Tonight is the last class of the summer session. We discussed adaptive reuse, redevelopment, transportation, Transit Oriented Developments, Architecture, and Facilities Management.

The first discussion was about adaptive reuse. There are pluses and minuses to reusing an old building. Simply using less construction materials is green in and of itself, and LEED recognizes and rewards the value of adaptive reuse. However, there are also often remediation issues or costs that can be unknown until reconstruction begins. Furthermore, an article for this evening points out that reconstruction can often never be as energy efficient or green as entirely new construction, due to the inability to install completely integrated modern systems.

There was a brief discussion about the potential for additional telecommuting benefiting smaller or rural communities. Could high speed internet access and better communications technology provide some benefit to these communities in terms of allowing more people to live and work in places that might be remote from traditional urban employment centers? Some of these small towns, born as service centers for the agricultural economy, have little reason to exist given the economic changes that have occurred since WWII. Small towns will need to be visionary in order to market themselves. Perhaps technology, high speed internet access, and telecommuting from a rural environment could be a good marketing hook.

We finished by citing the top trends identified throughout the course. These included Government sponsored projects, sustainability/green building/LEED, re-urbanization/mixed use/density, regulatory changes, and financial troubles.

Multi-family, single family and the economy really stinks

This evening the class discussed trends in multi-family housing, single-family housing, MFR, Appraisal and evaluation, development, and construction. We even covered the benefits (which are surprisingly large, money wise) of using iPads in construction.

We also had a valuable discussion of common pitfalls in analyzing home construction data. Given the cyclical nature of the home construction industry - with the majority of housing changing hands in the summer months - one has to be careful with period to period analysis. Comparing Summer quarter to 1st quarter sales is not revealing. Instead, same period, year over year comparisons, or even longitudinal comparisons over a long time period would be more useful for analysis.

Another note - a sad one for me - was the news of the bank taking back Valley View Center. When my family first moved to the DFW area in the early 1980's, we lived for a brief period just north of Valley View on Montfort Rd. I remember walking to Sanger Harris and watching movies at the (then) 2 screen theatre at the Mall. A victim of the overall economy and a poorer location vis-a-vis competitors, as well as a surfeit of mall competition in the north Dallas area, Valley View has been in decline for a long time. Still, its kind of wistful to see a piece of Dallas' recent past crumble. There's a great mosaic on the former Sanger Harris (now Foley's) store.

Another interesting article for this evening had to do with property losses from the BP oil spill and how to deal with them. Apparently, Charlie Crist is seeking to tap into BP to cover the losses sustained by businesses and homeowners along the gulf coast of Florida. I would wonder how much of a drop in property value could be attributed to the spill, as opposed to overall market conditions or poor management in the case of businesses. It seems like it will inevitably be a very arbitrary process. The situation does bring to mind the overall effect that the recent economic crisis, and decline in property values in general, has on local government and state government.

Another article discussed this evening dealt with real estate investment companies beginning to look into acquisition of distressed or broken multi-family projects. Some people, at least, are starting to bet that we are at or near the bottom. It will be interesting to see how that pans out, especially in light of the commercial mortgage refinancing cycle.

The discussion of a potentially growing "renter by choice" market was the most interesting portion of the evening. The transition from "the only people who rent are those who have no choice" to "renters by choice" has been ongoing for the past 20 or so years. The current economic cycle has probably reinforced the appeal of renting instead of owning one's home. The notion has been long marketed, by home builders and various government agencies, that owning a home is a sure fire investment, with a price trajectory that is always rising. Well, the recent crisis has shown that home prices can drop, and can drop quickly. So, more people are likely to view renting as a more viable alternative than buying. Also, more people have to rent right now, either as a result of lower or no income due to job loss or downsizing.

Also, more people have to rent as a result of their homes being foreclosed. In addition, there is a demographic element to the rental. As the large baby boom cohort ages into its 60's and 70's, it is likely that they will seek out living situations with less required maintenance and more convenience. Mowing the yard, fixing garbage disposal, and paying homeowner's insurance and property taxes are likely to become even less appealing to a person as they age. The challenge for real estate developers, planners, and architects is to ensure that new or repurposed multi-family properties are part of a whole community, or at least are able to serve the needs of an entire population. This "life-cycle" housing might well become very much a growth industry over the next couple of decades. This would mean viewing multi-family as part and parcel of the community, including retail, office, recreational, and medical care accessibility.

This will remake Fort Worth

This evening we met at campus and then walked over to the Trinity River Vision offices on West 7th Street in downtown Fort Worth. My overall impression of the Trinity corridor plans is that they will fundamentally remake the city of Fort Worth. Trinity Uptown itself would be enough to make a dramatic statement as well as changing the urban landscape of the city. But the plan is much more than that.

The beginnings of the project are similar to the background of the Dallas Trinity project. It begins with devastating floods, flood control methods that sealed off the river from the community, and a desire to reconnect the city with its principle natural resource. The massive levee system installed by the Corps of Engineers in the 20th century certainly protected Fort Worth from flooding, but also sealed off the river with a giant earthen wall. Fellow students pointed out that the North Texas area does not possess a surplus of natural amenities or striking landscapes. And people really like to connect with their environment, even if only in a scenic, sanitized way. People especially like water and interacting with water. It is therefore natural for Fort Worth to explore how to capitalize on its primary natural asset: the Trinity River.

Trinity Uptown has gotten most of the press and the accolades, but the Trinity River Vision is much more expansive than just Trinity Uptown. The Gateway Park plan is as ambitious as Trinity Uptown, and ought to provide a real benefit for residents of surrounding communities, ans well as opportunities for development and redevelopment around the park.Urban park planners always like to compare their plans with the size of Central Park in New York. While Fort Worth doesn’t possess Vaux and Olmstead, in Gateway Park, it does possess a footprint bigger than their Manhattan oasis.

Similarly, there are many smaller projects along the Trinity and its watershed throughout the City that will have large impacts on the quality of life and the value of many neighborhoods. There will be 27 miles of new trails, as well as rowing courses, ballfields, splash fountains, and other amenities that will get people out of their homes and connected with the river and their community. To me, the best part of the plan is how well integrated it is into the overall plan of the city. I also appreciate that there is an emphasis on residential, including an affordable housing component. It would be all too easy to price the working class entirely out of this kind of transformational development.

In comparison with the Dallas vision, Fort Worth seems to have much more organization, integration into the fabric of and overall plan for the city, and more momentum. There is a 12 year plan for finishing all the flood control and other infrastructure, and development of Trinity Uptown can begin as soon as financing loosens up. Local, state, and national interests seem much more aligned and on board with the Fort Worth plan than with Dallas. I would expect more built results from Fort Worth than from Dallas.

After the presentation, the class took a walking tour of downtown Fort Worth, including Sundance Square and the Radio Shack/TCC complex. The downtown residential development was particularly interesting in that it fit seamlessly with the overall built environment of a historic downtown.

The tour of the Radio Shack/TCC campus allowed the class to view the loop of the Trinity that will be redeveloped into Trinity Uptown. It also allowed us to experience the TCC campus. It is corporate monolithic architecture at its finest. Despite the green touches, the massive entry atrium is clearly designed to provoke awe and trembling in the visitor approaching the front desk. Not quite Mussolin's office at the Palazzo Venezia, but the same basic principle. Despite the intimidation factor, I think TCC has the finest junior college campus around.

They had me until the Skyway to Tomorrowland

On July 22, the class took a trip to Dallas to meet and greet at the Trinity River Foundation offices. There was a reception and presentation to an assembled group that included real estate professionals, representatives from design and architecture firms, the Dean of UTA's School of Urban and Public Affairs, and our small group of graduate students.

The Foundation offices were filled with interesting tidbits, including the large model of the vision for the Trinity River in Dallas. The model itself was a bit controversial when it was first constructed, with some eyebrows raised over the cost, estimated to be in the hundreds of thousands. Complete with a raft of tiny model houses and miniature led streetlights, the model is impressive, and conveys a powerful image of what the vast series of parks, parkways, athletic fields, and iconic bridges could do for Dallas. In addition to the overall model, there were models of the two Calatrava bridges as well as wall murals of the overall plan. And literature. Lots and lots of literature.

We met and mingled, then watched a presentation of the vision for the river corridor. Several aspects stood out. One was the proposed white water course. The design was pretty slick, using changes in elevation to create a course that paralleled the river but flowed in the opposite direction, then switched back to flow in the same direction so that a kayaker could take a trip, then walk up some stairs and start all over again. The Trinity Forest area was also interesting, allowing a very natural, almost wilderness experience within a large city. A decommissioned and repurposed bridge that would be analogous to New York's Highline park is another intriguing aspect of the overall plan.

The design was good and well thought out, but the organization, support, funding, and timeline were all a little more murky. Dallas approved over $200 million in bonds to begin construction of infrastructure for the plan, but has run into difficulties with the location of the proposed parkway and the structural integrity of the levees. The plan is massive, and will require an enormous commitment of time and effort, but seems to be largely based on the hopes that it will all work out one day.

There are plans for real estate development to take advantage of the amenities created by the plan, but these are also sometimes fanciful in conception. The vision offers opportunities to better connect Oak Cliff and Downtown, but certain aspects seem off. The main downtown gateway will be immediately below the Lew Starrett Justice Center, which deter young mothers from taking their toddlers for a stroll. Proposed Oak Cliff side development is linked to Downtown Dallas (at least in part) via a aerial tram. The artwork reminded me of Disney World's Skyway to Tomorrowland (a bit of 1960's technology which has, I believe, been closed). In total, the plan does not always parse well.

If much of this plan actually gets built, it will provide a great deal for Dallas. Not the least will be ample opportunity for additional development to take advantage of the amenities within the park system. It will be interesting to compare and contrast this plan with the Fort Worth vision.

This evening's discussion covered debt markets, lending, real estate financing, foreclosures, workouts, emerging markets, private equity, mezzanine finance, and investing. We also discussed next week's ULI meeting about "The Trinity and You". The meeting will be in Oak Lawn next Thursday, from 5:30 to 7:30. Should be interesting and, I hope, fun.

The first topic was financial reform and an article about Citi selling their private equity business. This divestiture seems to mark a return to core business lines for Citi. It also highlights an issue that contributed to the banking crash: the lack of seperation between origination, securitzation, and portfolio management. Glass-Steagal required a separation for years, but deregulation in 1999 removed this restriction. Citi was very aggressive during the 2000s in acquiring businesses like Salomon Smith Barney and Travelers. In preparation for financial reform, and as a means of generating funds to repay TARP money, Citi has been divesting many of these businesses.

Doom and gloom ruled the evening, with additional discussion of the looming danger of commercial mortgages issued immediately before the crash maturing over the next year and a half. The principal issue is the underlying value of the leveraged property having dropped precipitously over the past few years. Coupled with more restrictive underwriting standards and lower allowable LTV ratios, property investors will be sorely squeezed. Many will be unable to refinance, certainly not without substantial additional capital - which many do not have. This is a sort of slow-motion collapse, and the pressure of not knowing the real viability of their asset portfolios probably has a lot to do with financial institutions' unwillingness to open the finance tap.

The effect of the crash on property values here in North Texas can be seen in Brookfield Asset Management's impending purchase of the Two Addison Circle. Opus West, the original developer, began the project in 2008. With around $40 million in outstanding debt on the project, the 198,000 square foot building is expected to sell for nearly $80/sf, or roughly $16 million dollars. That's a 60% drop in value. Is there an opportunity for cash rich players to strike in this market, or is it still too early given the "extend and pretend" activity going on at so many financial institutions?

If many commercial mortgages are not set to be refinanced until 2011, and many financial institutions apparently either unable or unwilling to face the reality of their commercial lending portfolios, will there be a lag beyond even 2011 before a real mark to market occurs? It will take a comprehensive mark to market, and the ripple effect consequences of that mark to market on financial institutions' solvency and local and state governments' budgets and tax rates, before a real, sustainable recovery in the real estate market and commercial lending to occur.

Note as well that Brookfield is a Canadian firm. This raises the question of whether or not international money will buy in to the US real estate market, as the Japanese did in the 1980's, as they see price advantages to doing so.

We ended the session discussing workouts and private equity. The general consensus seemed to be that attempting some kind of workout is preferable than foreclosure, especially in a market as bad as the current one. This led to a brief discussion about the tax consequences of forgiven debt, which has generally been regarded as income by the IRS.

The Mortgage Forgiveness Debt Relief Act of 2007 allows up to $2 million in forgiven debt to be excluded from tax calculations. The link: http://www.irs.gov/newsroom/article/0,,id=174034,00.html

The IRS.gov site also discusses potential tax consequences of foreclosure. An interesting read (or at least as interesting as any IRS web page could be).

Fifth Session: 7/8/10

We began this evening's session with a discussion of overall trends in the travel industry. The specific subject was the changing nature of business travel. If the trend is continued scrutiny of operating expenses and continued emphasis on efficiency, will business travel keep declining over time or will the trend somehow change? If business travel continues to wane, how does this affect the hospitality industry?

Certainly, different hotel or hospitality companies position themselves differently in terms of their target markets. Still, the business traveler has long been the bread and butter of the travel and hospitality industry. To the extent that business travel fails to recover to pre-crash levels, the hospitality industry players that thrive will either reposition themselves to appeal to a different customer, redesign their offerings to create better value for the business customer in order to achieve a greater share of a shrinking market, or (more likely) a combination of both.

Travel trends include a number of interesting facets. Mode of travel may be shifting, as well as average distance. This would lead to greater importance for rail travel, as opposed to air travel. Florida has received stimulus money to begin development of a high speed rail corridor, and Florida's biggest hospitality and entertainment company - Walt Disney, Inc. - has made a play to be a part of it all. Specifically, Disney is offering financial support on construction of a rail stop near its resorts, only stipulating that it will have approval of design and have the operating concession for the station.

We also discussed the impact of the BP disaster on hotels and the hospitality industry on the Gulf Coast. While the question was posed as to the effect of poor media publicity on the fortunes of hotel owners and others along the Gulf Coast beached, I could not help but wonder at the narrative, and its validity. Certainly there are many thousands of business owners badly affected by the decrease in tourism to the area, but that is hardly a mere function of a poor media induced perception of oil fouled beaches. The Deepwater Horizon spill is very nearly unprecedented in scope, exceeded in sheer volume perhaps only by Ixtoc in the Bay of Campeche, and in an area with far more widespread and intensely developed tourist dependent infrastructure.

Status of real estate in China and potential for the breaking of a real estate bubble.

Fourth session - 7/1/10


Tonight's topics are Industrial Markets, Low Income Housing, Taxes, and Governmental Trends and Issues. My perspective may be a little different than most of the other students, as I approach the subject more from a planner's point of view than a developer's. My first concern with regard to tonight's issues is one of policy I will be interested as the class and course goes on to hear other perspectives on the issues we discuss. We also touched on the issues of gentrification and displacement, and the role of business and government (if any) in addressing these things.

Gentrification and the pressure redevelopment can place on functioning low income communities is, to me, a very real issue that cities need to tackle. The effect of displacement on families and neighborhoods can be catastrophic. New Day films produced a documentary about Project Row Houses in the Third Ward of Houston. The link:

http://www.newdaydigital.com/index.php?page=shop.product_details&flypage=shop.flypage_newday&product_id=8123&category_id=467&manufacturer_id=0&option=com_virtuemart&Itemid=59

(note that the good folks at New Day are capitalists as well as documentary film makers, and wish to charge you $4.99 for access to their intellectual property.)

One take on Project Row Houses: http://www.brunerloeb.org/PDFs/Learning%20from%20Project%20Row%20Houses.pdf

The first article we discussed concerned possible fraudulent activities on the part of the City of Dallas in regards to low income housing. We examined the issue of resistance to low income housing and why that resistance exists. From NIMBYism to the role of the market versus the role of government, the conversation was wide ranging. Several articles discussed the value added to a neighborhood by the presence of affordable housing. Rather than view low income residents as a threat, community residents should recognize the value of the diversity these new residents can bring.

An article about ideas on commercial real estate tax credits prompted an interesting discussion on the role of governmental regulation in spawning "cottage industries". Examples given were ADA Compliance Officers and locksmiths installing keyless deadbolts in apartments. Another article cited the extension of federal homebuyer's credit. It is interesting to note that many, if not all of the federal homeownership policies since the Great Depression arose from the desire on the part of government to stimulate construction activity, rather than any grand social policy experiment.

The federal government also has a potentially huge role in the commercial office market, particularly (as would make sense) in the Washington D.C. area. The GSA acts as one of the nations largest commercial property owners.

Dr. Forgey also mentioned the new Master's degree program in Sustainability. After only a week and half of recruiting, they already have over 30 students. The student mix is much more non-traditional students, with many older persons already working in local governments seeking the degree.

Also, in a nostalgic trip back to last week, we spoke about the move of Los Angeles to cloud computing via GMail and Google Apps, and other online trends, including ManorLabs, Inc. from Manor, Texas, which serves to elicit and evaluate new ideas from city residents. Residents can vote or comment on each others' ideas. The potential of technology and web-based applications to assist with open government is enormous. From providing insight and information about policy debates and governmental actions to providing easily accessible parcel data, the web is being utilized by governments, citizens, and businesses alike.

Now, if only the web could somehow transform or de-evil Homeowners' Associations. We briefly discussed a recent article about the growing practice of HOA's foreclosing property for delinquent dues. Texas is apparently one of the worst states for this, with non-judicial foreclosure (27 days after notice) allowing HOA's to confiscate someone's home for as little as two months' back dues (plus the legal fees involved in the foreclosure process). Of course, there are some less than altruistic attorneys that have profited from this, as they can run a healthy transactional practice where their fees are always paid out of the proceeds of the foreclosure. Reprehensible.