Wednesday, December 23, 2009

Dallas-Fort Worth sees gain in office leasing in '09

The Dallas-Fort Worth area will wind up with a significant gain in office leasing this year, according to one of the area's largest commercial real estate brokers.
CB Richard Ellis said Tuesday that the D-FW area has had more than 1.3 million square feet of net leasing this year.

That estimate is in sharp contrast to statistics from other real estate firms and analysts who say North Texas has seen a net decline in office tenants in 2009.
CB Richard Ellis' report will come as a big surprise in a market where many major office tenants have consolidated this year because of the recession.
The net leasing gain reported by the real estate firm is "significantly down from last year's year-to-date absorption of 2.8 million square feet," said CB Richard Ellis research coordinator Sarah Rochester.
"And we looked into why our numbers were so much higher, and some firms had counted signed leases as absorption in 2008 while we waited to count the absorption until they actually moved in during the first quarter of 2009," she said.
Office market reports can differ dramatically because each company counts the leasing and the geographic areas differently.
According to CB Richard Ellis, the two business districts that saw the most net leasing this year were South Fort Worth and Stemmons Freeway in Dallas – areas that usually don't see large office demands. Business expansions by Bank of America, Parkland Memorial Hospital and Southwest Airlines drove the Stemmons area gains, according to CB Richard Ellis.
Dallas' Uptown district and Las Colinas were also among the top office market performers this year, the international real estate service firm said.
CB Richard Ellis estimates that about 22.9 percent of the D-FW area's office market is now empty.
So far this year, other office market surveys have shown significant declines for the area.
Real estate firm Cushman & Wakefield of Texas reported almost 1.8 million square feet of negative office leasing in the D-FW area through the third quarter. And the brokerage company is expecting to detail further office demand declines at the end of the year.
And Grubb & Ellis Co. reported almost 500,000 square feet of office leasing declines through the third quarter. Steve Brown/Dallas Morning News
D-FW OFFICE LEASING
Annual net office leasing, including subleases
2006 3.9 million square feet
2007 2.9 million square feet
2008 2.8 million square feet
2009 1.3 million square feet
SOURCE: CB Richard Ellis

Monday, December 21, 2009

Carlson Renews, Expands to 44,000 SF


DALLAS-Billion-dollar hedge fund Carlson Capital LP has decided to stay put at its current digs uptown, taking 43,663 square feet at the 350,000-square-foot 2100 McKinney class A office building. The 10-year renewal also expands Carlson Capital's space from its current 38,518 square feet.

Celeste Fowden with CB Richard Ellis' Dallas office tells GlobeSt.com that the lease was set to expire at the end of 2010, and Carlson Capital decided to see what else was out there. "We competed against the market. There are a lot of competitive deals available to tenants, and when it comes to a quality tenant like Carlson, everyone wants them in their buildings," acknowledges Fowden, who paired with CB's Worthey Wiles on behalf of building owner Metropolitan Life Insurance Co. Craig Wilson, Greg Biggs and Randy Cooper of Cushman & Wakefield of Texas Inc. represented the tenant.

Fowden says Carlson Capital will relocate to the top two floors of the building during summer 2010, taking the entire 19th floor and the majority of the 18th floor. The move required relocating a couple of existing tenants, as Carlson Capital wanted the top two floors as part of the renewal, she adds.

The building is currently 60% leased, with a block of approximately 120,000 square feet of contiguous space available. Two tenants, Crow Holdings and Texas Capital Bank, are leaving by year-end. Crow Holdings is relocating to a new campus, Fowden says.

Tuesday, December 15, 2009

Crescent execs return to fold after Barclays takes over

Some former top officers of Crescent Real Estate Equities are rejoining the firm now that it has new owners.

Last month, Barclays Capital and former Crescent vice chairman John Goff set up a new company to acquire the Fort Worth-based real estate investor.

Crescent said Tuesday that it has rehired eight executives who left the company after it was sold to Wall Street firm Morgan Stanley in 2007.

The top officers returning to Crescent include Jason Anderson, who will be chief operating officer, and John Zogg, who will be managing director of leasing for properties in the Dallas area and Denver.

Crescent has stakes in 36 office buildings nationwide, including Dallas’ Crescent complex in Uptown and the Trammell Crow Center and Fountain Place towers downtown.

Barclays took over the Crescent assets after a unit of Morgan Stanley Real Estate was unable to meet debt payments on the properties.

Transwestern wins huge real estate contract from RREEF

It will manage almost 9 million square feet of industrial, office space

The Dallas office of real estate firm Transwestern has landed one of the largest property management deals on record.

Institutional investor RREEF has hired Transwestern to operate almost 9 million square feet of industrial and office space in North Texas and Oklahoma.

The agreement includes high-profile projects such as the 5950 Sherry Lane office tower in North Dallas and the 4040 North Central tower near Cityplace.
"It's the largest such contract award I know of," said Jack Eimer, Transwestern's central region president.
RREEF – a New York-based investor that is one of the country's biggest commercial real estate owners – previously managed the buildings itself.

But several months ago, RREEF decided to hire outside companies to take over management of all its U.S. properties.
In October, RREEF selected Dallas retail brokerage firm United Commercial Realty to manage its shopping centers in North Texas and some other markets.
The new deal with Transwestern includes more than four times that much real estate
"We started off the year with about 21 million square feet of properties under management," Eimer said. "This will bring us to almost 38 million square feet.

"During these difficult times, owners are putting more emphasis on operations."
By STEVE BROWN / The Dallas Morning News

Monday, December 14, 2009

Fairfield Residential files for Chapter 11 protection

San Diego company builds in Uptown, other D-FW locations
An apartment developer with several projects in the Dallas area has filed for bankruptcy.

Fairfield Residential LLC filed for Chapter 11 protection from its creditors on Sunday.

“Although the relatively strong demand for multifamily rental units during this recession has allowed our businesses to continue to perform well, the unprecedented collapse of the U.S. real estate and capital markets has made it difficult, if not impossible, for Fairfield to continue without restructuring its financial obligations,” Fairfield CEO Christopher Hashioka said.

The builder is based in San Diego and has major operations in Dallas.

Fairfield said on its Web site that it plans “conduct its business operations in the ordinary course” while it seeks to restructure. The company said it has already reached a tentative reorganization agreement with “significant lender groups.”

Fairfield is asking a Delaware bankruptcy court to allow it to keep “it’s existing infrastructure in a new operating company.”

“Fairfield expects to emerge from this process and maximize value for all of our stakeholders by creating a stronger go-forward operating platform and continuing to be an active player in the multifamily sector,” the company statement said.

Fairfield said it plans to liquidate some assets through a trust.

The company has been a big player in Dallas’ Uptown district, where it developed several projects. It is currently building hundreds of apartments in the Village at Fairview complex on U.S. Highway 75 in Allen.

But Fairfield has already canceled some Dallas-area projects, including a development planned on Lovers Lane east of North Central Expressway.

In September, Fairfield surrendered ownership of the 13-acre Signature Pointe property to lender Compass Bank.

2010 Industry Outlook Hoping for an upward swing in the cycle

Tenants will continue to benefit from favorable lease terms, ‘blend and extend’ renewal options

Office, industrial and retail leasing in North Texas will continue to be challenging in 2010, as job losses and tighter corporate budgets continue to cause tenants to consolidate, commercial real estate executives say.

It will continue to be a tenant’s market and “blend-and-extends” will continue to be common in the office leasing landscape in 2010, said Steve Thelen, managing director of tenant representation for the Dallas office of commercial real estate firm Jones Lang LaSalle.

The strategy, which became common in 2009, involves tenants with a few years remaining on their leases signing early renewal agreements with their existing landlord to add a few more years to their current lease. The rental rate on the additional term is blended into the existing rate to create a “blended rate” that’s lower than the original. This allows the landlord to keep a tenant, and allows the tenant to achieve a lower rental rate immediately.

Overall, the North Texas office market will see vacancy rates rise slightly in 2010, and lease rates during the next 12 months could drop another 10% as landlords reduce rents to attract and keep tenants, Thelen said.

“I think the job losses are probably going to level out over the next 12 months,” Thelen said. “But we’re still going to have capital constraints on both tenants and landlords, so some companies aren’t going to want to spend the money to relocate, and landlords are going to view occupancy as much more important than rates.”

Slow office demand

Office demand will remain slow into 2010, according to a forecast by the commercial real estate firm Cushman & Wakefield of Texas Inc. Tenant demand dropped sharply through this September. Overall absorption ror the third quarter of 2009 decreased 271% when compared to third quarter 2008, with the market giving back a collective 1.77 million square feet.

John Hoctor of the commercial real estate services firm Altschuler Hoctor Co. said office building landlords might be able to make up some lost ground in 2010.

“Although we would certainly love it, we’re not looking for 2010 to be a year of huge recovery,” Hoctor said. “However, we do anticipate that more companies will loosen up their restraints on additional space requirements and begin to (lease) office space again in 2010. If you’re an owner of vacant space, you’ll have a chance to fill it in 2010.”

Industrial activity wanes

On the industrial side, North Texas absorption will continue to decrease in 2010 and possibly 2011 as well, said Jeff Thornton, Duke Realty Corp.’s senior vice president for Dallas operations.

“2010 will be tough,” Thornton said. “We’re hoping to see signs of market recovery in 2011, with stabilized absorption, and we’ll start seeing positive absorption and rent growth in 2012.”

Industrial lease rates fell by about 30% in 2009, when factors such as free rent and other tenant concessions are factored in, Thornton said.

Speculative development of industrial space, which dropped sharply in 2009, won’t restart until at least 2011, Thornton said.

In Dallas-Fort Worth, absorption of industrial space decreased by 3.9 million square feet through the first three quarters of 2009, according to Grubb & Ellis Co. Almost 81 million square feet of industrial space sits vacant.

The industrial vacancy rate increased to 12.2% during the third quarter, up about a point from the same time a year ago, the Grubb & Ellis report says. The G&E forecast calls for the overall industrial vacancy rate to rise to about 13% percent within the next year, as demand for space remains weak.

Retail opportunities

Filling recently vacated big-box retail space will continue to be difficult in 2010, said Earl Harris, senior vice president and director of project leasing for Dallas-based The Weitzman Group.

“I think it’s going to be another very busy year,” he said. “There’s a good number of local and national retailers out to make deals.”

Despite the closure of national retailers such as Circuit City, Steve & Barry’s, and Linens ’n Things, occupancy at North Texas shopping centers dropped only slightly in the first half of 2009. The area’s retail occupancy rate was 87% at midyear, down from 87.6% at the end of 2008, according to a report from The Weitzman Group.

Harris predicted absorption of retail space will be flat in 2010.

“In D-FW, we have a strong history of backfilling second-generation space,” Harris said. “The good locations will get backfilled, but landlords are going to have to get creative on uses and configurations to get tenants into their buildings.”

Sunday, December 13, 2009

Dallas Design District's second redo takes shape


Justin Tamayo did a double take as he was driving through the Dallas Design District a few months ago."I was amazed to see the all apartments they had built," Tamayo said. "I didn't know all of that was there."
Tamayo was so taken with the neighborhood that he moved there. "I bring my friends down there, and they're surprised at what's here," he said.
Indeed, if you haven't taken a recent spin down Hi Line Drive – or don't even know where it is – the trip will be eye-popping.
Developers have built three big apartment communities just west of Stemmons Freeway, and hundreds of residents have moved in.
Restaurants and shops are on the way.
"Obviously having 1,000 apartment units with a lot of people makes it more of a 24-hour environment," said Mike Ablon of Pegasus Ablon Properties, which is marketing the redevelopment. "There's a lot of excitement about the overall Design District."
Not its first redo
The former commercial neighborhood between Stemmons Freeway and the Trinity River started out as a warehouse district. In the 1980s, it began morphing into a neighborhood of design and furnishing firms.
Now the Design District is being remade into an urban village just northwest of the Victory Park complex.
Developer Wood Partners is the biggest player in the nascent rental market, finishing construction on two projects with more than 500 units between them.
"There's a pretty dramatic metamorphosis in that area," said Wood Partners' C. Todd McCulloch. "With every passing month, the Design District is more of an established neighborhood."
Wood Partners has leased about 60 percent of its Alta Design District project on Inspiration Drive just west of Victory Park.
The apartments rent for an average of $1,400 a month.
And the first tenants are about to start moving in at Wood Partners' 214-unit Alta 1900 Lofts building at the corner of Hi Line and Oak Lawn Avenue.
"We've been working on these deals for a long time, and it's surreal to see them open and people moving in," McCulloch said.
Trammell Crow Residential has rented more than half of its 355-unit Alexan Design District complex on Oak Lawn.
"The renters are coming from all over," said Crow Residential's senior managing director, Darren Schackman. "We are right in the middle between downtown and the medical center."
With rents that average more than $1,000 a month, the Alexa complex is vying with other new rental options in the area.
"Competition is good and bad," Schackman said. "But we are getting a good critical mass of people, which is bringing other development into the area, including restaurant and retail."
Eats on the way
Dallas businessman Shannon Wynne will start work soon on a restaurant at Hi Line and Oak Lawn.
"I still think it's a big secret," Wynne said. "Some people think we are absolutely crazy to go down there."
Still, Wynne said he's been impressed with the streetscape and landscaping upgrades in the area.
His new restaurant will be "a gastro-pub, for lack of a better term."
Three more restaurants are in negotiations, he said, but the retail and restaurant market in the Design District won't take off overnight.
"People think you put up a couple of apartment buildings, and it's going to be instant customer base," Wynne said. "It isn't that easy."
Steve Brown/DMN

Unwelcome mat out for project to house chronically homeless






Developer Larry Hamilton has been working for months to turn the empty Plaza Hotel south of downtown Dallas into homes for the homeless. But it's been much tougher than he imagined.  Hamilton and other developers complain of roadblocks even as they try to carry out the city's goal of opening 700 apartments for the homeless by 2014. The housing, which would come with mental health and addiction services, is considered the most effective way to clear the streets of the hard-core homeless.
But Dallas has lagged behind other major cities in creating the units. Public financing, neighborhood cooperation and political will are all in short supply in a city that has been able to raise millions for arts projects, a convention center hotel and Calatrava bridges over the Trinity River.
"They have this aspiration to do 700 units, but I think it's going to be hard to do any," Hamilton said. "I don't see how it's going to get done."
The apartments that Hamilton and others want to build are called permanent supportive housing. They are intended for the chronically homeless, the portion of the homeless population that has been on the streets for years and has disabilities such as mental illness as well as addictions. They are the most visible of the homeless because they panhandle, sleep on sidewalks and commit crimes such as theft.
On any given night, there are 600 to 1,000 chronically homeless people in Dallas County. They cycle in and out of jails and hospitals at a huge cost to taxpayers. Many gather downtown, and business leaders have expressed concern about their impact on Dallas' quality of life as well as its image.
Hamilton, who typically has developed high-end housing and hotel projects downtown, was among the loudest of those voices.
The chief executive of Hamilton Properties led an unsuccessful fight against a $23.8 million bond proposal in 2005 to build Dallas' homeless assistance center and fund some permanent supportive housing.
After losing that battle, Hamilton sought some of the bond money for the Plaza renovation. He said he now believes that housing is the solution to moving the chronically homeless off the streets.
"They have some really deep mental problems or substance-abuse problems and there's nothing really to address those things," Hamilton said. "We need to come up with some alternative that isn't incarceration."
Dallas currently has about 900 units of permanent supportive housing, most of which has opened since the City Council approved a Ten Year Plan to End Chronic Homelessness in 2004. Most are single apartments at various complexes, funded through federal rent subsidies and residents' rent.
Many of those complexes screen out people with serious criminal records, leaving some of the most difficult cases still on the streets. Officials say much of the remaining housing should be new construction or renovations run by nonprofits that can set their own admission criteria and care for dozens of people at one site.
"It's halftime," said Mike Rawlings, Dallas' homeless czar. "And the second half is going to be harder than the first half."
Housing saves money
Studies around the country have found that besides helping the homeless, permanent supportive housing can save taxpayers money by ending costly cycling through hospitals and jails.
A study published in the Journal of the American Medical Associationthis year found that Seattle saved $4 million in hospital, jail and other public services after 95 homeless people moved into one housing project. The residents' repeated visits to hospitals and jails had cost taxpayers nearly $8.2 million a year before moving into the project.
Experts say the housing works because residents become more stable and are more likely to take medications that help keep them out of trouble.The Seattle study found that the chronically homeless cost taxpayers an average of $86,000 a year at institutions, while caring for them in housing cost $13,440 per person a year. Dallas officials estimate it will cost an average of $8,000 to $10,000 a year here.
In Dallas, the jail, hospitals and the city drunk tank spend at least $50 million a year caring for the homeless. Most of that is spent on the chronically homeless.
"If we don't come up with pragmatic solutions, you and I are going to pay for these things," Mayor Tom Leppert said.
Also looking for savings is Dallas County Commissioner John Wiley Price, who recently set up a task force to examine the region's mental health system.
Dallas County spends more than $15 million a year providing health care to the homeless at Parkland Memorial Hospital. The county spends nearly $11 million a year jailing an average of 523 homeless people a night, and that doesn't include their medical care. Price said that investing in housing and mental health care can save taxpayers money.
"You've got to get people to understand that if you don't, it'll cost you. It's like the old adage of 'pay now or pay more later,' " Price said.
Question of priorities


Dallas has been slow to shift the millions going into jails and hospitals into housing. It's behind metropolitan areas such as New York and Seattle, which have far more permanent supportive housing.
The most ambitious cities have created special funds for the projects, such as a voter-approved housing levy added to the property tax in Seattle that costs the average homeowner $79 a year.
Dallas designated $2.5 million from bond funds for permanent supportive housing, but that will not go far. The city has provided $1.5 million to help Central Dallas Ministries develop 50 units for the homeless at a development that also includes other affordable housing and market rate condos. The rest was slated for a 120-unit project in South Dallas that got shelved because of neighborhood opposition.
Larry James, president and chief executive of Central Dallas Ministries, said more city money is needed.
"We don't place a high enough priority on what I would call the art of caring for humans," James said. "Caring for our poorest and our weakest is also an expression of our community's soul. That should be the new arts project."
Leppert said the city is considering some housing funding through a future bond program. He also said private donations can be important funding sources.
For now, the major source of public funding for the projects comes from state-issued tax credits. Low-income housing developers apply for the tax credits, which they can sell to investors to raise money for their projects.
Neighborhood balks
One of the criteria for getting the state tax credits – neighborhood support – has knocked Hamilton and other local developers out of the running. A project can lose significant points in a rating system because of neighborhood opposition.
Residents of the Cedars, the neighborhood surrounding the Plaza, raised strong objections to Hamilton's plans for housing for the homeless earlier this year. They said the plan was being rushed, that more units should be offered at market rates and that developers did not have the experience to run such a large project.
The opposition died down after Hamilton deleted any plans for homes for the homeless. But the state rejected his application for tax credits in March, so the white, 12-story Plaza building off Interstate 30, with its perfect views of the downtown skyline, sits empty.
Leppert created a task force that started meeting in August to figure out how to better work with neighborhoods on housing issues. He said it will be important to spread the projects throughout the city.
"I think we have to be careful. We're not going to solve this on the back of a single neighborhood," he said.
Rawlings, who serves on the task force, said residents' fears of plunging property values are unfounded.
"We just have to do a better job of educating groups," he said.
He pointed to a recent study by New York University's Furman Center for Real Estate & Urban Policy. It found that prices for the buildings closest to housing for the homeless increased over several years. The study of 123 developments found that most projects were built in distressed neighborhoods.
Hamilton said he can relate to residents' concerns about the housing. He originally was very skeptical of CityWalk@Akard, the downtown project that will include 50 units for the formerly homeless. The project is less than a block from a luxury apartment building his company developed, The Mosaic, which has rents as high as $7,000 a month.
But Hamilton said he changed his mind after visiting examples of successful permanent supportive housing projects in Los Angeles and Seattle.
South Dallas homeowner Alva Baker, who serves on the mayor's task force, says that the city will do a better job of addressing residents' questions.
"I think some of the fears people have can be effectively addressed," Baker said.
"I think as a city we haven't done a good job of telling the story of how people can heal their lives and how that makes a difference for all of us."
'We need to attack this'
Neighborhood opposition can be especially tricky here. Dallas' council district setup – in which council members are elected by smaller districts throughout the city – makes it difficult for elected leaders to go against their constituents.
"They're totally accountable and they take all the grief," Hamilton said.
But questions of where to put permanent supportive housing are moot if there is no money to build or operate it. Ultimately, leaders want to see millions being spent on jails and hospitals shifted into housing.
Doing that, homeless czar Rawlings said, will take more coordination between various governmental agencies, since the money comes from so many different pots.
The county, for example, agreed to give $1 million to The Bridge for annual operating costs after being convinced that the expenditure would save money by reducing the number of homeless people in jail.
And it has worked – saving the county $2.7 million in costs of jailing the homeless, said Ron Stretcher, Dallas County's director of criminal justice. The key is having data to make the case that shifting expenses will lower costs somewhere else, he said.
"If the money goes to a proven, evidence-based practice so that it will reduce our expenses in other areas, we're going to support that," Stretcher said. "The jail is not a place for people with mental illness,diabetes or other serious health issues. We want to make sure we're using the jail for the people who really need to be there."
Rawlings said the Metro Dallas Homeless Alliance, a nonprofit that coordinates homeless services, is working to create an advisory board with local, county and state officials to make the housing a top concern.
"For us to do this, we've got to make it a major political priority," he said, "We need to attack this like we did the convention center hotel."
Developer waits
Despite the many obstacles, Hamilton said he continues to work on a new plan for the Plaza to take back to the neighborhood early next year. The vacant hotel already is zoned for apartments. But he said he does not want to move forward without community involvement. And he needs the City Council's support to apply for tax credits.
For now, the former Ramada Inn sits vacant, except for a few caretakers living there.
Homeless people sleep in the bushes outside.

A number of chronically homeless people have been featured in The News' series on chronic homelessness. One will soon get housing, but the rest remain homeless.
Jonathan Austin
Caseworker Winford Cross cannot find Austin on the path he used to walk daily along Second Avenue in South Dallas. Cross met Austin in January as he drank a beer and pulled a red wagon along the road. He agreed to meet Cross to get help but never showed up.
Robert Ceccarelli
Ceccarelli, who is still addicted to crack cocaine despite 15 times in drug treatment, spent the first half of 2009 in the Dallas County Jail at a cost to taxpayers of more than $8,000. After that, he lived in a boarding house and tried to stay clean. But the 54-year-old continues to suffer from the effects of schizophrenia and bipolar disorder. He is back in jail on theft charges.
Richard Antwine
The 48-year-old with bipolar disorder and a crack problem has cycled in and out of jails and hospitals for years. He landed back in prison in July because of a parole violation. His projected release date is September 2012.
Dustin Rockett
The dishonorably discharged veteran lived in a tent in the woods near White Rock Lake when Cross, the city caseworker, found him in January. Cross took Rockett to the city's homeless assistance center for help, but he left within a day and has not been seen since.
Tommy Pinson
Pinson, who lived in the woods with Rockett, also went to the center, The Bridge. But within days, he returned to the woods.
Adam P. Smith
The 45-year-old former aerospace engineering major suffers from depression and a history of alcohol abuse. He has bounced between treatment, psychiatric hospitals, shelter and jail. Smith relapsed and is in jail on a forgery charge.
Virgil Wyatt
The Army veteran with bipolar disorder made the Dallas Police Department's list of top offenders downtown earlier this year after being arrested 15 times since 2001 on charges of theft, criminal trespass and assault. Cross is working to move him into an apartment, with assistance from the Veterans Affairs Department.
Kim Horner/DMN

Adam Saphier to lead Trammell Crow Co. in Dallas

Dallas-based Trammell Crow Co. has appointed Adam Saphier to lead the company’s Dallas-Fort Worth business unit, a role in which he will oversee all development and acquisition projects, new business pursuits, finances and day-to-day operations.

Saphier will succeed Denton Walker, who has run the D-FW business unit since 2001 and will remain with the group as a senior managing director. Walker will focus on office and retail projects, including the company’s Timber Creek retail development in Northeast Dallas and its Legacy office project in Plano.

It's an exciting time to be heading into the Dallas market, Saphier said. The Dallas-Fort Worth area "continues to be one of the best long-term commercial real estate markets in the U.S.,” he said.

"The challenge for us is to identify the best opportunities to create value in new real estate pursuits," Saphier said in an interview. "Those opportunities are being brought about by the turmoil in the real estate industry."

Saphier said he's especially interested in the possibilities for build-to-suit office development in the Legacy business park in Plano. Trammell Crow originally purchased 404 acres in Legacy and now has 234 acres left for purchase or build-to-suits.

"I don't think there's going to be much, if any, speculative office development (in North Texas in 2010), but I do think there will be build-to-suit opportunities," he said. "One of the things I'm really excited about is the land we own at Legacy. I think it is best-in-class quality, and we will have development there in 2010."

Bob Sulentic, Trammell Crow CEO, said Saphier's customer focus and his ability to drive growth and business performance will serve him well in his new leadership role.

“Adam is an excellent leader whose dealmaking and management skills make him the ideal choice for TCC’s headquarters city and one of the company’s most significant markets,” Sulentic said in a press statement.

Saphier joined Trammell Crow in 2005 and previously served as a principal with the firm’s Houston business unit. He specializes in the development of Class A office buildings, both on a fee basis and as principal investments.

Saphier's recent work has focused on the sourcing, financing, development and leasing of 1.5 million square feet of office projects with total project costs of about $500 million. These projects represent Trammell Crow's largest in Houston, including Energy Center I, Energy Center II and Hess Tower.

Saphier serves on the Urban Land Institute’s Houston Executive Committee as co-chairman of their sustainability committee and on Trammell Crow's national sustainability task force. He received a bachelor's degree from Pomona College and an MBA from the Darden Graduate School at the University of Virginia.

Trammell Crow, an independently operated subsidiary of CB Richard Ellis Group Inc., is one of the nation’s leading developers and investors in real estate. It has developed or acquired more than 500 million square feet of buildings with a value of more than$50 billion. As of September, Trammell Crow had more than $6.1 billion of projects in process or in its pipeline.

Saturday, December 12, 2009

City officials see hope for project to revive downtown Dallas' decaying Statler Hilton


More than any other building, the historic but decaying Statler Hilton on Commerce Street has symbolized downtown's longtime stagnation and the enormous challenge of turning it into the vibrant heart the city needs.

Now, after years of inaction, there is new hope the Statler may be restored – perhaps sooner than anyone thought possible.

Mayor Tom Leppert and council member Ron Natinsky confirmed that the Statler's owners have approached City Hall about drawing up a restoration plan that would preserve the building's well-known facade.

Leppert said engineers and architects are looking at scenarios for the building, and City Hall expects to see plans in early 2010.

The scenarios being discussed include some mix of retail, residential and hotel space. But Leppert said he expects the project to lean heavily toward residential.

Richard Chiu, president of Warwick International Hotels, holds the building along with family members in Hong Kong.

According to Leppert and Natinsky, Chiu, who lives in Paris, is expected to take over full control of the building soon.

Ending inertia
At City Hall, there is hope that shift could help shake the torpor that has enveloped the building.

"We have been in contact with both the company and the company representatives. There has been a shift in responsibility over [the Statler] that has come with what we view as very positive conceptual ideas with what they would do," Leppert said.

The building's owners sent two representatives to a recent symposium at City Hall about a city-sponsored program to trade green cards for investments in Dallas.

According to Natinsky, Chiu is interested in using the program to put together an investment group to help fund the Statler's restoration.

Chiu was traveling this week. His office said a company officer would not be available to speak about the project until Monday.

Though movement on the project is in the earliest phase, any sign of life for the Statler – or the Dallas Grand Hotel, as it is also known – is seen as a step forward for downtown.

"If any building downtown is the poster child for why we need to redevelop and save downtown, the Statler Hilton is it," Natinksy said.

The building opened in 1956 and for years was a jewel of a downtown rich with oil and banking revenue.

But it has been vacant since 2001 and in decline.

There has been no shortage of plans and promises to renovate and restore the 710-room hotel. So far, all have come to naught.

Substantial problems
The building poses enormous problems. Its floors and walls are constructed of poured concrete, meaning its 8-foot ceilings can't be easily raised. It contains asbestos and has out-of-date wiring.

There is also the issue of the old Dallas Public Library, which adjoins the building. It is historically important as well and has at least as many problems as the Statler.

Leppert and Natinsky acknowledge there are challenges.

But there are also reasons to believe the time has come for the Statler to be revived, they said.

The eastern end of downtown is in the swing of a major revival, and the Statler appears to be the last piece of the puzzle.

The long-vacant Mercantile Building is now restored and nearly full of tenants. The city has entered into heavy subsidy deals to see the nearby Continental Building and Atmos complex brought back to life. The University of North Texas plans to restore the Municipal Courts Building as a law school.

And Main Street Garden, the city's most elaborate park, is now open and active just across the street from the Statler.

The building's owners "can see we are fulfilling our commitments. They are the last standing piece on that square and that has elevated their interest in getting something done," Natinsky said.

Time is right?
There are two other reasons renovating the Statler may be more realistic now than ever.

First, City Hall has tried to make it harder on the owners of vacant buildings downtown to just let them sit and decline.

Under a program initiated by Leppert, owners of several vacant buildings, including the Statler, were required to bring the structures up to code or risk losing them in lawsuits with the city.

Also, the creation of the City of Dallas Regional Center – a federal program that trades green cards for major investments in Dallas – is expected to generate low-cost capital for redevelopment projects all over the city, but particularly in downtown.

The prospect of cheaper financing makes doing deals in an expensive area such as downtown more feasible, Natinsky said.

"The availability of putting together a CDRC investment group to do the project brings to the table a significantly lower cost of money," Natinsky said.
RUDOLPH BUSH / The Dallas Morning News

Friday, December 11, 2009

Dallas Design District's second redo takes shape

Justin Tamayo did a double take as he was driving through the Dallas Design District a few months ago."I was amazed to see the all apartments they had built," Tamayo said. "I didn't know all of that was there."

Tamayo was so taken with the neighborhood that he moved there. "I bring my friends down there, and they're surprised at what's here," he said.

Indeed, if you haven't taken a recent spin down Hi Line Drive – or don't even know where it is – the trip will be eye-popping.

Developers have built three big apartment communities just west of Stemmons Freeway, and hundreds of residents have moved in.

Restaurants and shops are on the way.

"Obviously having 1,000 apartment units with a lot of people makes it more of a 24-hour environment," said Mike Ablon of Pegasus Ablon Properties, which is marketing the redevelopment. "There's a lot of excitement about the overall Design District."


Not its first redo

The former commercial neighborhood between Stemmons Freeway and the Trinity River started out as a warehouse district. In the 1980s, it began morphing into a neighborhood of design and furnishing firms.

Now the Design District is being remade into an urban village just northwest of the Victory Park complex.

Developer Wood Partners is the biggest player in the nascent rental market, finishing construction on two projects with more than 500 units between them.

"There's a pretty dramatic metamorphosis in that area," said Wood Partners' C. Todd McCulloch. "With every passing month, the Design District is more of an established neighborhood."

Wood Partners has leased about 60 percent of its Alta Design District project on Inspiration Drive just west of Victory Park.

The apartments rent for an average of $1,400 a month.

And the first tenants are about to start moving in at Wood Partners' 214-unit Alta 1900 Lofts building at the corner of Hi Line and Oak Lawn Avenue.

"We've been working on these deals for a long time, and it's surreal to see them open and people moving in," McCulloch said.

Trammell Crow Residential has rented more than half of its 355-unit Alexan Design District complex on Oak Lawn.

"The renters are coming from all over," said Crow Residential's senior managing director, Darren Schackman. "We are right in the middle between downtown and the medical center."

With rents that average more than $1,000 a month, the Alexa complex is vying with other new rental options in the area.

"Competition is good and bad," Schackman said. "But we are getting a good critical mass of people, which is bringing other development into the area, including restaurant and retail."


Eats on the way

Dallas businessman Shannon Wynne will start work soon on a restaurant at Hi Line and Oak Lawn.

"I still think it's a big secret," Wynne said. "Some people think we are absolutely crazy to go down there."

Still, Wynne said he's been impressed with the streetscape and landscaping upgrades in the area.

His new restaurant will be "a gastro-pub, for lack of a better term."

Three more restaurants are in negotiations, he said, but the retail and restaurant market in the Design District won't take off overnight.

"People think you put up a couple of apartment buildings, and it's going to be instant customer base," Wynne said. "It isn't that easy."

Court filings detail troubles at Today Realty Advisors

Today Realty Advisors, the lead investment vehicle of Dallas mogul Eric Brauss, had negative equity of $8.3 million at the end of October. By that time, Brauss was already making preparations to close down the company.

Those details emerged in new court filings this week as some investors got a Dallas state court to approve the appointment of a rehabilitative receiver for several Brauss partnerships. The investors claim that millions of dollars have been diverted from partnership funds.

Brauss, who liked expensive cars and lavish homes, shut Today Realty in mid-November and may have left the country, according to court documents.

"That left no one as general partner to call the shots," said Stefani Eisenstat, an attorney with Dallas-based firm Riney Palter. She represents a group of investors who are fighting to keep the Brauss real estate empire out of federal bankruptcy court.

Over the years, Brauss companies invested hundreds of millions of dollars in projects such as shopping centers, apartments and land. Brauss and his wife, Christine, also were major patrons of the Dallas arts scene, including the opera and performing arts center.

Other details from court filings this week, including a copy of a Dec. 4 deposition of Today Realty executive vice president Sue Shelton:

•In a phone call to Shelton on Nov. 12 or 13, Brauss ordered the Today Realty offices closed.

•The 10 remaining employees, including Shelton, were terminated the following Monday. Each received 2 ½ months of severance pay and insurance through the end of the year, and each was allowed buy his or her company computer for $100.

•The company had been downsizing for more than a year. At its peak, it employed 120.

•In October, Brauss told Shelton that he was going to start playing "hardball" with the landlord and not pay the November rent.

•Brauss' salary was $175,000 a year, plus fee and partnership income. Christine Brauss' salary was $75,000.

•Shelton's salary was $150,000 a year, plus bonuses. She said she made $350,000 in her best year.

In the deposition, Christine Brauss' attorney, Eric Redwine, tried to establish that Eric Brauss made all the business decisions, not Christine, who filed for divorce last month.

Redwine asked Shelton how Eric Brauss referred to his wife's business acumen.

"That she was a dumb blonde, and it would be time wasted on her anyway," Shelton responded.

Asked Thursday about that statement, Redwine said, "That's how Eric Brauss viewed her."

But Brauss' attorney disputed the statement.

"Eric would never say anything derogatory like that," Larry Friedman said. Friedman said he had talked to his client three times by phone Thursday, but he did not know where Brauss was. He said Brauss was still running the partnerships.

The court battle over the Brauss empire is complicated. On Sunday, one of Christine Brauss' companies, Buckingham Financial, filed for Chapter 11 bankruptcy, which could move the case to federal court.

But Eisenstat's clients want the case to remain in state court with a rehabilitative receiver appointed for all 39 partnerships.

Friedman said that favors a few investors rather than all. He was upset by the latest court move Wednesday, saying he wasn't given proper notice.

Eisenstat said proper notice was given.

Henry S. Miller Cos. agrees to go into bankruptcy

Real estate company still has to decide whether to file Chapter 7 or 11

Legendary commercial real estate management firm Henry S. Miller Cos. has agreed to enter bankruptcy, according to an attorney who forced the Dallas-based firm into court and court records.

“They are in bankruptcy, and this is just the next procedural step of the process,” said Marc Stanley of Dallas’ Stanley, Mandel and Iola, which represented three creditors who filed an involuntary bankruptcy petition July 7 to force the issue.

At a Dec. 3 hearing on the involuntary petition, attorneys for Henry S. Miller Cos. agreed to the demands made by the creditors. The creditors said they were owed nearly $2 million collectively.

Henry S. Miller now has to decide whether to try to convert the case to a Chapter 11 reorganization, Stanley said.

The involuntary case was filed as a Chapter 7 liquidation, meaning a judge could force the company to dissolve in order to satisfy its debts.

“We will try to move it back to a Chapter 7,” Stanley said Friday.

The firm’s namesake founder died Dec. 5 at age 95.

Wednesday, December 09, 2009

Is This How You Currently View Your Property Investment?


The commercial real estate market has many current challenges pushing from all sides. Tenants are hard to come by. Rent is hard to come by. Debt pressures are increasing. And every owner has the burden of real estate taxes. Despite these paramount issues many appraisal districts are still increasing taxes.

Now how can a appraisal district that appraises property based on "MARKET VALUE" justify increases when there is an obvious decrease in market value virtually everywhere? The answer is they do not! That is something for the taxpayer to do. But as a taxpayer do you know where to do this? Do you have the time devote to preparing a complete and detailed case? Do you have the tools for preparing a case? Do you know property tax law?

Well we do. We are Harvard Property Tax Consultants and we specialize in Commercial Property Tax Appeals. We would love to sit down with you and discuss how we can save you money!

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Bankruptcy filing may send fate of Brauss' real estate empire to federal court

The fate of much of Eric and Christine Brauss' real estate empire could be headed to federal bankruptcy court because one of her companies filed for Chapter 11 reorganization last weekend.

However, investors who have sued the Brausses in state District Court in Dallas, alleging the diversion of millions of dollars, are fighting the transfer of the case to federal court. A federal hearing is scheduled Dec. 29.

Stefani Eisenstat, an attorney for the investors, said Brauss and his wife have both taken the Fifth Amendment, which protects against self-incrimination, in the civil case.

"That is completely inconsistent with seeking relief," Eisenstat said of the weekend bankruptcy filing involving Buckingham Financial LLC. Buckingham is one of the defendants in the civil case.

Last week, The Dallas Morning News reported that Brauss' Today Realty Advisors Inc., which has invested in hundreds of millions of dollars worth of projects, had closed its Far North Dallas headquarters and that Brauss was nowhere to be found. Brauss and his wife are also prominent patrons of the Dallas arts.

Larry Friedman, an attorney for Eric Brauss, acknowledged that his client took the Fifth but, Friedman said, only because investors said they had complained to the U.S. attorney. Eisenstat said neither her firm nor her clients had gone to the U.S. attorney.

Eisenstat said many of the 39 investment partnerships involved in the investor suit have no debt. "Our goal is to get a receiver appointed immediately," she said. The receiver's job would be to rehabilitate the partnerships, not liquidate them.

Eisenstat represents eight investors who together have invested between $5 million and $10 million. Altogether, hundreds of investors have about $130 million of equity in the 39 partnership entities.

Friedman said his client is a "stand-up guy" with a good investment record who was derailed by the worldwide downturn in real estate. He said Brauss wants a receiver who looks after the interests of all the investors and not just those involved in the civil suit.

Friedman said he communicates with his client regularly, but he doesn't know where he is.

Court documents indicate he may be in South America.

One filing in State District Court quotes a Nov. 17 e-mail from Brauss saying he was on a "very primitive tour in the Amazon rainforest."

A Nov. 20 e-mail from Brauss to one of his investors said:

"Sorry I did not get back to you until now, but needed to wait for my lawyers directions. ... Until we come to an agreement with you ... I need to stay here in South America."

In other Brauss developments:

• On Nov. 6, Christine Brauss filed for divorce from Eric Brauss in Collin County. The filing says they were married in 1986 and haven't lived together for nearly two years.

• On Nov. 18, Wachovia Bank was awarded a $5.2 million default judgment in Lee County, Fla., against Eric Brauss, Today Realty Advisors and FM Riverwalk LP. Eisenstat said that judgment is not related to the 39 partnerships.


Research librarian Molly Motley contributed to this report.

Oncor will buy, remodel downtown buildings


North Texas utility Oncor is close to buying a downtown Dallas office complex.

Oncor, which already has a large office downtown, is purchasing the vacant 1616 Woodall Rogers office buildings near the Victory Park complex, real estate brokers say.

The two eight-story buildings are just west of Akard Street and were built in 1978 and 1992. They once housed the headquarters of Central and South West Corp.

Real estate brokers say that Oncor plans to relocate workers who are now in the Energy Plaza tower on Bryan Street into the Woodall Rodgers buildings, which will be remodeled.

The high-profile offices have been empty for more than five years.

Dallas' Peloton Real Estate Partners has been marketing the property, which is owned by a California investment firm, for lease.

A spokesman for Oncor did not immediately respond to requests for information about the planned purchase. And real estate broker Lawrence Gardner with OMS Strategic Advisors, who is said to be representing Oncor in the purchase, declined to comment on the deal.

The Woodall Rogers buildings Oncor is buying have more than 260,000 square feet of office space, an atrium lobby, a data processing center, two levels of underground parking, an employee fitness center and a cafeteria.

Real Estate Giant, Henry S. Miller Jr. Leaves Behind a Legacy


Henry S. Miller Jr. was a true pioneer in the real estate industry. His impact was immeasurable and his legacy will continue to inspire future generations. NTCAR offers its condolences and prayers to the Miller family.

Henry S. Miller Jr. passed away on Saturday, December 5, after battling a brief illness. Nearly a century ago, Henry S. Miller Jr. turned a one-man sales office into one of the country's largest real estate companies. By the mid -1980's the company had become the fifth largest real estate brokerage operation in the nation. In the years following, Henry S. Miller Co. was sold and bought back from Grubb & Ellis, and Henry S. Miller Residential was sold to Coldwell Banker.

Miller's long and extensive career carries a legacy of accomplishments. Miller purchased, transformed and sold the historic Highland Park Village and developed the Preston Royal Shopping Center. He helped to broker one of the largest ever real estate transactions, the sale of the Pennzoil Place, in Houston. Miller is credited with the concept of specialized real estate services. Together with his son, Vance Miller, developed a compensation program to attract and retain valuable professionals that still continues to work 40 years later.

Henry S. Miller Jr. was inducted into the NTCAR Hall of Fame in 1988. He also helped to foster the careers of dozen of real estate agents, including Hall of Fame inductees; Vance Miller, Herb Weitzman, Roger Staubach and Wayne Swearingen.

Friday, December 04, 2009

Westmount Realty Capital LLC sells 3.9 acres to Forest Park Realty Partners III

Real estate investment firm Westmount Realty Capital LLC said Friday it has sold 3.9 acres of land at the Westmount Health Campus to Forest Park Realty Partners III for expansion of the adjacent Forest Park Medical Center.

The land is located in a prime spot right off Interstate 75. In the same area, Forest Park Realty Partners acquired 6.9 acres in August.

The hospital itself is located at the northeast quadrant of North Central Expressway and Forest Lane in North Dallas. The first phase of the 66,000-square-foot hospital was completed in March 2009.

“This purchase indicates Forest Park Realty’s enthusiasm for this enviable location and the growing success of the project already built on the campus,” said Cliff Booth, president of Westmount.

With the additional sale announced, Westmount Realty Capital said only 5.5 acres of land remains for purchase in the vicinity near the hospital.

Real Estate Challenges

Residential

•Residential and commercial property values (combined) fell $8 trillion, or almost 20%, through mid-2009 (Economist)
oHousing starts are up slightly, but inventories remain very low
oResidential building permits at all-time lows
oNew commercial developments at near stand-still

•23% of U.S. homeowners owe more on their mortgages than their properties are worth
oNevada, Florida, Arizona & Michigan hit hardest
ofollowed by California, Virginia & Georgia (Wall Street Journal – 11/24/09)

•U.S. home prices forecast to hit bottom in early 2011 (JPMorgan Chase) – another 10-15% drop in prices

•Over 90% of first-time buyers are financed by FHA conforming loans
oQualification requirements for FHA are increasing due to defaults in recent loans – 1 in 8 loans are in default
Increase in down payment from 3.5%
Higher credit scores required
oFHA reserves for default insurance have fallen below statutory requirements – will need U.S. Treasury assistance

•Fannie Mae and Freddie Mac were the primary financiers in 2009 for residential housing
oHold __% of mortgages originated in U.S. in 2009
oSole lender for multi-family
oBoth are seeking additional federal government assistance – must be recast/recapitalized in 2010

•Fed will stop buying mortgage loans in Spring 2010, which will adversely impact residential mortgage rates (4.95% for 30-year fixed in October) – estimated to jump 100 basis points

•Tax credit for home purchases will expire in April 2010 (just as Fed mortgage purchases expire)

•Demographics will drive future demand
oYoung and old moving to higher-density in-fill locations
More need for attached product – both rental and “for sale”
Urban planning more important
Build near amenities – museums, entertainment, restaurants/retail
oRental demand will grow faster than population
Loan requirements for young require 10-20% down payment
Aging adults selling suburban homes and moving into more affordable housing
Immigrant population
oResales are 80% of residential market – only 1% of population buys a new home
oImmigration represents 28% of U.S. population growth in 2000’s and will level in the future at about 30%
oHouseholds w/o children will represent largest % of homebuyers

Commercial

•Vacancy rates escalating (3Q09 numbers) reflecting lack of demand:
oOffice – 19.4%
oRetail – 18.6%
oWarehouse – 13%
oHotel – occupancy rates at 58.7% (680 basis point drop YOY)

•Office
oRents down 40-70%
oTransaction volumes down significantly – 90% in NYC in last 2 yrs.
oLong-term demand will shrink
Centralized offices no longer needed
Retail space will compete with traditional office space (store front commercial locations)

•Retail
oDemand for space down dramatically
oRents down in all property types
oDisintermediation of internet impacting retail space
oAmerican consumer spending $$ in 2009?
Liquor – up 12%
Restaurants & bars – up 10%
Big box discounters – up 7%
Everyone else is down w/ autos at bottom
oNo loans for inventory or finish-out of retail space
oRetailer bankruptcies will continue to empty big boxes and strip centers
oInfill grocery-anchored strip centers and fortress regional malls will survive

•Apartments
oVacancy rates at 8.4% in 3Q09 (off 580 basis points YOY)
oRents soft in all markets
oExpected to recover in late 2010
oGlint of hope due to favorable demographic demand
oScarce construction set stage for rebound – shortage by 2012

•Hotel
oSector is “totally slammed”
Overbuilt
Financed with adjustable-rate mortgages
Late-cycle deals will be on market in 2010
oHas most potential to recover sooner

•$1.4 trillion of commercial real estate loans to be refinanced in next 18-14 months
o1/6 of all construction loans in trouble category (6/09 FDIC report)
oCMBS roll-overs of $250 to $300 billion annually through 2015 (PWC/ULI)
oBanks hold 55% of commercial real estate loans

•Little or no development
o2-3 years for market to come back
oLittle financing available & where available
60-65% loan-to-value ratio
7.0-7.5% interest rates
1.4 debt-service coverage
oPrice of existing assets below replacement cost
oClimate change and “green” initiatives put on hold

•Transaction volume down dramatically – 90% from 3Q07 to 3Q09
oImpediments include
Lack of financing
Sizeable gap between bid/ask on price
Volume of distressed properties coming to market

•Official unemployment rate of 10.2% (Dept of Labor)
oIncluding “discouraged” workers (those who have given up finding a job after months of looking), the rate is estimated at 13%
oAdding “part-time workers for economic reasons” (i.e., couldn’t get a full-time job), the rate is estimated to be 19.2% or 30.6 million people (CNN)
oNet job loss continues

Banking Issues

•FDIC will close over 300 banks in 2010 – a fraction of the “zombie” banks (an estimated 5,000 branch banks need to be closed in Texas alone)
oDoes not have the funds to continue foreclosing banks
oCharging “healthy” banks $50 billion to rebuild capital base
oWill likely need bailout from U.S. Treasury

•TARP funds not being used for lending – rather to meet Fed capital requirements

•Fed is proposing to raise capital requirements for all banks that will further discourage lending

•All interest rates expected to rise, resulting in
oDownward pressure on real property values
oConstraint of business expansion
oReduced consumer spending
oHigher cap rates on all property classes

•Banks currently dealing with residential crisis – expected to address consumer credit debt and then commercial loan issues

•Current $7 trillion U.S. deficit expected to rise by $14 trillion over next 10 years (assuming current interest rates)

oWill have to print dollars to deal with deficit – can’t issue much more debt
oChinese, Japanese and EU will not continue to buy U.S. debt w/ impending inflation

Baen Predictions (University of North Texas Real Estate Professor):

•Dollar drops 40% in next 12 months
•Cash is king in short-term – crap after that
•Growth will be through hyper inflation
ocan’t be debt since it has driven growth for last 15 years
ogo long on fixed interest rates
ohard assets should appreciate
•20% possibility of a depression – will be blamed on terror or some international issue, not debt
•U.S. housing market will be socialized – on the Stockholm model
•Buy hard assets with reasonable leverage – will be repaid with inflated dollars
•Invest in the 6 G’s:
oGold
oGuns
oGround (real estate)
oGas (oil & gas)
oGrub (commodities)
oGod
John Baen Director of Economics and Real Estate at UNT