Tuesday, August 28, 2007

Downtown Updates

• A California Investor is negotiating to purchase the building that once housed the Grand Hotel and restore it to a first class, historic hotel. It is currently owned by a Hong Kong firm and has been closed for more than six years. The new investor has also contracted to buy the adjoining former Dallas Public Library building and a nearby parking garage.
• Construction on the 1600 Pacific Tower will recommence with a new owner and construction plans. Lockey Capital Group has plans to turn the tower into more than 300 apartments. With the redevelopment of 1600 Pacific, Thanks-Giving Square will have the largest concentration of converted apartments downtown.
• 142,409-sf of leases have recently been announced at Plaza of the Americas. JPMorgan’s is the largest tenant, thanks to a 15,566-sf expansion. Capmark Financial also renewed with a seven-year pact. Newcomer, Memphis-based Sedgwick Claims Management Services, took 17,302-sf, leasing nearly all of the 12th floor. These three deals have pushed Plaza of the Americas office space to 75% occupancy.

Home Sales

DALLAS (The Dallas Morning News) – New-home sales were down more than 17 percent in the second quarter, and sales of pre-owned homes were off 15 percent in June. The biggest drop in new-home sales was in homes below $150,000.
"What we are seeing more than anything is the impact of the tightening of the subprime market," Mr. Brown said. "Some of those buyers probably shouldn't be buying."
During the first half of 2007, the median sales price of pre-owned homes was up 1 percent from a year earlier to $150,000, primarily because fewer low-cost homes were changing hands.
Builders started 8,568 single-family homes in the quarter -- down almost 40 percent from a year earlier, according to statistics by housing analyst Metrostudy Inc. Builders sold 9,774 homes in the just-completed quarter -- the lowest total in more than two years.
With the cutback in construction, the number of unsold new homes in the area has declined to just under 11,000. About 13,000 single-family homes were under construction in North Texas, compared with about 18,000 a year ago, according to Metrostudy.
The supply of homes for sale is down from same time last year’s eight months to about seven months.

SLOWDOWN OF APARTMENT RENTALS

(The Dallas Morning News) – The pace of apartment rental has slowed dramatically according to the latest numbers released by apartment consultant M/PF YieldStar.
Average monthly apartment rents at the end of June were up about 1 percent from a year ago to $716.
"Results for the second quarter fell way below expectations," said Greg Willett of M/PF YieldStar, with virtually no increase in apartment rentals.
A net 300 units were leased during this year’s first half, compared with the more than 7,000 net apartments leased in the same time last year.
Homebuilder giveaways and for-rent homes are in direct competition with the apartment market.
"The number of single-family homes available for rent appears to be way up, even though many aren't getting rental rates that actually cover mortgage costs," Mr. Willett said.
Dallas–Fort Worth leads the country in teardowns, mostly to create redevelopment sites. More than 3,500 area apartments were demolished in the last six months. Even so, overall vacancy rates inched up to about 7 percent.
Almost 13,000 units are in the construction pipeline, mostly in central Dallas and in the Las Colinas area, according to M/PF YieldStar's latest estimate.

Dallas Developer Focuses on Hotels

"We think the economics now make more sense to do hotels," said developer Ted Hamilton, who with his father, Larry, is finishing construction on the Mosaic apartments at Thanks-Giving Square.
"Because of the rising prices of these vacant buildings, it's getting harder to make residential projects work."
The Hamiltons know all about the downtown apartment market. Starting with the Davis Building in 2002, Dallas-based Hamilton Properties has built almost 800 rental units in the central business district.
Their latest apartment project combines two former Union Fidelity Life Insurance Buildings at Akard Street and Pacific Avenue into downtown's largest high-rise apartment complex. It has 440 units, and rents start at more than $1,200 a month.
"We have about 75 units rented, which we think is good since you haven't been able to get in the front door until just recently," said Mr. Hamilton, who expects to finish construction this summer.
Soon after, work will begin on the developers' first hotel redo.
Loft hotel
The Santa Fe IV at 1033 Young St. was built in 1925 as a railroad freight warehouse. The eight-story brick building across from the Dallas Convention Center has been vacant for more than a decade.
Hamilton Properties, in partnership with Irving hotel firm Sava Group, plans to convert the derelict industrial building into an Aloft hotel. Aloft is a new chain being rolled out by W Hotel's parent company, Starwood Hotels & Resorts Worldwide Inc.
"We always wanted to do a loft hotel, and this was our perfect opportunity -- a warehouse building," Mr. Hamilton said. "We plan on start construction in September."
The developers will add a ninth floor to the building, which will give them space for 195 rooms. They also plan to open up the big arched windows on the lower floor of the building and add a curved auto court on one side.
Hamilton Properties first looked at using the Santa Fe IV building for a combination of residential units and hotel rooms, but they decided the demand was stronger for lodging.
"There isn't any other national hotel brand that is as close to the convention center," Mr. Hamilton said.
Good bones; bad spot?
The company's second hotel deal is just as close. It's redoing the 252-room Plaza Hotel at Akard and Interstate 30, across the freeway from the convention center.
The 12-story hotel was built in 1972 and at one time operated as a Ramada Inn.
The renovation plan is for a much different property than a standard roadside brand.
"We are targeting more of the hip, urban, chic," said Larry Hamilton. "We've looked at all the Ian Schrager hotels, and we want to be very edgy."
Mr. Schrager has opened boutique hotels in New York, Miami, Los Angeles and San Francisco.
"Our Plaza Hotel has good bones and a fabulous view of the skyline," Larry Hamilton said. Plans call for a dramatic new entry, a theme restaurant and bar and a redesigned pool area.
A top floor of themed hotel suites will replace current bar and restaurant space.
Construction is scheduled to start this fall, Mr. Hamilton said.
The architect for both hotel projects is One Group Design.
While downtown Dallas isn't lacking for hotel rooms, new small and unique properties can capture business, said Greg Crown of hotel analyst PKF Consulting.
"The Aloft hotels are a little bit more trendy because of Starwood's panache," Mr. Crown said. "It's targeted to be directly competitive with Hilton's Garden Inn and Marriott's Courtyard."
He said the Santa Fe IV location is an ideal site to attract convention business. But, Mr. Crown said, the Plaza Hotel has previously been a tough location because it's across the freeway from downtown.
That could be somewhat offset by redevelopment in the area just south of Interstate 30, which includes condominium, apartment and entertainment projects.
Not entirely new
Hamilton Properties does have some experience in hotels.
Mr. Hamilton said that while his company is known in Dallas for its apartment deals, it was involved in hotel projects in Denver. And Hamilton Properties is also one of the partners in the Magnolia Hotel in downtown Dallas.
"I've helped [hotel developer] Steve Holtze on the Magnolia and on a project in Houston," Larry Hamilton said. PLAZA HOTEL, AS IT COULD BE: Plans call for an urban chic feel for the 252-room hotel, a new entry, a theme restaurant and bar and a redesigned pool area. Hamilton Properties plans to convert the industrial building into an Aloft hotel with an additional floor and an auto court. SANTA FE IV, NOW: The brick building near the convention center was built in 1925 as a railroad freight warehouse. It has been vacant for several years.
By STEVE BROWN / The Dallas Morning News