COMMENT OF THE DAY RUNNER-UP: SHOULDN’T EVERYBODY BE SELLING INTO A DOWNTURN? “So if someone could lend me some clarity on the housing market I would appreciate it. This is how I understand it: Median price is down, number of sales are down, however inventory went down to 3.6 months as well. Houses in the 150-250 range are still doing fine though. The first two issues seem to be related to anemic sales in the luxury market due to the loss of oil/gas workers, but I don’t understand how inventory can tighten when sales are down. Could someone help me out here?” [MrEction, commenting on All Signs Pointing to a Houston Slowdown; A TIRZ for Montrose] Illustration: Lulu
TAKARA-SO COMPLEX BACK ON THE MARKET, THIS TIME WITH NEW UTH UPGRADE If you were thinking its purchase by a SoCal investment firm almost exactly 1 year ago meant the pseudo-Japanesee 1962 apartment complex at 1919 W. Main St. would be shielded from the evict-and-redevelop cycle for a few years, think again. Apartment Income Investors has put the Takara-So Apartments, which sit on most of the block surrounded by Hazard, W. Main, Colquitt, and McDuffie, back on the market — with a twist. Though on-site signs have not been changed, the complex is described as the Takara South Apartments in a sleek set of marketing materials produced by Newmark Grubb Knight Frank, the firm that’s marketing the 77-unit, 10-building, 1.22-acre property once owned by Allen Stanford. Why unload the storied complex now? So much has happened in a Montrose year: There’s that $2.05 million jump in the property’s tax appraisal. And maybe some profits to be made: Though no asking price is listed, included comps indicate the sellers are likely aiming for offers between $8 and $10.8 million. The purchase price was listed on company documents as $5.51 million. [LoopNet; previously on Swamplot] Photo: Newmark Grubb Knight Frank
If you thought it was kinda adorable how those 2 same-owner mattress stores are snuggling up right next to each other at the corner of Westheimer and Montrose Blvd. in Montrose, you’re sure to be enthralled by the suburban version of the same like-kind pair-up down about Sienna Plantation, what with their separate, straight-laced façades and separate showrooms. Mattress Firm has been open for a couple years already at 8741 Hwy. 6 South in Missouri City; the same company’s slightly larger Mattress Pro just opened up next door at 8735 last month. Better yet, the buildings are for sale, together!
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YOU’RE NOT FROM TEXAS, BUT TEXAS WANTS YOUR MONEY ANYWAY Wondering why a bunch of out-of-towners are afoot hunting down $214,000 homes (such as the Lakewood Forest number pictured here) to buy as investments in Houston — just as locals start to feel a bit jittery about the possibility of coming oil-price-drop aftershocks? The sudden outsider enthusiasm may stem in part from a roundup of “Best Buy Cities” published last month by Forbes, which purports to tell folks with extra cash on their hands Where To Invest In Housing In 2015. Number 3 on the list, which magazine writers in concert with a firm called Local Market Monitor came up with after exploring data on job opportunities and population increases — is Houston. But all 5 major Texas cities make it to the Top Ten. What, oil prices are falling? That just means you shouldn’t buy a home in Midland, declares the quoted expert, whose first name and credentials the article doesn’t bother to identify. (It’s Ingo Winzer, Local Market Monitor’s founder, who lives in North Carolina.) The list is revised annually, though between those efforts Forbes is generally busy producing a steady stream of clickbait ranking cities on various other criteria. [Forbes] Photo of 11711 Cedar Point Ct.: HAR
OIL PRICE PLUNGE LEADS TO STOCK DOWNGRADE FOR NEW GREENWAY PLAZA OWNERS Last year Atlanta-based Cousins Properties splashed out big in the Houston office market, purchasing all 4.4 million sq.-ft. of Greenway Plaza for $950m in October, 8 months after they snapped up the $233m Post Oak Central complex, making Houston the dominant market in the CUZ portfolio. Which might have seemed a great idea in October 2013, when crude was going for about $100 a barrel, but now? A security analyst from Bank of America and Stifel have both downgraded Cousins Properties shares from “buy” to “hold,” citing falling oil prices and the company’s exposure to Houston. [Realty News Report] Photo of lightning over Greenway Plaza: Russell Hancock via Swamplot Flickr Pool
TILMAN FERTITTA SEES AND SMELLS A NATIONWIDE REAL ESTATE CRASH, STARTING IN HOUSTON Landry’s CEO and purported Shiloh Club irregular Tilman Fertitta ladled out a deep bowl of bear stew from the teevee-front kitchen of his restaurant empire Wednesday, telling Bloomberg TV viewers that he smells a national real estate crash on the order of what happened in 1986, and volunteering that he “can see it in Houston right now.” He prefaced these comments to hosts Erik Schatzker and Stephanie Ruhle with a survey of the “crazy numbers” he is seeing in real estate valuations and transactions: “You are seeing it in New York probably more than anywhere else; but you are seeing it in Texas; you are seeing it in California. And . . . history always repeats itself as we always know, but I think it’s going to repeat a little sooner this time. You can just see it coming. There are so many cranes everywhere.” What’s the trigger? “If oil stays in the 70-something dollar range — where it is right now — you’re gonna see it in Houston first,” he said, adding that it might take an oil price of $50 a barrel to bring on a “total crash” like the one in the eighties that knocked Houston off its feet for a good decade. Fertitta continued his jeremiad with a few complaints about inflation, which he sees as “huge,” no matter what Ben Bernanke has to say to the contrary. [Bloomberg TV; previously on Swamplot]
ONE MAN’S THRIVING GAYBORHOOD IS ANOTHER’S MONTROSE VALUE-ADD PORTFOLIO What is the Montrose Value-Add Portfolio? “48 apartment-units, 13 townhomes, 1 quadraplex and 5 rental homes with 8-units that include 2 garage apartments; for a total of 73 units, 67,960 rentable square feet, with a land tract of 2.09 acres.” Writes a reader who came across the listing: “This is where I live. I love the phrase ‘The Montrose Value Add Portfolio,’ it practically screams ‘knock it down!’ So much for my old gayborhood!” The properties are all within walking distance of the MVAP’s listed address: 409 Stratford St., a stone’s throw from the always-hopping cluster of bars and clubs on Pacific St. to the north and but a little farther from Numbers and Indika to the south. No asking price is indicated in the marketing materials. [Loopnet; brochure (PDF)] Photo: Transwestern.
Last week, after a vote of the State Securities Board, Texas became the lucky 13th state to allow equity crowdfunding. Jumping the gun on nationwide rules authorized in 2012 but still not put in place by the SEC, the new statewide setup will allow companies to raise up to $1 million a year through approved “portals,” or crowdfunding websites. Any Texan will be able to invest up to $5,000 per company, but qualified investors (individuals with assets of more than $1 million — minus their home — and $200K in annual net income) will be able to invest any amount.
Unlike donation-based crowdfunding efforts popularized on sites such as Indiegogo and Kickstarter, portals operating under the new rules will turn subscribers into owners of the projects they invest in. The rules, which go into effect next month, apply to any type of company investment, from restaurants to local businesses to real estate — as long as the investors are Texas residents, the companies are Texas companies, and the crowdfunding website is based here. A Houston beta site hoping to begin offering stakes in “corporate backed single tenant leased properties” — such as the dummy McDonald’s Net Lease portrayed in the image above — has already been announced.
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Developers have become very interested in Spring Branch, notes a Swamplot tipster. The latest evidence: the recent sale of the Blalock Woods Apartments (pictured above), just north of the Katy-Fwy.-side 99 Ranch Market at 1111 Blalock Rd. The new owner of the townhome-style complex is a group put together by investment and apartment-development firm Stanmore Partners. The property changed hands on October 1st; on the same date, residents of the Spring Branch apartment complex received a brief letter saying Greystar Management Services will be taking over management of all 316 units. The letter didn’t reveal the name of the property’s new owner, and didn’t say anything about shutting down the place, but a source tells Swamplot that no new leases are being written, and that a “departure deadline” of June 2015 is being planned.
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New Homes or Apartments?
COMMENT OF THE DAY RUNNER-UP: HOW TO POSITION YOUR INNER LOOP INVESTMENT BUSINESS FOR THE COMING DOWNTURN “Cody, yeah I agree with you. If this isn’t the top of a market cycle, it’s damn close. If you bought low, now is the time to sell high. And do it without regret because you’ll never go broke by profit-taking. But even more than your Montrose assets, sell the stuff that you’ve got that is further east. In a downturn, there will be a flight to asset quality both on the part of capital markets and tenants. Montrose values will go down, but Greater Third Ward be much more volatile.
Use some of the proceeds to short high-yield bonds, use the remainder to reposition your outfit as an apartment management company. No matter how bad things get, there will always be a need for management companies, and this gives you a way to maintain the continuity of your career and to keep your ear to the ground. Then, in the worst of the down-cycle, while most everybody else is paralyzed and some are distressed sellers, you’ll have cash (hopefully a LOT of cash if that short position plays out for you the way I think that it might), a company, and a resume.
And when my prediction pans out and you’re fantastically successful, don’t forget whose crystal ball made it possible. I might need a job by then.” [TheNiche, commenting on Gibbs Boats on West Gray and Montrose Is Selling Everything Now] Illustration: Lulu
HOW TO DO RIVERSIDE TERRACE ON $647.32 A DAY This 1930 brick and half-timbered 4-bedroom home on Riverside Dr. in Riverside Terrace sold for $205,000 on January 14th. With no apparent updates, the unrenovated property, which sits on a 12,560-sq.-ft. lot, sold again at the end of August — for $350,000. [HAR]
THE TAKARA-SO APARTMENTS WON’T BE GOING AWAY JUST YET Inner Loop property watchers: As other Montrose apartment complexes are knocked down and redeveloped left and right, do your thoughts turn occasionally to the Takara-So? If so, you are not alone: The 77-unit 2-story apartments at 1919 W. Main St., occupying the entire 1.22-acre block also bounded by McDuffie, Hazard, and Colquitt, was sold back in May in an off-market transaction. The complex that once belonged in the portfolio of swindler Allen Stanford is now the property of a group headed by Southern California firm Apartment Income Investors. A cached version of a memo for the investment posted online in advance of the sale envisioned renting out and holding the property for 3 to 5 years before selling it to investors or a developer, and identifies the price as $5.51 million. Photo: Takara-So Apartments
Investor Steve Moore, who’s made a name for himself by buying up, moving into, establishing unusual rules in, cleaning up, and lowering crime rates at some of the roughest apartment complexes in Houston neighborhoods such as Greenspoint and Westwood, has a new investment (and new address) — in Sharpstown. Working with an investment group, the owner of more than 5,000 apartment units has purchased a majority interest in the Gardens at Bissonnet condos at 7400 Bissonnet St., the 200-unit complex near Fondren Rd. known as the Le Promenade condos when it was home to the La Primera gang. Moore was sought out for the purchase by the Greater Sharpstown Management District after the condo complex was put into receivership last year; a series of security measures, which included changing the property’s name, were instituted as part of a legal settlement between the county and the property’s previous owners.
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Moving into the Gardens at Bissonnet
The photo above — sent to Swamplot by a HAIF user who goes by the handle SkylineView — is our best view yet of the project themed-condo developer Randall Davis has been working on for more than 5 years: convincing the Galleria McDonald’s to scooch over just a smidge and sell him part of the fast-food restaurant’s parking lot so he could build a 30-story highrise on it with all the benefits and cachet of drive-thru adjacency. Davis’s $70 million Astoria (portrayed in more glamorous circumstances at left) is being funded in part by the immigration dreams of 29 well-to-do foreigners, who have ponied up $1 million a piece to gain themselves status as U.S. residents, a path to citizenship, and a piece of whatever action the investment brings.
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Between Whole Foods and Fast Food
COMMENT OF THE DAY: HOW DID HOUSTON CHANGE FROM TOWNHOMES TO APARTMENTS? “Before the financial crash in 2008, developers were giddy to get large lots such as these and develop them into townhomes or high-end single family residential. See, for example, the townhomes that sit up against the railroad tracks on Center Street that now have a view of the Wal Mart parking lot. Or the gated community at Washington Ave. and Memorial Heights.
Since then, I’m seeing more of these parcels developed into mid rise apartments, or shopping centers. Did something change in regards to bank financing or is this a response to more out of town money investing in Houston because it’s a ‘hot market’? Does anyone here know the answer?” [ShadyHeightster, commenting on A Second Midrise Alexan Planned Right Beside the First One on Yale] Illustration: Lulu