Bayside

8/10/2016

I attended a Chamber of Commerce luncheon today. The main event was a presentation of Kent Donahue, developer of Bayside. I have met Kent a couple of times. He's a good fellow.

Kent described where he is, and where he's going in converting Robertson Park into a development called Bayside.

Folks, I've been around some pretty fancy real estate development over the past 50 years. Nothing I have been around equals the grandeur of what Kent Donahue is planning for Bayside. It includes an 8 acre clear water pool, magnificent water fountain displays, very upscale housing, resort hotel, apartments, marina, upscale and casual restaurants, offices, and a spectacular bridge and entrance to the development. There are probably many things too numerous to mention.

If reality and dreams come together, and I think they will, Bayside will completely "re-brand" Rowlett. Rowlett will no longer be a backwater of Dallas area suburbs. Maybe a little different than Frisco and Plano, but not less noticeable. I have high hopes for Rowlett, and I think it just might be possible.

Kent Donahue is the perfect developer for this endeavor. He is not flashy or showy. He's down to earth and quietly confident. There's a huge difference between confident and "showy." Showy gets the headlines. Confidence gets the job done. I like the ones that know how to make something work.

4 Comments

Randy Cherry

8/15/2016 09:07:50 am

I just wonder if the City gave too many incentives to the Developer. How normal is it for the City to basically guarantee the cost of infrastructure?

Ron Miller

8/15/2016 10:40:21 am

The city negotiates all incentives individually. Much is determined by the benefits that accrue to the city after development is complete. It is a fairly complicated calculation in which, unfortunately, many municipal officials of many cities are not proficient. Sometimes the developer's charm results in more incentive that another developer's lack of a $1,000 suit.

As far as guarantees, nearly all times any guarantees are made in favor of the city, not guaranteed by the city. Who is the city guaranteeing the infrastructure to? The city is the ultimate owner of the infrastructure. It is their baby to own and maintain. If anything, a city will usually require a "set aside" letter from any lender loaning funds for the development. The "set aside" letter guarantees the city that the lender will have funds to pay for infrastructure. The city already knows they are going to own the improvements.

8/16/2016 03:58:32 am

Aren't they giving him 50% of the tax revenues for 10 years to pay for the infrastructure?

8/16/2016 08:51:20 am

Of course, I didn't set in on negotiations. I can only guess at the considerations, but if the city is providing 50% of tax revenues for 10 years, I think it reflects on the nature of the transaction. This "partnership" is not terribly unusual.

I don't want to get off in the weeds here, but each city/developer negotiation is different. Much depends on the nature of the development.

Bayside is a beautiful piece of land. However, it is horribly underserved by infrastrurcture, including water, sewer, roads, etc. The land was never meant to be developed. Time changes things. Circumstances came along that allowed the land to be sold to a "partnership" of a developer and a city. Legally, the opportunity existed, but the numbers still have to work. The developer is interested in the profit motive. Rowlett is interested in the profit motive, too, with a twist. They call it taxes. If the development works, the city and the developer both win.

I have not seen the developer's budget for development. He is still developing costs. Yet, he continues to incur costs at this date. At this point, he is doing a lot of educated guessing. He can''t even develop asking prices on land south of I-30 yet because he still doesn't know his costs there.

One way to lower his risks is for the city to offer the tax incentive. By giving tax revenues back to the developer, the city lowers the costs of development for the developer. It is a part of making the numbers work. If costs are too high to be marketable in the marketplace, the land won't be developed. The profit incentive won't be there.

So, the city leaped into the breech and offered a return of part of the costs. WHERE DID THE MONEY COME FROM? It came from capital and revenue generated by the developer. If the developer didn't develop, the revenue wouldn't be there. In other words, 100% of zero is still zero. If the development didn't get done from the efforts of the developer, the revenue wouldn't be present to give anything back to anyone.

Now, I don't want to speak for City Council, but it makes sense to me to "team up" with the developer to help him with his costs in return for getting the future revenue of a possibly $1 BILLION in development improvements. After all, we're only giving back some money he generated. We're also sharing tax revenue with the City of Dallas, as part of the purchase price.

In short, if Rowlett didn't participate, the deal probably wouldn't have been done. Rowlett would have been the loser.

The numbers must always work. If the numbers don't work, nothing gets done.

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Bayside

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