Weekend Home in College Station: What To Buy, And When?

Howdy!


I'm back one last time this semester and I have enjoyed blogging (for the first time ever, I might add) about my real estate interests the last few months.  As I prepare to graduate in May with a Bachelor's degree in finance and move towards beginning the Master of Real Estate program in August, I know I will look back on this class as one that really solidified my decision to pursue a career in Real Estate.

Every member of my immediate family is an Aggie graduate, and from the time my brother started his freshman year here in 2008 up until now, our family has been season ticket holders for Texas A&M Football.  Over the past few  years, the program has soared to new heights and the excitement is at an all-time high here in Aggieland.  That being said, my parents are looking for new real estate investments in the area to help cut down their expenses every fall and also provide a source of steady cash flow as they prepare to retire.  Currently, my parents own an RV and park it near the basketball arena each home football game weekend.  Not only is the initial purchasing costs for the mobile home high, but my parents dish out hefty operating costs each month for parking, maintenance, storage, etc.

Over the past several months, my parents have been looking for properties for sale in the College Station area and have asked for my input in the process.  My expertise on many of the factors is limited, but it's been quite an experience helping them attempt to value these property investments.  Our goal is to find a property that is (a) located in the Southside Historic District near campus, (b) have prospects for extensive renos, and (c) be an ideal size/location that would be appealing for renters.  Issues that we have run across thus far have been the fact that properties in this area, for several reasons, don't last long on the open market.  We believe that with the student growth in the city, coupled with the large amount of developers wanting in on the action, we are competing against folks who are in the know well before us.  These developers know what's selling, when it's selling, and for how much.

Regardless of whether the odds are stacked against us, we still have had the opportunity to pull the trigger and put in offers but have been hesitant to do so.  Some properties seem to be too expensive to do a tear down and rebuild.  Others seem too far from campus with no room for parking, making it unattractive if we were to market to students or family renters.  Another big question is if Bryan/College Station can continue the growth we have seen over the last 3-4 years.

 Properties in the SSHD have seen annual growth in value anywhere from 8 to 20% since 2012.  The prospects look great for a long term investment, as Texas A&M University is planning huge student increases, properties are being developed further and further outward, and the excitement of the university's athletic successes (see Kyle Field, Aggie football and baseball) is higher than ever.  However, it's important to question the popular belief and consider the likelihood of a pullback in the market on the horizon.  My parents have long term interest in whatever property they choose to buy, so this might not be as important of a factor to them as it is to some.  But being sole investors (not looking to partner in the deal), this is still a factor to consider, nonetheless.

I'm very blessed and thankful for them involving me so much during the process, as I have not only enjoyed every minute of it, but I have learned a ton in the process.  With my dad and brother being commercial real estate professionals, there's nobody else I'd rather learn the ropes from.  Whenever my parents come in town, we spend a few hours each day just driving around looking at different properties and weighing our options.  When the family is back home in Houston, I serve as a Realtor of sorts, taking pictures of different houses, walking off property lines and calling brokerage firms to ask for quotes.

Hopefully, in the near future, my parents will decide to close on a deal and I can live in the house during my final semesters of graduate school.  By bringing my friends in to live with me as renters, I can help make the transition seamless for my parents and provide them with some immediate cash flow without having to market or search for potential tenants.  Also, it would be pretty sweet for us to have a weekend house for the next few years so we can hang out in our own place while we watch some Fightin' Texas Aggie football!

Well that's all I've got.  It's been an exciting and helpful semester, and I have enjoyed learning everything that I have over the past few months.  And to Mr. Peterson, thank you for everything you've done for me throughout the semester and I can't wait to take some more of your classes next fall in the Master's Program!


Best,

Austin Decell

Unique Office Buildings and Their Environments

Howdy all!

I'm back again to write one of my final blogs of the semester, and this time I wanted to change up the pace a bit.  During a recent lecture, we spent a lot of time talking about the ever-changing landscape of corporate office space.  Companies today are making a large commitment to improving the overall atmosphere and environment in the office, as well as upgrading the quality of their facilities in the process.  Today, I want to examine some of my favorite examples while also thinking about what my personal ideal office environment would be.

Today, Google is a wonderful example of the "fantasy" workplace so many workers seem to covet. From private sleeping pods and multistory slides, to unlimited gourmet meals and massage parlors, Google's headquarters has it all.  The tech giant has always attracted the most talented and brilliant employees to maintain the firm's global stronghold on the industry, but now it's using its dream office to make sure they stay. Laura Wilken, who works in Google's Real Estate & Workplace Services division, says the company is always trying to "figure out any type of program that will make Googlers happier, healthier and more productive".   Productivity is the driving force behind these changes, and the firm is considered the world's best company to work for, according to Fortune.com.  

While this "Disneyland" office would certainly pique my interest in taking my talents to the Silicon Valley workforce, my opinion is that the employees are treated a bit too much like children.  Nutrabolt, a sports training and supplement company based here in Bryan, is the real dream office for an active, sports enthusiast like myself.  One of my room mates, who is a current employee with Nutrabolt and has taken me to hang out and "play" up at the building several times.  This state-of-the-art facility is beautiful and comes with all the bells and whistles: full locker room, sauna, steam room, cold and hot tubs, full weightlifting and cardio gyms, rooftop putting green, basketball court, kitchen, pool and shuffleboard tables, and much, much more.  

However, that's merely the additional facilities that come with their spectacular office space.  Both stories of the office building utilize an open, collaborative design with fantastic architecture and modern furniture.  The walls are built out of whiteboards to allow for novel concepts and ideas to be shared among anyone at any time.  Comfortable bean bags and lounge chairs are littered throughout the office to provide employees with areas to relax and work in peace.  Every desk is in plain view of every other team member's desk in a particular department.  It truly is a sight to behold.

I think this style of environment would be very suitable to my personality.  I enjoy being around other people and collaborating, working hard in a comfortable setting, and I definitely wouldn't mind enjoying a nice game of pool or shooting some hoops as a nice break every now and then.  I'm a fast paced worker who loves teaming up with others to accomplish challenging tasks.  Both Nutrabolt ( with their top notch athletic facilities, fun amenities and convenient location) and Google (beautiful location, incredible perks and challenging work) are both amazing work environments in my opinion.  Hopefully one I'll be able to enjoy a corporate culture similar to what these two firms have incorporated into their businesses. 

Google Headquarters, Mountain View, CA:

Nutrabolt Headquarters, Bryan, TX:

Former Hometown Mayor Fails to Deliver On Big Promise

http://www.houstonchronicle.com/news/houston-texas/houston/article/Texas-developer-delivered-heartbreak-and-6134920.php?t=329927798e&cmpid=fb-premium#photo-7658905

"Texas developer delivered 'heartbreak and desperation' with unmet expectations"

In a recent lecture in our FINC 371 class, we spoke in depth about the fiduciary duty a service provider has to their client.  This topic came to mind once again a few days later, as I read an particularly interesting article in the Houston Chronicle about developer/businessman, David Wallace.  I was raised in Sugar Land, Texas and had met Wallace on several different occasions while he served as mayor from 2002 to 2008.  When I read about his real estate ventures, I was astounded at his inability to see his projects all the way through.  Look no further than Joplin, Missouri.

In May of 2011, an EF5 tornado ripped through the town of Joplin, killing 158 people, injuring over 1,000 more and causing roughly $2.8 billion in damages.  The town was devastated and was looking for extreme aid in the recovery process.  In comes Wallace Bajjali Development Partners, a real estate development firm that focused in large-scale municipal investments that was created by David Wallace and Costa Bajjali.  They had been praised for big-name projects around the Sugar Land area and across Texas, which was partly the reason Wallace had won the election for Mayor in 2002.

Wallace Bajjali LP was hired by the city of Joplin to lead an $800 million redevelopment effort that promised a shin city full of beautiful new residential and retail properties.  However, Joplinites soon learned the hard way what Sugar Land natives had known all along: David Wallace and his partner were not what they made themselves out to be.  When all was said and done, Wallace and Bajjali had left town with $1.7 million in fees and a $5 million private loan.  The partners had failed to build a single property.  By the time 2014 rolled around, Joplin officials couldn't get a hold of Wallace or Bajjli at all, as they learned that the company had closed its doors and the two businessmen were MIA.

The "slick-tongued salesmen" had pulled off similar tricks in the past, as developments in Waco and Amarillo had also been played on big stage.  Joplin officials said they had heard rumors of Wallace's past projects, but were completely swayed by Wallace's slick and convincing sales pitch.  As of today, Wallace is being sued by two former employees in Joplin for fraud and breach on contract. The city continues to rebuild and believes it will eventually be better off now that Wallace is no longer in the picture.

This story was difficult for me to read, as I feel that Wallace's actions have tainted the reputation of my beloved hometown of Sugar Land.  This is an incredible city that was once voted the 3rd Best City to Live in the U.S. by Money Magazine.  So much culture, history and livelihood was once credited to a man that I look up to as a kid.  Wallace was always so genuine and welcoming to me and my family during the times that I met him, making it so disappointing to now know that his genuineness was merely a deceitful facade. I know that the city of Sugar Land is now in better hands and I hope justice is found for both Joplin and Wallace himself.

The article was a great example of how important trust, loyalty and commitment are in massive real estate investments such as the Joplin deal.  The city not only lost a large sum of money in the faulty business of Wallace Bajjali, but they also faced a serious setback due to the time lost in the process.  It's so vitally important to do your due diligence and thoroughly check your client's background when making an expensive investment, and Joplin failed to sift through Wallace's smooth lingo and fancy renderings.

One-Time Texas Rangers Owner Lists Dallas Estate for $100 Million

http://www.wsj.com/articles/dallas-estate-of-tom-hicks-is-now-seeking-100-million-1425591851

"Dallas Estate of Tom Hicks Is Now Seeking $100 million"

If you're a high-net-worth individual looking for a spacious, luxurious estate in the Dallas area, you might want to check out what Tom Hicks just put on the market.  Hicks, a former stakeholder in the Texas Rangers franchise, has placed his 25-acre, 27,000 square-foot estate on the market for a paltry $100 million, making it the most expensive residential property in the city.  After initially asking for $135 million in 2013 to attract possible wealthy buyers, Hicks has now provided a (somewhat) more comfortable bargain and has posted the listing publicly on the MLS.

At first, I did a double take when I saw the listing price.  Researching the highest-priced properties in cities like Houston and Fort Worth, I couldn't believe the appraisal of the home.  That was before I began to read more about this unique piece of real estate.

The mansion, located in the wealthy neighborhood of Preston Hollow, is a beautiful property with a bevy of amenities.  This fully-gated, Italian-style home has plenty of features that billionaires adore, including a a 4,800 square-foot recreational complex, wet bar, home movie theater, outdoor pool, and a helicopter pad in case you prefer traveling by air over land.

In addition to the amenities listed above, the home features endless chandeliers, numerous statues, a full 19th century-inspired library and gorgeous landscaping surrounding the home.  Stainless steel, marble, granite and limestone can be found all throughout the interior rooms.  After buying the home in 1997, Tom and Cinda Hicks decided to embark on a 33-month renovation plan to expand and upgrade the property in future hopes to sell it once their six kids grew up.  Allie Beth Allman, the listing agent for the property, said the couple has put more capital into the property than the 8-figure asking price.  The Hicks hope to sell soon and spend more time at their new home in La Jolla in San Diego, California.

This article interested me particularly due to our in-class studies of property appraisals.  It's perplexing to think what method and information was used in valuing the estate.  The cost comparison approach would have most certainly been difficult, considering there are hardly any comparable properties to use in the valuation.  If the couple really had invested more than $100 million in renovations, I wonder what factors (besides low demand from a select target market) caused the market value to be less than the asking price. Assessing the house using the cost approach would suggest the home could be valued at well above the $100 million price.

Also, I am curious about the Hicks' large commitment to high-end finishing and luxurious fixtures in the mansion, and whether or not they will attempt to salvage some of those assets or simply leave them as part of the estate sale. I hope to follow this property closely, as I'm intrigued to see what the final purchase amount will be and which lucky (or not so much) multi-millionaire will end up
occupying the home.

NFL Return to L.A. Imminent as World-Class Stadium Plans Unveiled

http://www.prnewswire.com/news-releases/hollywood-park-land-company-announces-plan-to-build-world-class-sports-complex-in-inglewood-300015442.html

"Hollywood Park Land Company Announces Plan To Build World-Class Sports Complex In Inglewood"

Growing up in Texas, I have been raised to eat, live and breathe football.  In my much younger years, in addition to watching Texas A&M football, I loved watching the Houston Oilers in the Astrodome.  When the team left for Nashville (now the Tennessee Titans), I had no NFL team to root for for almost six years until professional football returned to Houston in the form of my now favorite team, the Houston Texans.

As the years have passed, I have recognized the economic and cultural impact that professional sports teams can have on a city, and how these large metropolitan cities thrive on serving as the home for these franchises.  Because of this, I had always wondered why Los Angeles, the second largest city in the United States, hadn't had a professional football team since 1994 when the Rams (now the St. Louis Rams) played in Anaheim Stadium.  The cities of San Diego, San Francisco and Oakland were home to the Chargers, 49ers and Raiders, respectively, so why would the world-famous city of Los Angeles not be worthy?  Well, after over 20 years of waiting, it looks like the citizens of the city of Angels have their answer.

On January 5, 2015, Hollywood Park Land Company (HPLC) in Inglewood, California released an expanded plan to develop 298 acres by adding a world-class football stadium along with 4 million square feet of retail, office, hotel and residential space.  The project is said to be built by no cost to taxpayers and provide thousands of jobs during and after construction.   HPLC is a joint venture between Stockbridge Capital Group, a real estate investment management firm, and the Kroenke Group, a leader in commercial real estate and development.

In 2005, Stockbridge purchased 238 acres in Hollywood Park for future development and the Kroenke Group purchased an adjacent 60-acre parcel in 2013.  The project, which has been named "City of Champions Revitalization Project", will include the following:

• an 80,000-seat, state of the art football stadium
• a 6,000 seat performance venue
• 890,000 sq. ft. of retail
• 780,000 sq. ft. of office space
• 2,500 new residential units and a 300-room hotel
• 25 acres of public parks, playgrounds, open space and pedestrian and bicycle access

Also, 60 acres of undeveloped land surround the village that is ideal for building a central district that will aim to successfully blend entertainment and residential life in Hollywood Park.  The development is expected to create long-term revenue growth for the city of Inglewood and the Greater Los Angeles area and is slated to be completed in time to host an NFL team for the 2018 season. 

This news was extremely intriguing to me not only because of my deep love for sports and football but also due to my increasing knowledge and curiosity of commercial real estate.  In my opinion, this is one of the best investments I have seen in a long time, and I'm not sure why it took so long for someone to step forward and fund it.  Granted, the development plans and architecture of the village were most likely very complex and the idea couldn't be formulated until the possibility of an NFL team moving to L.A. was at least a strong possibility.  Recently, the St. Louis Rams moved to a year-to-year lease at the Edward Jones Dome in St. Louis, giving them the flexibility to move so things are moving quickly to say the least.

At this point, all signs point towards either the Rams returning to Los Angeles or possibly the Raiders relocating from Oakland, as the city still refuses to build the franchise a new stadium (circa the late 1990's when the Oilers decide to up and leave for Nashville).  With this massive, diverse, football-starving megacity, this development couldn't come at a better time and the people of the Greater Los Angeles area will be flocking to the new "City of Champions" in no time.  It appears that Stockbridge and Kroenke just struck oil out west, and NFL fans alike couldn't be more excited.

Future Downturn Expected for Houston Housing Market

http://www.cnbc.com/id/102424293

"Houston housing awaits spring chill"

Growing up in the Houston area, I have developed a great interest in the city and have become more aware of the growth and development of the area.  A few weeks ago, I came across this article from CNBC.com that examined the housing market in the city and the expected impact from recently low oil prices.

Houston is a strong, energy-focused economy with many large O&G firms establishing their headquarters in the metropolitan area.  That being said, as the energy industry goes, so does the city's economy. As these energy companies thrive, more jobs are created which leads to expansion and growth around the city limits.  As corporations such as Halliburton, Baker Hughes, Weatherford and Conoco Phillips experience corporate layoffs, the desirable and "frothy" real estate market is expected to face an eventual cooling-off period.

However, according to historical analysis, economic standstills such as the energy struggle we see facing Houston today don't effect the real estate market as quickly.  A real estate agent in the Houston area said, "Now that oil prices are down, things haven't completely changed, but let's just say that they have come to more of a stall".  Evidence has shown that the largest drops in year-over-year oil prices haven't had an effect on housing markets until much later. Statistics show home prices don't tend to slide until roughly 18 months to 2 years after the city experiences job losses.

After already experiencing drops in sales of town homes and condominiums, experts believe that a cool-down on the residential side is next.  Rick Sharga, executive vice president of of Auction.com, says it's only a matter of time until the housing market feels the effects.  "Because it hasn't been hit yet doesn't mean it's not going to happen, so I think patience is the buzz word. We're expecting that Houston will cool down significantly on the residential side".

I found this article to be interesting to me as it pertains to my future career plans and my parents' retirement plans.  Upon finishing graduate school and preparing to begin my career, I am very interested in working in either the Dallas or Houston area.  I'm hoping that my knowledge and experience gained in the MRE Program will allow me to make wise decisions in the real estate market.  It will be interesting to see how the market responds once oil prices start to rise again, and whether or not the market will be frothy again by the time I am a potential home buyer.  Buy low, sell high is the idea here.  Ideally, property values will be relatively low when I am looking to buy and will appreciate quickly as the housing market begins to recover and grow at rates seen previous to the oil slides.

As for my parents, they are looking to retire very soon and are considering many different options as they look for their future home.  They've looked at high-rise condominiums in the downtown area, smaller homes in high-population suburbs inside the 610 loop and even multiple acre lots in exurbia Houston.  I think the recent drop in oil, and the subsequent impact on major firms in the city resulting in job losses, will eventually make a difference in their financial decision once they decide they're ready to quit working for good.

Blackstone Group purchases Cosmopolitan Hotel and Casino

http://www.wsj.com/articles/blackstone-looks-to-buck-the-odds-on-vegas-strip-1424200562

"Blackstone Looks to Buck the Odds on Vegas Strip"

In December 2014, the New York investment firm of Blackstone Group LP purchased the Cosmopolitan of Las Vegas at a price of $1.73 Billion from Deutsche Bank AG.  The luxury hotel-and-casino property on Las Vegas Boulevard has largely under performed since its opening and Blackstone is looking to revamp and transform the property to become more attractive to high rollers from around the world.

The Cosmo, since opening its doors in 2010, has been one of the least profitable casinos on the Strip.  Its average daily room rate of just over $300/night is well above the Strip's average of $125.  Blackstone executives identify this struggle as a direct result from previous managers of the property failing to target wealthy tourists and customers from China and Southeast Asia.

Blackstone's goals are to first boost gambling revenue, which brought in a lackluster $203 million in 2014, ranking as one of the worst on the Strip.  The firm's long-term hope is that the company will be fueled by hospitality, entertainment and retail services. The prospects of a financial turnaround for the property are not far-fetched, as many of the desired qualities for a top-notch Las Vegas casino are already in place.  The property still remains one of the most popular locations on the Strip due to its fabulous real estate, quality entertainment and rooms with high-end finishes.

I found this article to be interesting due to my recent time spent travelling to Las Vegas and my experiences staying at hotels and casinos on the Strip.  I have always been enticed to stay at the Cosmopolitan, but high nightly rates drove me to choose other options each time I visited the city.  Also, I am curious to see how Blackstone plans to increase gambling revenues when the property is surrounded by some of the most famous and successful gambling destinations in the world (Bellagio, Caesar's Palace, MGM Grand).

Lastly, I find it ironic yet fascinating how Blackstone is making such a big gamble in the biggest gambling city in the world.  Many hotel-casinos have been struggling as of late and the Cosmo is a huge and risky project to take on (Blackstone Group is now the third owner of the property since 2008).  Chris Jones, a senior analyst for Union Gaming, went on to say that if Blackstone is able to turn around the Cosmopolitan "it would be one of the few recent successes by firms in the investment business".  Personally, I think Blackstone can pull off the recovery given their experience in the hospitality and entertainment industry and their successes with similar big projects in the past.  Only time will tell, but I am going to Las Vegas for a third time in May and I am looking forward to stopping by the Cosmo to see if there have been any noticeable changes or additions to the property since my last visit!