was virtually worthless.

Don't tell that to the shopkeeps and residents of Radio Row, as the collection of 19th-century buildings was formerly known. They fought long and hard against the condemnation efforts.

[TheNiche]

Anyways my question is - if one block is full of successful businesses, the why is the rest of main street in midtown relatively deserted? Everybody says its too expensive to build there, but why is the land so expensive if everybody is afraid of operating businesses/living there? It's like the area is extremely undesirable, yet expensive. I know it has potential but there's still something weird about that.

Also, do you guys think that area will ever be developed, or is it always going to look like a war zone?

The area will be developed with high-density structures, most of them mixed-use, but it will take a very long time.

You are correct that the area is too expensive to justify development given demand at present. The problem is that we shot ourselves in the foot with the rail line and all of the marketing efforts to promote Midtown...I'd call it a premature ejaculation. If our timing had been perhaps five years later (and especially if the Red Line were completed concurrently with the University Line and all these new BRT routes), then Midtown would've had more time to fill in while prices were lower, commensurate with demand, and the rooftops would've both created a basic justification for neighborhood retail and also have fed revenue into the Midtown TIRZ and Management District. Instead, a lot of demand for housing got displaced east of downtown and even into the fringe of the Third Ward.

Neighborhood retail is important because once land prices along Main Street get as high as they are, developments necessitate rental rates at which tenants could choose basically among all neighborhoods throughout the region. If Midtown has no successful and nice neighborhood retail within walking distance, lots of bums, inadequate sidewalks, a divided grid, southeast-side views of downtown that aren't as breathtaking, and a train that only goes to areas that also lack any semblance of neighborhood retail, much less a retail destination, then what is the prospective tenant's motivation for renting an apartment in Midtown as opposed to Montrose or Uptown? Or, for that matter, they could go downtown, where there also seems to be momentum. And it isn't as though these folks can't afford cars or as though parking for their car is hard to come by, like it is in NYC or other highly-dense urban places, so the value of LRT is by itself insufficient to motivate most people to pay such high prices for housing.

The damage is done. Growth has been stunted, and although we might actually manage to see *something* once the LRT/BRT system is more extensive and hooked up, but because growth causes even more growth, I'm not entirely sure that Midtown will be what everyone wants it to be...and it certainly isn't right around the corner.

[houstonmacbro]

Let me expand a bit.

This isnt NYC or HKG as i said earlier. We are Houston with ample amounts of land. People here are reluctant to spend more money and get less for it, unlike NYC and HKG. If the goal is density, the city and METRO are going about it the wrong way. You dont use tax payer dollars to purchase property inorder to drive up the value to create density. Only an idiot would subscribe to that mess when theres tons of beautiful land to be had elsewhere in the city for cheaper prices. The low prices will be the key to creating density, not over inflated prices caused by bad business transactions from METRO, the organization whos primary focus should be mobility.

I thought the purpose of the purchase is to HOLD the land value until at such time it can be developed. So that developers can buy it back in the future for the same price today.

[Watch4Snakes]

I am under the impression that Metro has far more sweeping powers than the average person is aware of. I, personally, have never read its charter or other provisions and can't speak with complete certainty, but it doesn't seem that Metro's dealing in real estate is illegal in any way. So, if Metro chooses to continue to pursue this venture, are there any legal grounds to block them from doing so?

In my personal opinion, there needs to be a catalyst to get development snowballing along Main Street. Perhaps a deal with this property will end up aligning itself with a decision by Camden to proceed with its own "Superblock." Of course...wishful thinking, as with many others here. But somebody, some entity, needs to do something different to cause a change to occur. I'm hopelessly optimistic, and I immediately, perhaps foolishly, convinced myself that this whole deal with create that much-needed "catalyst" in 2008.

[TheNiche]

I am under the impression that Metro has far more sweeping powers than the average person is aware of. I, personally, have never read its charter or other provisions and can't speak with complete certainty, but it doesn't seem that Metro's dealing in real estate is illegal in any way. So, if Metro chooses to continue to pursue this venture, are there any legal grounds to block them from doing so?

The big question is whether METRO has the authority to work a deal with any given landowner to purchase the property, take it off the tax rolls, and sell the property back to the same individual a year later at the same price. Assuming that something doesn't go horribly awry with the deal, what they are effectively doing is deciding for the City of Houston, HISD, Harris County, and every other taxing entity that they're all going to provide a unanimous tax abatement. So rather than METRO paying the holding costs for a TOD project out of their own pocket, which would be appropriate because their mission is to ensure better mobility, all these other government entities end up paying in the form of lost revenues and METRO is cash neutral.

[musicman]

I am under the impression that Metro has far more sweeping powers than the average person is aware of. I, personally, have never read its charter or other provisions and can't speak with complete certainty, but it doesn't seem that Metro's dealing in real estate is illegal in any way. So, if Metro chooses to continue to pursue this venture, are there any legal grounds to block them from doing so?

METRO has plenty of condemnation power. they can actually condemn 1500 ft around a rail stop which would encompass a large area of land. will they do it? not if they don't want to attract more dissenters.

[TheNiche]

METRO has plenty of condemnation power. they can actually condemn 1500 ft around a rail stop which would encompass a large area of land. will they do it? not if they don't want to attract more dissenters.

Actually, after the New Haven, CT supreme court decision and the subsequent TX legislative session that outlawed use of eminent domain for economic development, is that power even lawful anymore?

Btw, I know a guy really well that was personally involved in granting METRO's condemnation powers. It was a calculation designed to give METRO sufficient power to effectively circumvent the lack of zoning so that they could do successful TOD. Otherwise, it was anticipated that METRO and special interests could use TOD in a single neighborhood as an excuse to promote zoning everywhere. The irony is that METRO doesn't like to use their condemnation power because it is politically unpopular, but that even though they have it, certain special interests in favor of zoning still cite TOD as a reason for zoning.

Edited April 11, 2007 by TheNiche

[musicman]

Actually, after the New Haven, CT supreme court decision and the subsequent TX legislative session that outlawed use of eminent domain for economic development, is that power even lawful anymore?

tell that to the houston business journal...

the Houston Business Journal reports that Metro wants to get in the eminent domain business:

"Under a new Metro real estate initiative, owners of land within a 1,500-foot radius of a light rail station could stand a higher chance of having their property condemned by the transit agency.

. . . .

Now, Metro is taking a more active role in stimulating real estate development along rail corridors (see related story). As a result, development activity within the 1,500-foot limit could extend the transit agency's influence far beyond the actual tracks.

Metro's eminent domain reach covers a span of five football fields in any direction. The surroundings of a single urban rail station can encompass several square blocks occupied by scores of buildings.

as of last yr this was still in place.

Edited April 11, 2007 by musicman

[Montrose1100]

tell that to the houston business journal...

the Houston Business Journal reports that Metro wants to get in the eminent domain business:

"Under a new Metro real estate initiative, owners of land within a 1,500-foot radius of a light rail station could stand a higher chance of having their property condemned by the transit agency.

. . . .

Now, Metro is taking a more active role in stimulating real estate development along rail corridors (see related story). As a result, development activity within the 1,500-foot limit could extend the transit agency's influence far beyond the actual tracks.

Metro's eminent domain reach covers a span of five football fields in any direction. The surroundings of a single urban rail station can encompass several square blocks occupied by scores of buildings.

as of last yr this was still in place.

But I thought that was just for "right of way" as in expanding the Rail Line, not purchasing the land and such for developement?

[musicman]

But I thought that was just for "right of way" as in expanding the Rail Line, not purchasing the land and such for developement?

well, that's what one would hope. the only place they have this power is around rail stations. from the houston biz journat Metro Board Chairman and real estate developer David Wolff says there is no set policy in place regarding the condemnation of land for development purposes. The way the law is written is is subject to interpretation and that's what people (including legislators) are afraid of.