Dallas City Councel gets Earful on Planned Apartments for Homeless

The Dallas News

 

Foes of a plan to move chronically homeless people to an Oak Cliff  apartment building went on the offensive Wednesday, telling the Dallas City Council their neighborhoods are no place for such a project.

Four speakers continued the public outcry against the Dallas Housing Authority's proposal, which includes renting 100 units at its Cliff Manor high-rise to tenants who in many cases have battled addictions and mental illness.

"If this was such a good idea, why wasn't it discussed openly with the 12 surrounding neighborhoods?" asked Daniel Duke, who lives near the building on Fort Worth Avenue.

"We do not want to be the testing ground for the Metro Dallas Homeless Alliance's experiment with supportive housing," he said. "We do not appreciate being the dumping ground for the city of Dallas' homeless problem. Find another direction."

Marty Martin said she is "not averse to services to less fortunate Dallas residents. However, the area near Cliff Manor has more than its share of subsidized housing."

Other speakers wondered about tenants coming and going "after hours," people "hanging around" the apartments, and the impact on nearby schools, property values and the area's redevelopment.

Questions were raised about safety, who would oversee the tenants' medication and where they might go if they "relapse."

"What you're hearing is the beginning of a tidal wave of distress coming from Oak Cliff because the neighborhood was ambushed and left out of the public discourse to determine its future," said council member Dave Neumann, who represents the Cliff Manor area.

MaryAnn Russ, the housing authority's president, could not be reached Wednesday. But in a previous interview, she said the agency will target women and older residents in setting aside more than half of the high-rise's 180 units for "vulnerable" people who have been stabilized.

"We're going to try to do this in a way that doesn't have a negative impact on the neighborhood," she said, noting that "we are an agency that's supposed to do this sort of work. ... The solution to homelessness is housing."

Re-establishing lives

Mike Faenza, president of the homeless alliance, told the council Wednesday that Cliff Manor would be a place for re-establishing lives.

"It's not a shelter. It's not psychiatric care," he said. "It's for people who have a right to live and be our neighbors and have some support services to enable them to be successful."

And there's no evidence, Faenza said, that residents in permanent supportive housing have a negative impact on neighborhoods.

Neumann said the Cliff Manor plan was on "hold" and would be the subject of a public meeting June 21 at Methodist Dallas Medical Center in Oak Cliff.

"It will be packed," he said.

Faenza later said "we'll regroup after that meeting." There is "no firm date from DHA when the move-in will take place," he said.

Russ has said the building has the required zoning and her agency doesn't need permission to proceed. She said staffing would be increased and a variety of support services provided.

But Fort Worth Avenue business leaders argue that the property needs a specific-use permit from the city to offer the proposed services. A decision has not been made.

Other council members weighed in Wednesday, with some calling for better communication, the need for public involvement in homeless-housing decisions and a better overall plan for deciding where permanent supporting housing units should be located.

Occasionally, comments drew challenging outbursts from some of the speakers who had addressed the council.

Council member Delia Jasso, who also represents Oak Cliff, joined the call for better communication and inclusion of neighborhoods in decisions. She said some providers of housing services are failing to provide appropriate services.

"That's why you have people roaming Jefferson Boulevard with $5 in their pocket," she said.

Jerry Allen, who represents northeast Dallas, said the work of housing the homeless "may need a different approach on the front end."

But the challenge is not insurmountable, he said.

The numbers

"We've only got 5,500-plus homeless in the city of Dallas," Allen said. "That sounds like a lot," but given the area's total population "that's not very many homeless."

"We ought to be able to come together and take 5,500 people, find them a proper apartment in Dallas, give them the support they need and move forward with this."

In conclusion, Faenza told the council that his group is trying develop a strategy for providing homes for the formerly homeless without using local tax dollars or tax credits.

"In a partnership with the DHA, I think we've found that solution," he said.

Faenza then asked two residents of The Bridge, the city's homeless assistance center, to stand up. The two women have been selected to move into Cliff Manor Dallas apartment, he said later.

Neumann and some of the project's opponents loudly lashed out, criticizing Faenza for an "ambush.".

Apartment Rents Rise as Sector Stabilizes

The Wall Street Journal

Apartment rents rose during the first quarter, ending five straight quarters of declines and signaling the worst may be over for the hard-hit sector.

Nationally, the apartment vacancy rate stayed flat at 8%, the highest level since Reis Inc., a New York research firm, began its tally in 1980. Local markets, such as Houston apartments, generally followed the national lead, although there were exceptions.

Reis tracks vacancies and rents in the top 79 U.S. markets, and rents rose in 60 of them, led by Miami, Seattle and New York—all cities that have notched big rental declines in the past year.

Rents increased 1.6% in the first quarter in Miami and 0.9% in New York. The gains came during what is usually a seasonally weak period for apartments and suggested that landlords may have some momentum heading into the peak spring and summer leasing season.

"Deterioration seems not to have just been arrested but reversed," said Victor Calanog, director of research for Reis. "Several markets have bottomed and may be on track to recovery," he said.

Nationally, effective rents, which include concessions such as one month of free rent, rose 0.3% during the quarter compared with a 0.7% decline in the fourth quarter of last year and a 1.1% drop in the first quarter of 2009. Vacancies are tied to unemployment, because many would-be renters move in with family members or double up during a downturn.

"We clearly hit an inflection point in all of our markets in January and February," said Jeffrey Friedman, chief executive of Associated Estates Realty Corp., which owns and operates 12,000 units in the eastern U.S.

Renters are also staying put longer: the average renter now stays for 19 months, up from an average of 14 months, said Mr. Friedman, and despite low mortgage rates and greater home affordability, fewer renters are leaving to buy homes.

"This is the first time in many, many years that it feels like even people who could afford to buy are making the investment decision not to," Mr. Friedman said.

Difficulty in obtaining financing for new construction of Dallas apartments, meanwhile, has limited the supply of new units that will be added in the coming years. Those fundamentals have landlords and investors excited about the potential for rents to pop once the economy gathers steam.

Still, Mr. Calanog said that a "slow recovery" was likely and that landlords shouldn't expect "galloping rental growth" until the job market firms up, particularly because younger workers that are more likely to rent have borne the brunt of job losses.

Others warned that gains were fragile and that landlords could continue to offer concessions to fill units.

"Rent reductions are not over yet," said Hessam Nadji, managing director at real-estate firm Marcus & Millichap. He said he didn't expect to see sustained rental growth until the second half of the year.

Barely half of the 22,000 units in buildings that opened their doors last quarter were filled, and landlords may cut deals because they face deadlines to pay back construction loans. "That's where renters are going to find deals," Mr. Calanog said.

Portland, Ore., posted the largest rent decline, at 0.7%, followed by Las Vegas, San Diego, and Southern California's Inland Empire. Those three markets have all seen an uptick in home-buying activity, particularly among the low end from first-time buyers and investors.

South Florida, meanwhile, appears to show signs of stabilizing after a painful years-long slump prompted by heavy overbuilding. Rents gained 1.1% last quarter in Palm Beach and 0.8% in Tampa-St. Petersburg.

"That market has been so bad for so long that many people had started to forget about it," said Alexander Goldfarb, an analyst at Sandler O'Neill & Partners LP.

Biggest Annual Rent Gains

Rank	Metro Market	12-month Effective Rent Growth
1	Colorado Springs	2.5%
2	District of Columbia	2.0%
3	San Antonio apartments	1.5%
4	Dayton	1.4%
5	Little Rock	1.3%
6	Chattanooga	1.2%
7	Austin	1.0%
8	Suburban Maryland	1.0%
9	Louisville	0.8%
10	Pittsburgh	0.8%

Raytheon Shopping for Big Texas Office Space

The Dallas News

A high-profile office tenant is shopping for a big block of space in Dallas' northern suburbs.

International defense and high-tech conglomerate Raytheon Corp. is looking for potential locations for consolidating its Dallas-area offices, real estate brokers say.

The deal would encompass several hundred thousand square feet of space and would be one of the largest in the Dallas area in the last year.

Raytheon already looked at moving into part of the former headquarters of Electronic Data Systems, which is now a unit of Hewlett-Packard. But a transaction to take over a large portion of the EDS headquarters building in the Legacy business park fell through, real estate agents familiar with the deal said.

Raytheon is now considering office locations in the Telecom Corridor, including Nortel's buildings along U.S. Highway 75 near Campbell Road.

Officials with Massachusetts-based Raytheon wouldn't confirm that the company is hunting for office space. But they didn't rule it out.

"We stay abreast of opportunities in the market," Raytheon spokesman Keith Little said. "We don't discuss specific properties that we may be considering."

Real estate brokers say the EDS headquarters and Nortel buildings are logical choices for a company that needs a big office in Dallas' northern suburbs.

Both companies have reduced the amount of space they use in the Dallas area in recent years, and Nortel is in bankruptcy.

"Yes, we have been talking to companies about the Richardson space," said Nortel spokesperson Jamie Moody. "And, just like we're selling off all our businesses, we are also selling our assets, including real estate, so that we can recover the greatest value in the interest of our creditors."

Despite a real estate downturn that has left acres of North Texas' office space sitting empty, there are few prime vacant offices as big as Raytheon would need.

"For spaces 200,000 and up, your options are fairly limited," said Greg Biggs of Cushman & Wakefield of Texas. "We are working on a transaction in North Dallas that's fairly sizable, and the amount of existing space available is fairly limited in big blocks."

Raytheon has operations in several Dallas-area locations, including on U.S. Highway 75 north of LBJ Freeway, farther north in McKinney and on Lemmon Avenue in Dallas.

Unlike in previous economic downturns, the area isn't awash in vacant Dallas apartments or office space. That's why some companies – including Pizza Hut – have recently chosen to build.

"We don't have all the see-through [empty] buildings we had here in the early 1990s," said Greg Langston, managing principal in CresaPartners' Dallas office. "One thing we didn't do is overbuild this time."

Missed Payment Rate Jumps on Dallas-Area Commercial Property

The Dallas News

An increasing number of Dallas-area commercial properties are falling behind in their mortgage payments.

At the end of last month, the missed payment rate for Dallas-area buildings with securitized mortgages was more than 33 percent higher than the national average, according to a new report by Trepp LLC.

The New York-based analyst tracks thousands of commercial properties across the country that are financed with securitized mortgages.

More than 9 percent of Dallas-area commercial properties with securitized debt were behind in payments at the end of February, according to Trepp's report, released Wednesday. The national delinquency rate was 6.72 percent.

The Dallas-area late loan rate has increased almost 200 percent from a year ago, said Paul Mancuso, vice president of Trepp, which provides real estate data and analytics.

"Although elevated, the [Dallas] region is well below the double-digit delinquency rates experienced in troubled states such as Arizona, Nevada, Florida and Michigan," he said.

Almost 160 Dallas-area commercial and investment properties are on the list of troubled real estate deals. The debt on these properties adds up to about $1.28 billion.

Among the largest real estate deals cited in the report is the Four Seasons Resort and Club in Las Colinas, which has been posted for foreclosure.

"Excluding the delinquent $175 million loan to the Four Seasons Resort and Club, the current delinquency rate would decrease significantly to 7.9 percent," Mancuso said.

Downtown Dallas' Harwood Center office tower and the Village on the Parkway shopping center in Addison are also on Trepp's watch list.

The Dallas sector with the highest mortgage delinquency rate is hotels. Almost 17 percent of securitized hotel loans here were behind in payments at the end of February. The office building delinquency rate was just over 12 percent.

Loan data from properties with securitized debt provides an important window into the health of the commercial real estate sector.

Trepp said the nationwide increase in late loans in February was 23 basis points,. It was the smallest increase in six months, but late loans are still at an all-time high.

In 2009, the number of commercial properties posted for foreclosure in the Dallas-Fort Worth area jumped almost 27 percent.

Foreclosure Watch: The Four Seasons Turns Cold in Dallas

The Wall Street Journal

It looks like the gamble taken by commercial-property owner BentleyForbes Holdings LLC last October in defaulting on its mortgage on the Four Seasons Dallas might not pay off. The lenders who hold the 431-room hotel’s mortgage filed this week to foreclose.

BentleyForbes skipped its October payment on the Four Season’s $183 million securitized mortgage in a bid to get the mortgage’s special servicer, CWCapital Asset Management, to revise the loan’s terms. In doing so, BentleyForbes explained that the hotel’s cash flows no longer covered its $10.9 million of annual interest payments.

This week, U.S. Bank, acting on behalf of the mortgage holder, filed a notice with the Dallas County Clerk’s Office to foreclose on the property, according to Foreclosure Listing Service Inc., a foreclosure-research company.  A CWCapital representative didn’t return calls seeking comment.

A lawyer representing BentleyForbes said the owner has “demonstrated its good faith and continued commitment” to the hotel with a $60 million renovation of the property in the past two years.

“The filing of the foreclosure posting is something that BentleyForbes was expecting as it is a standard administrative process required by lenders,” attorney Stephen Meister said in a statement. “Regardless, BentleyForbes remains in proactive discussions with its lenders at the Four Seasons Dallas and is committed to working out a successful financial structure.”

Closely held BentleyForbes, based in Los Angeles, owns several office complexes and hotels across the U.S. It bought the Four Seasons in the Dallas suburb of Irving, Texas, in 2006. The hotel is known nationally as the site of the PGA’s annual EDS Byron Nelson Championship golf tournament.

The Four Seasons Dallas is one of several hotels carrying the Four Seasons brand to run into mortgage difficulty. Millennium Partners LLC, owner of the Four Seasons San Francisco, went delinquent last summer on the hotel’s $90 million securitized mortgage in a bid to get revised terms. Neither Millennium nor the special servicer on the loan, Cerberus Capital Management LP’s LNR Partners Inc., returned calls seeking comment.

Beanie Baby tycoon Ty Warner’s Ty Warner Hotels and Resorts is attempting to get an extension of the due date on its $345 million securitized mortgage on four resorts, including the New York Four Seasons. He had difficulty obtaining an extension beyond the loan’s Jan. 9 due date because the properties weren’t generating enough cash flow to meet the loan’s threshold for qualifying for the extension.

Now, Mr. Warner and the special servicer overseeing the mortgage are in a forbearance pact in which the servicer has pledged not to foreclose as the two sides try to hammer out a long-term extension, according to a person familiar with the talks. A representative of Mr. Warner’s hotel company didn’t return calls seeking comment.

Drop in Construction Could Lead to Apartment Shortage

The Dallas News

A dramatic decline in U.S. apartment construction could lead to a shortage of rental housing in the years ahead.

This year, developers are expected to start about 87,000 units – less than a third of what they build on average each year. And the outlook for 2011 isn't much better.

"We will be facing a severe shortage of apartments in the next few years, which will increase the cost of housing for consumers," Sharon Dworkin Bell, senior staff vice president of the National Association of Home Builders, said at this week's convention in Las Vegas. "We believe we should have 300,000 starts every year to have a stable market."

That's not likely in the foreseeable future.

"We have a combination of limited supply coming on and increased demand when the economy recovers," Bell said.

Michael Costa, a partner in McFarlane Costa Housing Partners of California, said, "We know that the demand for housing – especially rental housing – is going to be there. Each month we are not able to get our starts going, we fall further and further behind."

At some point, a lack of rental units will take a bite out of consumers' pocketbooks. "We are predicting now we may see upwards of double-digit rent increases," Costa said.

His firm, which typically starts up to 35 rental communities nationwide each year, has just four projects in the works.

The slowdown has been even sharper for developer Jerry Durkin, whose Wood Partners builds rental units across the country, including several recent projects in the Dallas area.

In 2006, Atlanta-based Wood Partners started about 6,500 units.

"We closed one start in 2009 – a 150-unit deal," Durkin said. "I don't know how 2011 ramps up unless capital frees up."

Over the last couple of years, the Dallas-Fort Worth area has been one of the country's top rental housing construction markets. But startups of new Texas apartments have virtually stopped.

More than 11,000 Houston and Austin apartments were under construction in North Texas at the start of 2010, however, and there are lots of new units on the market, so rents have been falling and vacancies increasing.

The same is true in other U.S. markets, which makes apartment analyst Greg Willett of MPF Research skeptical about a shortage.

"To get back to an essentially full occupancy rate of about 95 percent, we've got to absorb about 600,000 apartments nationally and about 30,000 Dallas-Fort Worth apartments," Willett said.

"The builders are overestimating the number of kids in the basement" who will move out of their parents' homes when the economy rebounds, he said.

Dr. James Gaines of the Real Estate Center at Texas A&M University also says a shortage is a ways off.

"An offsetting factor is the number of foreclosures and other distressed properties being bought by investors and turning into rentals," he said.

Dallas apartments analyst Ron Witten predicts apartment markets around the country could be full by 2012, but that doesn't mean building would start right away.

"Developers have to find and entitle sites, then begin construction," he said. "It could easily be 2014 and possibly later before a meaningful number of new apartments are available for residents."

Dallas-Fort Worth Housing Poised For A Rebound

Dallas News

After slogging through two years of decline, the North Texas housing market is headed for a rebound in 2010. The only question, analysts say, is how strong the bounce-back will be. And that depends on the economy, of course."Any sustained turnaround in sales and construction activity will definitely depend on the economy and job growth," said D'Ann Petersen, a business economist at the Federal Reserve Bank of Dallas. "We do see increasing signs that the local economy has bottomed out, and business contacts say they are through cutting staff."

Petersen said there are signals that the worst is over for the Dallas-Fort Worth housing market. Next year will look better for builders and buyers.

"It will be slow going in 2010, but I do think that Dallas' housing market is in a better position than many other areas of the country to respond to positive economic growth," she said.

During the last two months, sales of pre-owned homes have increased significantly from year-ago numbers, and price declines have slowed. At the same time, the number of homes for sale in North Texas has fallen to the lowest level in more than two years.

Given the demand from homebuyers, builders will have to start more houses in 2010, said David Brown, an analyst with Metrostudy Inc.

"There now is currently less than a six-month supply of homes priced under $250,000 and just over a six-month supply of homes priced between $250,000 and $500,000," Brown said.

"If homebuilders are not able to start as many homes as they are closing because of lending constraints, then some of those buyers may be forced into the resale market and could cause new home closings to fall further next year."

Builders started only about 13,000 homes this year in North Texas – the smallest production volume in almost two decades.

"The current annual rate of about 13,200 starts should prove to be pretty close to the bottom," said Ted Wilson of housing research firm Residential Strategies Inc. "Interestingly, several builders have suggested that the bottom would have been closer to 11,000 starts – similar to the 1990 bottom – had we not had the $8,000 first-time buyer tax credit."

Wilson is projecting about 15,000 home starts in the D-FW area next year.

"If job growth picks up sooner rather than later, starts could push as high as 17,000, but we are still feeling conservative about the market," he said.

Tight lending

With many small builders cut off from construction loans, Wilson said that large public companies with better access to capital could have an edge in 2010.

"I wouldn't be surprised to see some of the larger builders flex their muscles with regard to access to interim financing and pick up market share in 2010," he said.

In the pre-owned home market, the number of properties listed for sale fell below the six-month supply point in November. That's considered a balanced sales market.

Price outlook

The decline in existing home prices in North Texas has all but stopped. Median home prices have actually inched up from their bottom in February.

National analysts agree that Texas – which for the most part didn't experience the last housing bubble – is poised to see home sector gains in the year ahead.

"We expect the Texas economy to perform better than the national average over the next year," said David Berson, top economist with mortgage insurance company PMI Group. "And because the bubble was less in Texas than in most other states, that's positive for house prices in the state."

"Price gains may be somewhat less in Dallas apartments than some other parts of the state," Berson said. "But [they're] still likely to be at least equal to the national average and probably somewhat better.

Analyst Stephen Bedikian of housing consultant Real IQ is expecting an uptick in the market next spring.

"By March, we're likely to see volume increase and prices firming," he said. "That trend will continue throughout the summer, and then we will return to a market that treads water for the balance of the year.

"I would expect people to be surprised by strength of housing prices between the March and August period."

But foreclosures are unlikely to ease in 2010.

Dallas-Fort Worth apartments and housing foreclosure postings set a record at more than 61,000 filings in 2009 and could be up again in 2010, analysts warn.

"I expect foreclosures next year to be a tad above this year – they are not going down," said George Roddy, president of Foreclosure Listing Service, which tracks local filings.

Roddy said that even when the economy rebounds in North Texas, the foreclosure market will lag. "It takes time after the job market comes back to help people who have been trying to hang on to their house."