We toured two affordable housing projects with Joy Horak and Nicole Cassier, one which was a recent redevelopment, and the other that had been operating for four years. This corporation focuses on affordable housing by utilizing tax credits, HUD financing, state and city support, as well as donations from individuals, businesses, and foundations. The two sites that we toured were Bray’s Crossing, which is a 149 unit affordable housing complex that was recently completed, and Canal Street, which is a 133 unit complex that has been operating for four years. Both of these sites are dorm style, multi-family facilities that have one room efficiencies with common area kitchens and living areas. They charge anywhere from $415 to $477 per month and focus on getting their tenants from various government foundations that service the lower income echelons of Houston citizens. Construction of both facilities was similar, but the final construction budget, which is all inclusive of everything including furniture, for the projects was very different. Bray’s crossing cost a total of $14M to construct partially because of a $1.5M acquisition cost of land. This high acquisition price is because the development was built on I-45, which is one of the busiest highways in Houston and has high property values. To assure that highest and best use will always be provided by this structure they designed it with the ability to knock out walls to combine multiple units. The Canal Street site construction cost was $6.1M and allowed for 50% and 30% of MSA funding for affordable housing. The affordable housing component focuses on providing for the recently homeless, recovering drug addicts, and those that have found themselves in a difficult financial situation. The foundation doesn’t view their occupant’s financial situation as a problem, but rather as a challenge. With help from private funding and various tax credits and public contributions, the foundation has succeeded in not ever having to evict someone for lack of ability to pay. They typically build structures that are profitable not only to gain tax credits, but to protect their integrity and ensure that they can provide continued development of similar projects. Their truly innovative approach to developing affordable housing by individually separating projects and their ability to work with the city, state, and federal government virtually assures that they will continue to provide these developmental services. After concluding our tours, these nice ladies took us to lunch. Thank you very much for your hospitality!
City Centre
We met with the Director of Development, Brandon Houston, at this site and discussed the various challenges that he faced from the planning to lease-up phase. He stressed to us that the developer and manager, Midway Companies, is a very conservative organization and that is the main reason that they have been able to weather the perfect storm that has occurred over the past three years in the real estate industry. They take personal responsibility for planning, construction, marketing, management, and leasing to ensure that all of these critical aspects are done correctly. This ensure that there is never a point where a project is passed on to another entity and effectively reduces the possibility that the “blame game” can occur if something goes bad. Although they are willing to take risks, they always to their best to minimize their potential downside. This particular project was a $500M investment that 60% of the equity came from the Michigan State Teachers Pension fund and the rest was mostly private investors. It is situated on 38 acres that was bought for $30M on a option contract with the existing regional mall which was on the site. This was an absolute steal for them because they demolished the existing structure and left the parking garages, which would have cost about $42M to construct the 3500 spaces. It is a mixed use development with 425k retail SF, 450k office SF, 244 hotel rooms, 22 condos, and 525 residential rental units. All of the buildings are LEED built, but the company decided not to spend the extra expense to pay for their certification. This urban development is all class A product and was preleased to a minimum of 50% prior to construction. The neighborhood it is situated in is one of the wealthiest in Texas with a median home price of around $900k. They expect to make all of their investors return on equity hurdles upon completion of sale after a projected ten year holding period. Midways approach to conservative and realistic business practices has produced a reputation that ensure their continued growth and sustainability.
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