A HEIGHTS RETAIL RESURRECTION 
The Leader is reporting that the Baptist Temple Church on Rutland and 20th St. in the Heights has sold 2 of its oldest buildings to Braun Enterprises, which says it will tear them down and replace them with less sacred spaces — that is, retail or a restaurant. If the almighty dollar has triumphed, there’s still a silver lining — or so Charlotte Aguilar suggests, reporting that the sale of the buildings — the church’s original sanctuary, built in 1912, and a larger one built in 1940 — will fund a $3 million renovation to its remaining 65,000-sq.-ft. T.C. Jester Building on 20th; a new 300-seat sanctuary will be added and classrooms and offices updated. [The Leader] Photo: Charlotte Aguilar via The Leader
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Real Estate Investing
COMMENT OF THE DAY: THE ONLY NUMBER I NEED “For me, as someone who routinely buys, restores, and holds these types of property for the long term (including a property right across the street from this one that is roughly the same age / type of construction), the only thing that I consider when determining value (and this a pretty standard / typical metric) is CAP rate. Specifically, I use the CAP rate at current rents and expenses to determine what it is worth today . . . and I calculate a projected CAP rate after renovations to determine what it will be worth with higher rents. The CAP rate is just a simple calculation for the rate of return on your cash in the deal. If you are simply buying a property and continuing on as is, the CAP rate is the return (from cashflow) on your down payment. If you are planning to upgrade the property the CAP rate is the rate of return on your down payment + carrying and renovation costs . . . based on the new rents.” [Jared M., commenting on The End of Another Almost Afton Oaks Apartment Complex?]
The low-lying Skylane Central apartments beside the Taylor St. bridge are about to be sold to Greystar, which says it plans to tear them down and put up something like this parkside 8-story complex — but that’s just one of several renderings the Houston Chronicle is reporting that the developer is considering for the site near White Oak Dr. at the southern end of the Woodland Heights. The deal should be done by September.
- Aging apartment complex near downtown to be replaced with luxury building [Houston Chronicle]
Rendering: Meeks + Partners
Note: Read an update to this story here.
What’s left of the Gramercy Place apartments on the 200 block of Portland St. were sold this month. A few of the apartment buildings, which date to 1935, were torn down before being replaced in 2002 by the Museum Tower on Montrose. Now, the seller’s agent says that the remaining 5 buildings and 31 units that records show have been owned for the past 15 years by an entity controlled by Rebecca Parsons were closed on two weeks ago.
And the buyer? The seller’s agent wouldn’t say. But a Swamplot reader with knowledge of the transaction shares a document and some rumors that suggest the buyer is an LLC presided over by Hungry’s Cafe and Bistro owner Fred Sharifi. And the document states an intent to smash the rest of the apartments and put up “residential rental midrise buildings.”
CITY COUNCIL TO DECIDE WHETHER DOWNTOWN HOTEL REDO WILL RECEIVE FEDERAL DOUGH 
Houston Politics’ Mike Morris is reporting that city council will vote today to decide whether it will loan Pearl Real Estate up to $7.4 million toward the $81 million renovation and redevelopment of the 22-story slipcovered 1910 Samuel F. Carter building at Rusk and 806 Main St. What does Pearl have in sight? A JW Marriott. (It’d be across the street from BG Group Place.) Last summer, explains Morris, the city applied for U.S. Department of Housing and Urban Development money that would be passed on to Pearl and ultimately paid back with interest — or that’s the idea, anyway. This kind of deal went off without a hitch in 1998, when the Rice Hotel paid back their $4.8 million right on time. But the city’s been kept waiting before: “In early 2005, it came to light that the Magnolia Hotel (which had gotten $9.5 million in 2002) and the Crowne Plaza (which had gotten $5 million in 2000) had never made a full payment to the city on their loans.” Though by 2012, Morris adds, those loans had been repaid. [Houston Politics; previously on Swamplot] Photo of 806 Main St.: Swamplot inbox
The only thing that’s really changed about 3400 Montrose, a tipster tells Swamplot, is the name of its owner: Global Paragon, which bought the former podium for Scott Gertner’s Skybar in 2011, went “belly up” this past November, the tipster says, and the vacant 10-story building’s now owned and managed by a 40-person LLC that’s looking for a buyer or a joint venture.
And that’s where these interior photos, from a short-on-info listing posted recently on Cushman & Wakefield’s website, come in:
Those of you waiting with bated breath for the renovation, redevelopment, or removal of the 1950s-era office building at 3400 Montrose Blvd. (across Hawthorne St. from the Montrose Kroger): keep on bating. The company that bought the vacant 10-story building last September has told its 500 Israeli investors that its operations in Israel and Houston are both “in dire financial straits,” according to a report in Israeli newspaper Haaretz.
An investor in a possibly nonexistent real-estate venture headed by his friend Billy Frank Davis tells Chronicle reporter Mike Tolson that Davis didn’t let on to his friends that other friends had also invested with him: “He didn’t want word of mouth. Bill’s image was always the most important thing to him. He always portrayed himself as a very successful and wealthy person. Everybody thought Bill had money.” On Monday, the disbarred attorney pled guilty to a single count of wire fraud in connection with a Ponzi scheme that bilked his friends and golfing buddies at the Champions Golf Club, the River Oaks Country Club, and the Braeburn Country Club out of $7.8 million. According to Tolson’s report, however, the losses may have been much higher than that.
COMMENT OF THE DAY: COOL DEVELOPMENTS NEED WACKY BUCKS “There’s plenty of eccentric millionaire money around. I guess they are just more private that they used to be? (My husband’s boss keeps bars of silver in his basement, for example.) Or, they prefer to spend their money on credit default swaps than cooky real estate schemes. C’mon rich people! Do something interesting.” [anon, commenting on Comment of the Day: A Different Kind of Money]
COMMENT OF THE DAY: A DIFFERENT KIND OF MONEY “Could the banality and sameness of what developers in Houston are constructing be in part to changed lending standards by the banks? Back in the 1970′s Gerald Hines developed very innovative office buildings for the day, employing famous architects for the design. Pennzoil Place is no cookie cutter “international style†box, that’s for sure. But back then, we didn’t have interstate banking either. For those of you born post 1985, that means ALL of our banks were headquartered in Texas. I’d assume Hines went to see Ben Love at Texas Commerce Bank, or the guys at Allied Bank, and they worked out the loans. Today, those loan officers are in New York or Charlotte, and don’t want to risk their bank’s money on something avant garde. Also, developers today rarely keep their portfolios together more than a few years. They ‘flip’ their completed properties to REITs so that they have the capital to build something else. When you need to turn your property over quickly, it’s best to have something the buyers understand, and that didn’t cost so much per square foot that you can’t make a profit selling it in 18 months. A REIT just wants to purchase something with what they feel will be a certain stream of income over a 10 year time horizon. They are oblivious to the fact that it’s not a thrilling design.” [ShadyHeightster, commenting on The Muse Moving in Next to the Post Office in Castle Court]
COMMENT OF THE DAY: WHAT YOU REALLY MADE ON YOUR HOUSE “. . . Most people say ‘I bought it for x and sold it for y, so I made an (y-x)/x return on my house’ which really isn’t the case. That formula can tell you your total appreciation in market value, but that is not the same as your ROI. To get closer to calculating an accurate nominal return, you need deduct the following from y: total in real estate taxes you paid while you owned the home, total expenses for repairs and maintenance, total amount of insurance premiums, the total interest and fees you paid to a lender before paying off your mortgage, and any commissions you paid to a realtor. You can then add back any income tax benefit you got for deducting your interest payments as well as any income you got from renting out all or part of your property. If you wanted to take things to the next level you could discount these cash flows and also convert nominal dollars to real, but I think even with just doing the above exercise most people will find that they didn’t really make as much money on their house as they think they did, and unless you manage to time your purchase, sale, and hold period just right, home values really have to appreciate significantly each year for the regular homeowner to just break even on it as a pure investment. That said, I think there are a lot of other very good arguments in favor of home ownership, including some financial ones. My point is just that if you bought a house for $100K and sold it 10 years later for $200K, you didn’t actually get a 10% annual return unless your property was tax exempt, you paid cash (and had a separate account set up to hedge inflation and compensate you for the cost of that capital being tied up for ten years), sold it yourself, didn’t buy homeowner’s or flood insurance, and never made any repairs.” [You Didn’t Earn That, commenting on Comment of the Day: What You Inner Loopers Got Wrong]
COMMENT OF THE DAY: WHAT YOU INNER LOOPERS GOT WRONG “. . . You could have bought a 3,000 sqft home in the burbs for $250,000 and put the $500,000 you saved in an investment that has a return that is better than 3%. Not to mention the money you had to spend putting a couple of kids through private school. The idea that residential real estate is a good investment is not supported by the data during a time of record low interest rates. Once the fed starts to raise rates again you are going to have trouble selling those homes that sit on expensive land for what you have in them. The only people that made off like bandits in the last decade in Houston were those who bought a single family home on a 7,000 sqft lot and replaced it with several single family townhomes.” [Dave Swank, commenting on Shops Replacing San Jacinto Stone, Just North of the South-of-the-Heights Walmart]
Back in April, former Bootsie’s Heritage Cafe chef Randy Rucker gave up on plans to open a new restaurant in the holdout parcel (above and at bottom right in the photo at right) behind the Asia Society Texas building. Now that property’s owner, Balcor Commercial, is giving up on it as well. The 3,624-sq.-ft. former doctors’ office on a 11,700-sq.-ft. lot at 5219 Caroline was listed for sale earlier this month for just a tad under $1.5 million. The property traded hands for $907K back in July of 2010, when Japanese architect Yoshio Taniguchi’s steamy building next door was just a muddy construction site. Renovations of the Caroline building for Rucker’s conÄt never began. “Unfortunately, converting the Caroline property into a fully functional restaurant while maintaining the integrity and design of the structure turned out to be a challenge,” an owner’s rep tells Swamplot.
MITT ROMNEY’S MISSOURI CITY MORTGAGE Among those who answered the clarion call to invest in Houston-area real estate back in the early eighties, just a few years before its big crash: Presidential candidate Mitt Romney. Long before he earned billions at the helm of Bain Capital, Romney bought 5 rent-to-own houses in suburban areas of Houston — “without putting up any of his own money,” according to Mike McIntire’s report. Romney got stuck renting out the houses until the late 1990s, when he unloaded 4 of them, “mostly at a loss.” The tenants of the fifth house wanted to buy their 1,836-sq.-ft. 3-bedroom home (at 1350 Gentle Bend Dr. in Missouri City’s Hunters Glen neighborhood) but couldn’t qualify for a mortgage. So Romney became their bank. Tim and Betty Stamps have been making out $600 checks to Romney every month for 15 years. They refinanced the property with him this June. [NY Times]
COMMENT OF THE DAY: THE SAME BOAT “. . . When talking to people looking for stuff in Montrose, this is what I hear: 1) Nothing available 2) Over priced for what you get 3) By the time you try to take it, someone else already has 4) What you do get will have bad electric, bad roof, bad pipes, sketchy tenants, etc. 5) Was built in the 60′s most likely. Doesn’t have it’s cert of occupancy, no water pressure, low insulation, old windows, etc. Then I like to joke that this is what I hear from people trying to BUY apartments in Montrose. Point being, the challenges you face as a renter are the challenges you face as an investor. And the solutions are often the same: Network with owners, jump on something good if you see it, communicate with the property manager showing if you don’t like the place (this is big), look every day. . . .” [Cody, commenting on Comment of the Day: What’s the Thought Process?]