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July 19, 2010
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MULTIFAMILY MONDAY: END OF NO ZONING?
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| You know the “Tower of Traffic” signs on West U lawns? The ones that depict "Ashby High Rise" as a toothy tower destroying Houston’s peace? Last week, we spoke to developer Buckhead Investment Partners' CEO Kevin Kirton and president Matthew Morgan about their $42.2M lawsuit against the City of Houston for denying a building permit. |
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| Buckhead Investment wants the City to either compensate the company or allow it to build 1717 Bissonnet (the actual name of Ashby High Rise, a name given by unhappy neighbors) as originally planned. Kevin, above, tells us Buckhead bought the two-story, 67-unit Maryland Manor complex in Aug. ’06, with plans to redevelop the 1.6-acre site into a 23-story, mixed-use project with 187 condos or 226 apartments, five townhomes, 9,600 SF of retail, and 6,700 SF of executive office suites. NIMBY opposition began in July ’07, and over the next two years, the City denied Buckhead a building permit 11 times, he says. In Aug. ’09, a permit was granted for a 23-story facility, excluding many original uses. In February, Buckhead filed its lawsuit claiming the City misapplied a driveway ordinance to limit the amount of commercial and residential space. |
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| Matthew says then-mayor Bill White tried to stop the development by creating an ordinance against high density or height, but Texas law forbids new ordinances created to impact a development already planned and awaiting a permit. The ordinance finally applied regards the placement of driveways for maximum safety—White used it as a traffic ordinance, and told Buckhead the project could create no more than 120 trips on Bissonnet at peak hour, they tell us. The City rescinded Buckhead’s approved traffic analysis and made it reevaluate all intersections with three-quarters of a mile from the site. Buckhead’s traffic analysis shows even for the worst intersection (Shepherd and Bissonnet) the worst-case scenario would add a four-second delay, even with all original uses. |
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| Kevin and Matthew believe “every developer should be concerned about this” because there’s no way to know ahead of time if the City will apply the ordinance or what the trip max will be. They’re concerned that if the City can arbitrarily deny a project a permit, companies will not want to move here and build. As for the lawsuit, Buckhead submitted its first request for discovery and is working on depositions. Judge Nancy Atlas recused herself two weeks ago (she’s married to White’s campaign finance chair). Kevin and Matthew tell us Annise Parker hasn’t said anything about the project since becoming mayor. We rang up City of Houston attorney Dave Feldman for comment. "The City believes it has meritorious defenses to the developer’s claims, and we will resolve this in the court house,” he told us. |
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| REVALUING SENIORS |
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| Grandparents are worth way more than $2 bills, so look for changes in seniors housing over the next decade. Marcus & Millichap reports that the healthcare legislation’s Community Living Assistance Services & Supports (CLASS) Act will revalue skilled nursing communities; high cost of care will lead eligible seniors to opt out, leading to reduced payouts. The value of skilled nursing facilities is their profitability, not physical sites, so this could mean a decrease in building value. Assisted living units like Hearthstone at Braeswood, above, may benefit from higher projected reimbursement, so more seniors will choose that project type. Over the next 10 years, changes will encourage developers to build continuing care retirement communities with larger assisted components. A shortage in SNCs means the government will need to spur development and supplement the high cost of care, according to the firm. |
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| We chatted with Marcus & Millichap Texas head of seniors housing and healthcare Doug O’Toole, who tells us need for seniors housing will grow and Texas will continue to be a leading retirement state. He says Houston’s independent living has the highest occupancy in the US, and since Texas’ housing market is better than many other popular retirement areas (Florida, Nevada, California), it’s easier for seniors to sell their homes for equity to fund rent in a seniors living community. He predicts most demand will be for AL properties with dementia facilities, which are already in short supply in Texas. Doug tells us seniors housing has some of the best LTV in CRE— he’s seeing 80% or higher. Most of the interest now is from REITs and portfolio owners, and he predicts new development will begin in Houston this quarter. |
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| APARTMENTS AND AUTOS |
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| Multifamily Executive’s web conference (coinciding with its annual tech issue) has a suggestion for apartment owners: imitate the auto industry and get web-savvy. John McElroy, above, former editor of Automotive Industries, says owners no longer control information, and consumers trust info they find online over a leasing agent. John suggests apartment complexes display availability of units online, include real-time pricing and inventory, assign full-time website/online leasing agents, and allow online maintenance requests. Businesses today should follow the “push” model of information (you know, like an e-newsletter that arrives in your inbox): constantly stay in touch with customers, providing them with valuable info and opportunities for instant gratification before they ask. Helpful tip: A study found that responding to an e-mail within an hour can double the sales conversion rate. |
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| Please send story ideas to Catie Brubaker, catie@bisnow.com. |
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