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.

ARGUS HQ
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:


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