Friday, June 15, 2012

Days Six & Seven - Houston Rockets Ahead

Discovery Green Park
Houston, TX
The last leg of our tour was spent in Houston where we made six real estate site visits.  While in Houston, we visited Discovery Green Park, the City Centre mixed-use development on the site of a former regional mall, New Hope Multi-Family Community (Houston's 1st LEED Certified Multi-Family Project), Argus Software HQ, and AMREIT.  On the final day of our journey, we stopped at Houston's Code Enforcement Office and talked with Steve Steizer about sustainable building trends.  Of the cities we visited on the Texas Real Estate Tour, Houston was the biggest surprise to me.  Overall, I was very impressed with the City of Houston and enjoyed looking around a city that is famous for having no zoning laws.  In fact, of all the places we visited on the tour, Discovery Green Park in Houston was by far the most interesting outdoor space.  Every city should have a park like this close to its CBD or Central Business District.  Designed by Hargreaves Associates, Discovery Green Park is, in my opinion, a masterpiece.  What started out as parking lots and old buildings has become a first-class park that is truly sustainable. The park is privately owned and has a parking garage underneath it which serves the nearby convention center. According to our tour guide, the park is vital to the area and has made a difference in the lives of Houston residents, and we saw very clearly how the park was even being utilized early on a Friday morning. To care for and manage the park, a non-profit organization called Discovery Green Conservancy has been created.  This framework was necessary since the park is privately owned.  Clearly a great deal of thought and time went into the design and construction of Discovery Green Park.  "From the earliest stages of planning, Discovery Green has been designed to use the latest technology in “green” building methods, energy conservation, and sustainable, environmentally-friendly park operations. Discovery Green has earned a Gold rating from the LEED Green Building Rating System, which is the national benchmark for the design, construction, and operations of high-performance green buildings," according to Discovery Green's Website.  The different components of the park work together seamlessly to create a natural and sustainable oasis just minutes from the hustle and bustle of downtown Houston.

Discovery Green Fountain
Houston, TX
Entrance to Underground Parking
Discovery Green Park

Our guide, William Flowers, gave us an excellent tour that was both informative about the park and about real estate in general.  Mr. Flowers talked about the 'power of 10' as in you need 10 or more things to do in an area before a location reaches a tipping point and becomes vital to a neighborhood.  Discovery Green is adjacent to downtown and the George R. Brown Convention Center -- a pretty impressive piece of real estate.  The total cost to acquire the land for Discovery Green Park was approximately $57 million, and the total cost to build the park was an estimated $125 million.  Some might argue that's too much money for a 12 acre park, but the park is now a real estate linkage and anchor for downtown development. Furthermore, Discovery Green Park plays a giant role in the 'power of 10' idea and probably should count as more than one of the ten places needed to build a vital community because of its size and because there are so many different things to do in the park. In the first three years, for example, Discovery Green, a public-private partnership, welcomed more than three million visitors and hosted more than 800 public and private events.  A Houston resident or tourist could visit Discovery Green Park to play, watch a concert, see the artwork such as the Monument Au Fantome, exercise (classes open to the public are held weekly), eat lunch (on-site restaurant), meditate under the trees, read (there is a small library component on site), play in the very cool water fountain (we saw some kids playing in the fountain during our visit), attend a wedding, or ice skate in the winter time.  As you can see, Discovery Green operates within the 'power of 10' principle.  The park's design is very linear with curves placed strategically throughout the park and Margo Sawyer, a well-known artist, designed the very trendy above ground entrances to the underground parking.  From the open space to the mature trees to its curvilinear design, Discovery Green Park is really something -- the park's designers did a great job.  I liked the park from the moment I arrived. To top off our park tour, Mr. Flowers encouraged our group to stop and admire the amazing view of downtown Houston from the park - truly incredible.  The idea of the 'power of 10' stuck with me throughout our site visit and made me think about how else the power of 10 principle might apply to different aspects of real estate.

Houston, TX
During our time in Houston, we also visited HQ for Argus Software and learned about the different tools they have for real estate professionals.  Thanks to Kari Mayfield and Erica Hohl for their time and for the tour of Argus HQ.  I remember now I have a great deal to learn about Argus DCF.  My favorite stop in Houston (other than dinner at Yia Yia Mary, a Greek food restaurant owned by Pappas Brothers) was AMREIT.  At AMREIT, we visited two gentlemen, Charles Scoville and Chad Braun, who took the time to share their ideas about real estate even though it was late on a Friday afternoon.  Our meeting was both informative and educational.  AMREIT is a REIT that targets irreplaceable retail corners.  The general criteria they use are as follows: 45,000 HH w/in 3 mi radius, $100K avg income w/in 1 mi radius, and trade areas with high demand for retail and traffic drivers.  While at AMREIT, we discussed real estate concepts such as REITS, % rent, barriers to entry, competitive advantage, trade areas, current and future climate for retail given the growing online retail component, and many other real estate topics.  We also discussed the use of real estate software in analyzing market data versus relying on gut instinct; we touched on this topic with other developers in Austin and San Antonio.  At the end of the day, the people we talked with all agreed that yes the numbers must work on paper, but equally important is that you, as the developer, must believe in your gut that there is a demand for the project/product.  Otherwise, the project is unlikely to work.

AMREIT Officials
Overall, Houston solidified what I had learned from visiting all three cities and those in between -- trends do matter in real estate.  Most everyone we met with talked about or referred to trends in one way or another.  Whether it was the 'green' trend or the trend toward one area of the city being revitalized, it is clear that the real estate professional, in order to be successful, must be a diligent life-long student of trends. Furthermore, just about everyone we talked to was positive about the future of real estate in Texas.  As the owner of Blue Leaf Realty, I took comfort in these words.  Texas, they said, has a great pro-business climate with no state income tax and reasonable tort laws.  As a result, more and more businesses are relocating to Texas.  More businesses means more jobs which means more residential and commercial construction which means more homes, office, industrial, and retail space. All of this is good news for real estate professionals in Texas.  One lingering question remains: Where is the next big gap?

Green Building Resource Center
Houston, TX
Our final stop was on Saturday morning at the City of Houston's Code Enforcement Building where we visited with Steve Steizer and toured the Green Building Resource Center.  It was a great place to wrap up our tour because we were able to see many of the products up close and personal that we had heard people refer to throughout our trip.  We saw ICFs (Insulating Concrete Forms), SIPs (Structural Insulated Panels), solar panels, energy efficient windows, high performing HVAC equipment, recycled insulation materials, and much more.  This was a hand's on exhibit which was nice because you could really look at the material.  The program director, Steve Steizer, talked about the importance of sustainable building and answered everyone's questions about the different green products.  Many thanks to Steve for his time on a Saturday morning.  We know from all the site tours that truly sustainable building is more than just a buzzword.  To be truly sustainable, a person who is committed to green building must consider a very diverse group of things such as water, energy, materials, lifespan, embodied energy, air quality, affordability, and site selection.  Because of budget constraints, a builder/developer must also consider the payback period and life cycle costs for his up-front investment.  Undoubtedly, green building is a real estate trend that is around for the long-haul!  As our group saw in several of the cities we visited, destination & specialty retail is also a growing trend - check out the flash mob in the video below at Houston's City Centre developed by Midway:

Days Four & Five - San Antonio Thrives: Beyond The Riverwalk

The Vistana
San Antonio, TX
Welcome to San Antonio where the Texas real estate group from UTA spent days four and five of our tour.  Overall, days four and five in San Antonio were perhaps my favorite part of the Texas Real Estate tour. San Antonio, in my opinion, has the most potential of any of the cities we visited on our tour.  Day four included site visits to: Build San Antonio Green, Solar San Antonio, Marty Wender's HQ, the 3+1 development, San Antonio's Economic Development Office, Lake Flato architects, and the Pearl Development along the famed San Antonio Riverwalk.  These site visits got to the heart of the matter addressing such issues as mixed-use developments, timing, location, design, sustainability, alternative energy, and the interplay between public and private entities in the real estate industry.  It was a heavy-hitting day, filled with tons of information about current and future trends in real estate.  Day five started with a great breakfast at Mi Tierra and a discussion with urban developer Ed Cross.  After talking at breakfast about a variety of real estate topics such as capital expenditures, unit mix, and borrowing and holding costs, we visited Ed's developments: The Vistana, a 1.4 acre mixed-use development, and 1221 Broadway, a multi-family project, which was fully leased up in 6 months.  Clearly, there is a huge demand for urban apartment living in San Antonio, just like there is in the DFW Metroplex.  On the other hand, Mr. Cross told us that his commercial/retail component at The Vistana was proving more challenging to lease.  We also made stops at the Friedrich Building, Alamo Architects, and AECT.  Six site visits later and we're on the road to Houston, but there is a great deal to talk about before we leave San Antonio for the more cosmopolitan city of Houston.

New Portion of RiverWalk
San Antonio, TX
San Antonio is a great city that feels on the cusp of a brighter future.  Major tourist attractions like the Alamo and the Riverwalk are there and heavily influence the real estate activity in downtown San Antonio.  This has its pluses and minuses.  As you might expect, tourist attractions are a big draw for hotels and there are plenty of them in downtown San Antonio. Tourist attractions are great for a city because they draw dollars into the city from outside the area.  Other heavy hitters in the tourism industry are in San Antonio as well. For instance, while talking with developer Marty Wender, we discussed the importance of economic generators such as Sea World and Fiesta Texas.  Sea World is an economic generator because it creates other economic activity such as hotel construction and road construction, two things that are necessary to create a tourist destination.  Marty Wender understands economic generators as he was the developer who brought Sea World to San Antonio.  He also felt strongly about building roads because roads provide access for commercial end-users.  As a result, many high profile companies like Microsoft have located in his developments.  To me, it seems that San Antonio, like most cities, is learning or has learned that it can not solely rely upon one industry like tourism and it must, at the end of the day, strengthen its local economy and serve its citizens as well as the thousands of tourists that visit the city each day.

We also discussed another crucial aspect of real estate and that is sales.  As any good salesperson knows, selling is a mixture of art and science.  According to Mr. Wender, to be successful in sales, you must believe in the product or service, believe the product is good for the customer, and have a passion to sell.  This is so very true in real estate, and we practice it everyday at my own company, Blue Leaf Realty.  You can't sell what you don't believe in!

Several keys to development were discussed during our time in San Antonio:

1. understanding how to maneuver in the political landscape, 2. understanding of how growth is occurring in the city, 3. understanding the cost of money and how to find it, 4. understanding trends, 5. understanding how to be flexible when the economy shifts, 6. understanding how to lead a team of professionals, and 7. understanding the role of location, timing, and capital.

1221 Broadway
San Antonio, TX
It became apparent that these factors were applicable in all the cities that we visited and that each city is inherently struggling with the same challenges in varying degrees. Such challenges voiced were: How do we attract and keep young professionals? How do we redevelop the blighted areas of a city without stepping into the private arena?  How do we fuel growth without stifling competition? How do we encourage sustainable building practices without discouraging growth?  Each city we visited was facing these and other issues that were voiced by San Antonio's Economic Development Coordinator for downtown, David McGowen.  Thanks Mr. McGowen for shedding light on how public and private entities must work together to make things happen.  Public/private partnerships are rapidly becoming more common and more important in the real estate industry.

3+1 Development
San Antonio, TX
As downtown areas like the CBD of San Antonio receive more attention and more dollars, it will become a tightrope for cities to balance the demands of urban and suburban dwellers.  More attention should be paid to economically sustainable models of development in urban areas as well as suburban areas.  Lanny Sinkin and Nic Jones at Solar San Antonio are doing their part.  They are leading the charge in San Antonio for the use of alternative energy via solar power.  They gave our group a better understanding of why solar is a terrific alternative energy source.  Mr. Sinkin indicated that politics is holding solar power back but progress is being made.  He also mentioned DOW's new solar shingles and the new legislation that prohibits HOAs in TX from restricting homeowners from adding solar panels on their roof.  I look forward to learning more about both of these topics that are vital to green building.  In my opinion, HOAs definitely need to have their power curtailed so I was glad to hear about this new legislation.  

Pearl - Mixed Use Development
San Antonio, TX
It was also good to see a mixture of sustainable projects in the downtown CBDs such as the Pearl Brewery redevelopment and the 3+1 development, an experiment led by college students comparing energy efficiency among alternative construction methods such as SIPs and autoclaved aerated concrete versus traditional stick construction, in San Antonio.  Overall, the Vistana in downtown San Antonio was very different from the Mueller development in Austin which was very different from the 3+1 project in San Antonio, but all contained elements that were sustainable and all were excellent examples of developments that provide options for the city's inhabitants.  In real estate, housing options are a good thing.  It was also nice to hear from Heather Holdridge how Lake Flato Architects (see video below) in San Antonio is building sustainable practices and energy modeling into all of their projects.  Thanks to everyone in San Antonio for their time; a special thanks to Mr. Jetter (see video below) who talked with us for several hours and explained in detail about how sustainable materials are a great option for construction.

Lake Flato Architects

AECT Compressed Earth Brick Machine

Day Three - Austin + San Marcos + Wimberly

Sam Gelfand - ACDDC
Discussion about Alley Flats
On day three, we got an early start.  Before heading to San Antonio, we made five real estate site visits and had an awesome lunch at a downtown Austin favorite, Hutt's Hamburgers (where I ordered a hot dog, go figure).  Day three started with a site visit to ACDDC, a non-profit devoted to providing design services to low and moderate income families.  At ACDDC, we talked with Sam Gelfand about a concept called Alley Flats, an innovative idea that is still trying to gain momentum.  The idea is simple - build small residences, typically less than 850 SF, on existing lots in urban areas where land is unavailable or very expensive and utilities and infrastructure are readily available.  According to Sam, there is tremendous potential with up to 30,000 lots in Austin that could be eligible for alley flats.  This idea is not new.  Historically, families have built homes on their land to accommodate growing families. In the case of alley flats, however, the lots are typical lots, not farms or ranches.  Whether intended for a family member or as an income producing property, the idea is a good one although not without its challenges, the biggest one being financing and dealing with issues such as HOA's, ingress/egress, and setbacks.  On day three, we also visited another innovative real estate project in East Austin called Pedernales Lofts, a mixed-use development.  Although the building was predominantly single-family condos, the ground floor of this project was unique because it could be residential or commercial depending upon demand.  The demand for the commercial was strong on the side that fronted a busy street, but demand for commercial was slight on the opposite side where the building faced a railroad track and a lesser road.

Having gone to school in Austin in the 90s, it was nice to see developments taking shape in both east and south Austin.  The city has definitely expanded to fill available space and SMART development practices are clearly being implemented throughout Austin.

S.M.A.R.T. Development

Mixed use
Reasonably priced
Transit oriented

Sanctuary Lofts Student Housing
San Marcos, TX
My favorite stop on day three was not in Austin; it was in San Marcos.  On the way to San Antonio, we stopped in San Marcos to tour the square and visit a student housing complex called Sanctuary Lofts, an adaptive reuse project that took over an old church building.  Sanctuary Lofts is an American Campus Community.  Students are able to share common space within an apartment while having their own room and bathroom.  Each student signs an individual lease with rates starting under $600/mos.  Residents also enjoy amenities commonly found in upscale multi-family projects such as fitness rooms, game rooms, office space, and outdoor facilities including a really nice pool.  Both ACDDC and American Campus Communities are taking creative approaches to solve one of the most inherent challenges in real estate development - finding land to build on in densely developed areas.

Neel Morton, Architect
Personal Residence
Our final stop on day three was in Wimberly, TX.  Many thanks to Mike for arranging the site visit to Neel Morton's office and residence.  Mr. Morton talked with us about how he used an existing green-house to create office space and how he was using sustainable materials such as recycled pallets as a primary building material for his home outside of Wimberly, TX.  He was gracious enough to explain in great detail how he used rammed earth construction to build temporary housing on his home site.  I'm sure Neel's home will be 'green' in the truest sense of the word - no marketing ploy here!

Thanks to everyone we met on day three in Austin, San Marcos, and Wimberly for their wonderful hospitality.  We learned a lot about sustainable building practices, adaptive reuse and redevelopment.  A special thanks to Catherine and Krista from the Texas Downtown Association and Preservation Texas for sharing their ideas about how small towns and historic buildings can get a new lease on life.  They are clearly doing some great work by helping to preserve small towns and buildings across Texas.

Rammed Earth Construction

Day Two -- Austin Marches On

The TreeHouse Store
Austin, TX
My favorite site visits on day two of our tour were The Treehouse Store and the Ronald McDonald House site visits.  We started out day two at The Treehouse Store in South Austin, a building supply store that is on a mission to bring sustainable products to the mainstream. We visited with co-founder, Jason Ballard, and learned about his zeal for conservation and ecological stewardship. What impressed me most was Jason's passion.  He is committed 100% to building a store that sticks to its mission of delivering sustainable building products.  The store is well-designed and well-stocked for the would-be do it yourself crowd who want to make their homes more sustainable.  The store stocks products that are difficult to find at other hardware stores.  In doing so, the store looks and feels very different from a traditional hardware store.  This is how the TreeHouse differentiates itself.  Every product at The Treehouse is filtered to ensure that it is sustainable and does justice to the store's mission.  They really try hard to purchase products that are made locally as in the very popular rain barrel which they can't keep in stock.  The products they sell are healthy, sustainable, high-performing, and responsible.  Thanks to Jason for giving us a great tour and kicking off our day two site visits.

Ronald McDonald House
Built by Beck Construction
Austin, TX
My other favorite site visit on day two was the Ronald McDonald House and who other to give us a private tour than Kent Burress, the CEO.  Mr. Burress led us through the Ronald McDonald House of Austin as if it were his own private residence.  He was intimately aware of every LEED (Leadership in Energy and Environmental Design) Platinum feature from the closed loop system to the low VOC (Volatile Organic Compounds) paint used on the walls and the 40% fly ash concrete used in the floors.  He also talked to us about how much thought went into the placement of the building, the daylighting challenges (93% of occupied space has natural light), the special chiller units, and the natural landscaping (irrigated with reclaimed water) and so much more.  He was a fount of knowledge as it related to the building and was clearly a hands-on CEO.  It was a special part of the trip to realize that sustainable features were making this building more energy efficient, have cleaner air, and contain more natural light which in turn was helping speed up the recovery process for its clients undergoing treatment at the nearby hospital.  This is where, in my opinion, real estate principles meet practical needs in a very special and unique way.

SOL Austin Development
Thanks Mr. Burress for the great tour and for the work you are doing to make the Ronald McDonald House in Austin a special place for the kids and their families.  In addition to these two memorable stops, we also visited with Molly (great presentation) at the Downtown Austin Alliance, looked at the SOL Austin development, toured a spectacular high-rise luxury condo building in downtown Austin called the Austonian on 3/4 acre, learned how a brownfield site has become a mixed-use development with sustainable features known as Mueller, a 700 acre redevelopment project with 140 acres of open space and park land, and witnessed first-hand how real estate really covers every facet of life: past, present, and future.  Whether it's it a new development, a redevelopment or an adaptive reuse, there are ways whereby the developer and the builder can implement sustainable features just like the developers of Mueller have done.  Learn more about the Mueller Redevelopment in the video below:

Day One - Austin Goes Green

9717 Peakridge, Austin, TX
Day one of the Texas Real Estate Tour began by visiting green built home sites in this year's Cool House Tour in Austin, TX. The homes were located throughout Austin.  All told, we visited 9 homes each with differing degrees of energy efficiency and green features.  We also visited an architect's home/office and a multi-family development that had sustainable features.  Many similarities emerged during our tour.  The most notable being that the word 'green' means different things to different people.  You might say the lesson learned is that green building is in the eye of the beholder.  Some homes were attempting to leave a very small footprint and be completely off the grid while others were using the latest in green technology to lessen their overall environmental impact.  Adding green features to a home cost money, and for many, the payback period is still unknown.  For some, the desire to be environmentally friendly is so strong that payback periods and life cycle costs are not a strong consideration.  Most people, however, build a home on a budget and therefore must prioritize in the construction of their home.  This makes understanding the payback period extremely important.  As more green buildings are constructed, data used in determining payback periods will become more widely available. Obviously, Austin is leading the charge in Texas toward residential construction that is more sustainable.  Other cities are likely to follow.

Although all of the homes on the tour contained standard green features such as low-flow faucets and energy efficient lighting, the home that really stood out was the first home we visited on the tour.  It was impressive because it was completely self-sufficient with regard to water (20,000 gallon rainwater system), including potable water.  The home at 9717 Peakridge, built by Hill Country EcoBuilders, also had a geothermal heat pump for heating and cooling the home, as well as a solar system.  As a result, it was the home that seemed the most sustainable as its features covered functionality and aesthetics.  Although many of the other homes on the Cool House Tour were unique and interesting, this one, located in a traditional subdivision, stood out as being the most 'green' of them all.  It also broke away from the stereotype that green homes are less attractive.  This home had it all - including exceptional finish-out such as bamboo cabinetry - in addition to its many green features.

Residential Sustainable Architecture
Across the board, day one of the Texas Real Estate Tour was filled with many interesting surprises.  Although each home we visited was unique, the home on Peakridge was my favorite site visit on day one because it seemed like the most sustainable home we saw, although the Wylie residence with its straw bale construction might give it a run for the money.

Design by Barley & Pfeiffer
The most amazing home design, however, goes to the architects who designed 7119 Valburn Drive in Austin near Town Lake.  This home was designed by Barley & Pheiffer Architects. It was the coolest home on the Cool House Tour. Amazing porches (some screened) capture prevailing breezes and provide exceptional outdoor living space with gorgeous views of the hill country.  South facing windows provided excellent daylighting, eliminating much of the need for artificial lighting during the day.  A metal roof was installed to accommodate both rainwater collection and solar pv system. Surprisingly, one of the most impressive features of the home, I thought, was the detached garage, an easy way to eliminate gases from seeping into the living space.  Overall, it is a beautiful and sustainable home with incredible attention to detail and an outstanding design.

Overall, it does seem that Austin is ahead of the curve when it comes to sustainable building practices.  The city is adopting legislation that requires home owners to perform energy audits prior to selling a home.  They are also implementing more stringent building codes that require new construction to install more energy efficient features.  This makes sense seeing as how Austin has always fought to preserve its natural landscape.  Its a fight that has paid off as many people are drawn to the inherent beauty of Austin. Austin's growth will continue to pose challenges to its unique small town vibe and natural heritage, but the city is moving forward and still managing to maintain its 'Keep Austin Weird' mindset as well as its natural beauty.  In spite of the traffic, Austin is a great city with the potential to continue to grow and prosper.  It has certainly defied the odds during the real estate downturn by continuing along a very positive real estate trajectory. I look forward to seeing how Austin looks in ten years -- who knows maybe BlueLeaf Realty will open a satellite office in Austin in the coming years.  If so, maybe an office with green features will be in order.  Day one of the 2012 TX Real Estate Tour was a big success.