Houston Site Visits Day 2

Bray's Crossing


Canal St. Apartments

City Centre Houston

9am-2pm, Bray's Crossing, Joy Brown (Director) & Nicole Cassier (Fundraising) at the New Hope Housing Foundation

The drive up appeal on the first project of the day was refreshing. With the tenant mix we saw just before entering the project, we could bet it was one of those affordable housing tax credit programs, with an extra touch of facade & color scheme design. We soon found out that it was much more than just an extra touch, the non-profit firm backing the movement was the first of it's kind in Texas to take advantage of tax credit developing, but has ever since been the benchmark. These two wonderful ladies gave us their morning and lunch time to offer information on the mission of the foundation, and the product they provide.
Bray's Crossing is a form of supportive low income housing, funded through tax credit financing, donations, and HUD financing (Houston HOME funds). The project is an adaptive re-use of a very problematic property the city just wanted to clean it's hands of, and virtually gave to the foundation. With 149 units, the property was reconstructed from the exterior, and remodeled from the interior, for $14M. The "sound wall" is a very interestingly designed metal mural that has significance for those tenants within the property that are going through rough times and need motivation. since the property is a rehab, an elevator was not required to be put in. The aesthetic qualities of the property make it a very homely place to be, with the interior corridor's water fall, and the lobby area reclining room, library, kitchen, or computer lab; all secured by a 24hr watch desk. Since many of the tenants have prior histories of drug usage and crime, New Hope really monitors the inflow/outflow of people. The project is fairly new, and has leased up to 14% for the short time it has been ready. There is a $6.1M tax credit on the project, with the rest being funded by private donors. Leases are usually 6 months in nature, but can range anywhere up to 13 months, truly a product of how stable the type of tenants are in general.

Our next stop was the Canal St. Project, a New Hope property that was built in 2005, and has 133 units, fully stabilized at 100% occupancy with a 3 month waiting period. The project has similar common areas and atmosphere as Bray's, but is a few blocks into the warehouse district and has a more open interior feel. There is an award winning Japanese garden setup in the middle, with a very detailed fire-glass window above the fron tdoor. The natural lighting in this property, along with Bray's Crossing, is phenomenal.

Joy and Nicole were so kind to treat us all to lunch at the original Ninfa's restaurant, a Houston landmark. I must say, they were pretty busy, and the Fajita Chicken Salad proved why their business was so good. Ultimately, the New Hope Foundation is setting the benchmark for the standards and qualities developers that use tax credit financing should have (many build and jet with hefty development fees).

2pm-City Centre, Brandon Houston with Midway Companies

First off, Brandon is the great great great great nephew of our state's founder, Sam Houston! Midway Companies is a firm that has it's roots in Dallas, and follows a lot of what Tramell Crow did in the hay day of building and acquiring. City Centre is a regional hub, in that apart from the Galleria and ancillary power centers around town, it is serving to be the first mixed-use development of it's kind in Houston. The 38-acre property was the site of the original Town & Country Mall, a Memorial area and Houston area destination for decades. With the amount of trouble they were facing, the mall was bought silently before it hit the market for $30M, an extremely low basis for Midway Companies. The location is so strategic that 2M people can access the property within a 20 minute drive, wow! 28-acres have been developed by Midway, and another partner has executed their option to buy the rest. The only thing that remains from the mall is the 3 parking garages, which got facelifts and were the focal points of position and platting out the master plan. The hotel tract was sold off to a boutique hotel group which has built a 244 unit property on the site already, and has an all equity position. It works a great synergistic force with the project with it's strategic positioning.The financing structure is a very interesting, in that it is 60% funded by the Michigan State Teacher's Fund, and the remaining 40% of equity is funded by HNW individuals. There were TIF funds all along, but Midway did not utilize them. They regret it now, as the infrastructure has cost more than they imagined. There is also no City of Houston public-private partnership agreement with the project. Currently, retail is 60% leased, Office Bldg 1=100%, and Office Bldg 2=70%. Residential rentals are at 72%, with an effective rent at $1.45psf. In retail, it is $35psf+NNN, and office is sitting around $22psf. No aspect of the project is LEED certified, but has been built with utmost care and quality, so if they were ever in need to do so, it shouldnt be an issue. The justification used was that with multi-tenant office buildings it is pointless to attempt to incur the costs of re-framing every tenant's mindset into being "green," whereas if any building was single-tenant, it is a lot easier to pass LEED as needed. Office space has many incentives, with Midway offering $30-$50 in TI, and 3-5 months of concessions on 7 year leases.
Brandon shared the importance of being creative, and delivering what the market dictates your project to deliver. The importance of not taking no as an answer is also vital, in that they would'nt have had the success of this project if they didn't stay persistent with offers for the mall. Overall, this project reminds me a lot of a Park Lane type of development with more space. It will bloom to be a powerhouse for tax base income for the City of Houston over the years, and will be an iconic property for those who plan to develop anywhere in the mixed-use arena.

This wraps up our trip to Houston, and John and I are back on the road after a bit of fun at Yardhouse!