New Hope Housing, Inc.
New Hope is “Houston’s first single room occupancy (SRO) provider” and offers dignified living accommodations for those of “limited income.” Mrs. Joy Horak-Brown, Executive Director, and Ms. Nicole (Nicki) Cassier, Director of Fund Development, were ever so kind as to show us around 2 of their properties and disclose details regarding each one’s conception, construction, and completion.
New Hope currently has 5 properties up and running with 2 more to be completed by fall of 2010. Their next project after the last 2 open won’t be completed until 2012. New Hope has its own onsite management at each of their properties, where the day to day operations are closely monitored. New Hope’s board of directors is made up of attorneys, accountants, and members of the real estate community.
There are vans at each property that provide residents with weekly trips to the grocery store and doctor’s appointments for their everyday needs. They are also located near public transit, for those tenants without vehicles. Community meeting spaces, weekly movie nights, a computer lab, a library, and an assortment of programs geared to help residents better their situation are just some of the amenities offered at each of New Hope’s properties.
New Hope’s funding is provided from a variety of different sources. Governmental programs provide 41%, tax credits 29% (which is a very complex process), foundations 24%, corporations 4%, and individual donors/churches provide 1% of their funding, for a total of $40.5 million for all of New Hope’s projects thus far. In order to gain and sell off those tax credits, New Hope, a not-for-profit, has to have a for-profit financial structure, taking a developer fee and placing some of the tax credits into a reserve. Every one of New Hope’s projects are all equity projects, meaning they have no debt on any property.
Brays Crossing
Brays Crossing, an existing series of buildings that cost $15 million to rehab, is where we met Mrs. Horak-Brown and Ms. Cassier. The 149 unit project was dedicated May 20, 2010 and is already 50% occupied. Tenants must make $22,350 or less per year to qualify for housing at Brays Crossing. The average stay in New Hope’s housing is 27 months, where leases are initially signed for 6 months and are month to month after. Potential tenants must go through a criminal background check. This check is not to discriminate, but for the protection of the other residents, as well as the property. For instance, sex offenders, arsonists, and people who have committed violent crimes are not permitted to reside in New Hope’s communities.
Brays Crossing was once a nuisance property to the City of Houston, riddled with crime and drug infestation. Police had to have armed interventions at the property multiple times a week. Mrs. Horak-Brown always made sure she had an escort with her when she visited the site prior to its current suggestion. Even after all the previous tenants and riff raff were removed, there was still need for an escort. Prior to becoming a nuisance to the city, it once was temporary extended stay residences for NASA engineers.
Mr. Joe Martinez, Community Manager for the property, opened up 2 of the units for us to see. They are idealized dorm style, single occupancy apartments with mostly built-in furnishings. The smaller unit rents for $415 a month, and resembles most dorm rooms, only with a kitchenette. The larger unit is about twice the size of the smaller, renting for $475 a month. The lower level apartments are ADA accessible. Some units even have roll-in showers. The rents include all utilities and cable tv.
Perforated steel murals along the interstate face of the property act as security barriers and break the sights and sounds of Interstate 45. They provide a more attractive alternative than just a blank wall. It also gives the tenants a sense of place, an attachment to the location they will be calling home, even if it is a temporary home.
Canal Street Apartments & Noon-time Sustenance
Dedicated on November 17th, 2005 Canal Street Apartments is a 41,000 sf affordable housing complex. It has 133 units that are 100% occupied and has a waiting list that is max’ed out at the limited 15 people. The apartments are similar to Brays Crossing, with 2 different idealized dorm style units. The building is a “P” shape where many of the units face a Zen-like courtyard. We also met Ms. Tamara Foster, the Community Manager, who complimented Mrs. Horak-Brown’s dialogue with detailed information of her own.
On a special note: Canal Street Apartments received the 2009 Urban Land Institute-Houston Development of Distinction Award.
The total all inclusive cost was $6.0 million, which includes the furniture. Speaking of furniture, Mrs. Horak-Brown noted that the criteria for the furnishings are that they be inexpensive, sturdy and stylish. Canal Street Apartments is a Home Funds project, which uses state and local money to fund projects to house “people at or below 80 percent (80%) of Average Median Family Income ("AMFI") for an area.” This however is not a low-income tax incentive deal. New Hope is expecting a sizeable net return from Canal Street Apartments this year. Not bad for a non-profit.
I have to say that I agree with what one of my fellow student’s said about the project. Amy De Vernon posted on her blog the following: “What makes these projects stand out from other low-income projects is their emphasis on bringing stabilization to each person coming in through beauty, cleanliness, art, architecture, landscaping, and a whole host of personal improvement classes.” I could not have said it better myself.
Much to my surprise, Joy and Nicki treated us all to lunch at Mama Ninfa’s, where I had an amazing meal, probably the best on the tour (Sorry Lori & J.D.). It was so good, I finished off the entire plate of (3) beef enchiladas, something I rarely do. But what made the meal even better was the conversation. I was able to sit next to Joy and across from the De Vernons, where we discussed a host of different topics. I want to send a personal thank you to Mrs. Joy Horak-Brown and Ms. Nicole Cassier for such gracious hospitality, both for lunch and for showing us your two wonderful properties.
CityCentre
Mr. Brandon Houston (yes, he is a distant relative to Sam Houston), Director, Development with Midway Companies, briefed us on CityCentre. Midway’s name comes from the street in Dallas, where the company was founded and is a full service development company, with in house leasing, management, & development services. They also build to hold.
They bought an existing mall located in one of the wealthiest neighborhoods in all of Texas, with a $900,000 median home price, for $30 million and were able to close in 60 days. Everything but the three garages was leveled. By keeping the garages, money was saved as the price per garage parking space at the time was somewhere between $10,000-12,000 and 3,500 spaces were needed. The site is a total of 38 acres, 28 of which was developed by Midway. The land is parceled out so that each building has its own ownership entity.
The property also is within a TIRZ district, but no public money was used for the projects infrastructure. The main reason was that Midway wanted to maintain control of the streets and keep them private. They plan on using some of the TIRZ funds to create a more pedestrian friendly path from the adjacent neighborhood.
The price tag for the project was $500 million. CityCentre’s primary investor is Michigan State Teacher’s Fund, who provided 60% of the equity. Typically Midway’s investors are high net worth individuals. Mr. Houston told us that Midway’s strategy is to eventually buy out all their investors and own the projects outright.
The debt service coverage ratio (DSCR) was 1.15 when the project started and will become 1.4 when the loan/s are renewed. Midway took developer fees as well as leasing and management fees despite each parcel being under a different entity. Construction didn’t start until each building was preleased to meet its debt service (loan payments).
For branding purposes, Midway approached Lifetime Fitness with a proposal for them to change their name. Lifetime already wanted to cater to a more upscale market and ended up creating a new brand called Lifetime Athletic.
Rents are above the market rates by $1 to $2 and Mr. Houston does not foresee this changing for the second generation of leases. He believes that the leases will remain above the market and even get higher. The 425,000 sf of retail space is 60% leased at $35 per square foot. The 450,000 sf of office space, between two buildings, is 100% and 75% leased at $22 per square foot, but offers 5 to 6 months free rent as a concession. Midway is working their way to bringing the effective rent up to $22 per square foot with concessions and tenant improvements. The 525 apartments are 72% leased at $1.45-1.50 per square foot per month. The 244 key (room) hotel has rates averaging between $180-200 per night. There are also 22 condominiums on the premises.
Mr. Houston gave us some wisdom that he has garnered along the way. Always be creative and open minded. Have a plan, but be willing to allow that plan to change. For instance, a restaurant tenant wanted $50 per sf in T.I., but Midway wasn’t willing to pay that much. So an idea bounced around where Midway become a 20% owner in the business and would pay the $50 per sf as an investor/owner. That’s being creative, because there is a give and take in real estate. Also, don’t take “no” for an answer until they file a restraining order against you.
Appreciating no regulation & Homeward Bound
I have to say that I have gained a new appreciation for Houston. Though not having zoning in such a large city is a little unorthodox, it does however, seem to be working for them.
I had a fairly painless drive home, with some congestion and traffic leaving Houston. I was pleasantly surprised that it only took 4 hours from CityCentre to my house. I even ended with a decent skyline shot of Dallas. Tomorrow, I return the car…I will miss the gas mileage. Thursday, we are at Dallas City Hall and Friday, in Fort Worth. ‘Til then.
No comments:
Post a Comment