Any recent resident of Rowlett, Texas, is aware of the representations made by owners of a certain parcel of land straddling I-30 in Rowlett, Texas named Bayside. It is a very valuable piece of land. Representations were made to Rowlett City Council, and literally to all the citizens of Rowlett. The amenity package proposed by the owners of the land included an 8 acre “crystal lagoon,” a water fountain that would shoot water streams 60 feet into the air, and a trolley system. Of course, there were other representations made, but the above amenities captured the “marquee” that Rowlett would put on their front door. Rowlett citizens were proud of that new image. They were no longer step-children in the family of surrounding cities. Rowlett had been quietly acquiring assets, and this was a big one that would tie Rowlett’s new image all together. All Rowlett citizens knew this.
However, subsequent to making those representations, the owners of the land recanted their promises. They wanted to drop the lagoon, the fountain, and the trolley from development plans. As expected, most of the citizens were furious. Part of the citizens are ignorant of real estate principles, and part of the citizens have no idea what’s going on. However, no absence of real estate analysis experience has prevented an avalanche of opinion. This writer has never seen such an outcry by “real estate experts.” The truth is, that with some exception, no one has real estate analysis experience beyond buying a house. In order to solve the dilemma, some experience is needed………. on both sides.
A little history.
The City of Dallas had owned the land every since the formation of Lake Ray Hubbard, about 1972. I am told the land was to become a park; part of a park system to completely encompass the lake. Then, reality set in and the cost of such an ambitious park system reared its ugly head. However, Dallas placed some park benches and picnic areas on the land and built a single toilet facility. However, the cost of even this reduced park system was cost prohibitive per Dallas. Over the years, the condition of the park deteriorated. A few years ago, most of the park benches north of I-30 was picked up. The “park just languished” and fell into additional disrepair. I think someone in Dallas realized that Lake Ray Hubbard was 10 miles away from the nearest Dallas address. Therefore, Robinson Park had become a probable eyesore on Rowlett’s front door.
This writer used to do a little writing for the Dallas Morning News. Also, I had been employed in some form of real estate development or finance for 50 years, since college. I easily recognized the development value of Robinson Park. I wrote about it. In 2007, I wrote two articles in the DMN. In 2008, I wrote one article. The thrust of all three articles was that Rowlett should purchase Robinson Park, hire a development and marketing expert, and develop the land the way they wanted. Apparently, wheels begin to turn in “officialdom.” I begin to hear stories that discussions were being made with the City of Dallas. John Harper was mayor, then.
Things progressed. A couple of elections were needed to clear the way for a sale to Rowlett. However, in the meantime, Rowlett had negotiated with investors that would immediately buy the land from Rowlett and pay the cost of acquiring it. ($31.5 million). The land cost Rowlett nothing. Rowlett only owned the land for about 15 minutes in the “simultaneous closing.” Rowlett was lured into this transaction because of certain representations made by Rowlett’s new partners and land owners. Some taxpayer money was spent setting up some tax vehicles and infrastructure costs. After announcement of the deal, all one had to do was listen and read. The citizens of Rowlett loved the new image the city was presenting. Bayside was to be a badge that Rowlett residents could be proud of. The deal was ballyhooed all over the metroplex…….even the state. The deal was also made with the citizens, no matter which elected officials signed which agreements. The citizens knew what they were promised. They also agreed (via elected officials) to spend some initial investment monies. That, folks, is CONSIDERATION. Consideration is required for any binding contract, written or verbal. In my opinion, written, or otherwise, a contract was made.
July 26, 2018
Representatives of the Bayside landowners appeared before City Council and recanted their representations (promises) of building a crystal lagoon, a water fountain, and a trolley system. These three items were the very essence of the new banner that the citizens of Rowlett thought they were going to receive. It was a crushing blow. The citizens were angry. Even people that had no idea what was going on felt the need to bloviate. That didn’t help much. The City Council decided to fight the developers and hold their feet to the fire. They decided to play hard ball. I totally agree with that decision. What follows are my reasons based on fact and experience, not opinions.
As with any negotiation, you want to negotiate from a position of strength. You need some muscle if you expect to win anything from your adversary. If you have no weapons, and the other side believes (knows) it, they will steam roller all over you. You end up with a empty
paper bag. The City has the hammer and they elected to use it. I am fully supportive. THAT DOES NOT MEAN THEY CAN’T GIVE ON SOME ITEMS. However, if anything is given up by the city, the land owners should be appreciative, not combative. The city should make it absolutely clear, they are the boss!!
Why the change of plans?
It was simple real estate numbers games. It is played all the time. It’s a game of shuffling around development ideas and costs to achieve the best yields. However, there is a catch. Your “game” must include Marketing issues. If you exclude marketing issues from the game, you can use any numbers you want. But if you do, it eliminates actuality. You can put 10 story office buildings wherever you want, even tho the market might suggest that the land is only best for townhouses. The initial Bayside development plan was easy to play arithmetic games with. For example, the plan called for an 8 acre lagoon. The developer in the July 26 CC meeting exaggerated the cost of the lagoon. He implied many, many, millions of dollars. Actually, the lagoon is only a vinyl lined, sand bottom pool with really good filtration system. My estimate is less than $2 million. It’s not the cost of the lagoon that’s the issue. It’s the use of the 8 acres. At an estimated value of $25/sq/ft the land is worth about $8.7 million. However, it doesn’t end there. First, costs associated with building the lagoon and fountain are eliminated. Secondly, It’s what can be built on the $8 million of land that can produce additional revenue. The revenue produced by the lagoon and fountain is chump change when compared to the revenue produced by 8 acres of upscale commercial development or very expensive residential housing. Altho other uses were proposed by the developers, they were unimaginative at best. One was a periodic concert area over a couple of acres. Some was townhouse land. There was nothing proposed that excited anyone. Bayside just became another real estate development, no different than was happening all over the Dallas/Ft. Worth metroplex. The magic would be gone. Rowlett would have lost its marquee.
What to do.
Simple arithmetic supports the abandonment of the lagoon, fountain, and trolley. From a development point of view, approximately $7-$8 million of development costs would be saved and the revenue received from developing the now available land would be enormous. However, this math works if there are no marketing issues. If we introduce marketing into the equation, what have we got? First, what effect would an angry citizenry have on a Bayside give away? Be assured, the citizens are angry. If City Council caves on this, there will probably be a wholesale replacement of City Council members. Rowlett finally has a chance to stand out in a crowd, and it would be given away at some cost!!? They don’t like being taken for a fool. The Citizens want their marquee back. How much of the revenue of the Bayside development was dependent on visitations from people from other cities or tourists? I would estimate quite a bit. The lagoon, fountain, and trolley isn’t designed for office workers. They are built to attract customers to upscale restaurants, retail shops, purchasers of high end condos and expensive apartments. These are things they want to see out their windows. Take away the amenity package and it’s just another commercial development, as in Plano, Frisco, or Richardson.
What’s the developer going to do? After all, it was their plan to begin with. Are they going to sit on the land forever? Nope. They’re business people. They’ll do something with it. One of Rowlett’s brilliant real estate analysts said, “Well, they will just get fed up with the city and sell the land.” Now, let’s analyze that brilliant comment carefully. At what price do you think a potential buyer is going to offer when they know the city is highly pissed and is really going to give someone some trouble unless that get their way? Do you think the offer might fall a little? Say, 50 cents on the dollar, or so? I don’t think that’s in the picture.
Do I think a compromise is in order?
Yes, but not as much as you think. It is absolutely imperative that the “image” originally proposed remain intact. However, we may be able to keep that “marquee” and still give the developer a break. For example, does a 4-acre lagoon reduce the attractiveness of an 8-acre lagoon by 50%? I doubt it. I wouldn’t accept less than 4 acres, but I don’t think there would be a serious erosion of “image” from the reduced size. The remaining 4 acres could be developed into more profitable real estate by the developer. The city went half way.
The developer called me at home the day after his disastrous presentation to City Council. We talked for nearly an hour. Most was just a rehash of the night before. However, he did say one thing that I agree with. He said the biggest cost problem they had was the fountain. I agree, given the type of fountain proposed. The types of plumbing and fittings required to build a fountain with several jets of water in a water show, shooting up 60 feet in the air, is not cheap. Not only is the installation expensive, but the continued maintenance is very expensive. I don’t think we need that kind of fountain to keep the image we wish to preserve. A much cheaper pump can pump dozens of gallons of water per minute up 30 feet. It’s a simple water pump. The water can then cascade down over a rock waterfall and become very attractive. By comparison to the other fountain, it is cheap to build and cheap to maintain. It will still provide much of the same effect as the 60 foot water jet…..not quite so showy, but aesthetically pleasing. Again, the city is demonstrating their willingness to work with the developer. However, the trolley stays! We don’t need a bunch of cars looking around for a place to park to eat lunch, then after lunch start looking for a place to park while shopping in a retail outlet. There would be cars driving all over the place because much is too far to walk. It’s best to have a central parking garage and a trolley system depositing people where they want to go.. It would be efficient, fun, and inviting. A good thing.
A word about the Bayside owners.
The owners of Bayside have made a couple of monumental screw-ups. The owners hired the developers. The developers do not own the land, but are hired hands. First, they believed a Chicago developer over a Dallas developer just because the Chicago developer presented a better arithmetic game. I could play arithmetic games with his plan, also. Anyhow, he apparently convinced the owners he could con the city into accepting the new plan. Apparently, he didn’t even think about the citizens. That was pretty stupid. Secondly, he cited market studies that supported his claim. I remember him saying 1300 residents in Rowlett had been contacted. I challenged those findings. In fact, on my blog, I offered to donate $100 to the charity of their choice to anyone that would contact me and tell me they were contacted in a survey about Bayside. No one, nada, zip, people stepped forward. Word began to circulate that he lied to Council and that no market study was done. That, again, was not smart. Therefore, lo and behold, a few days after that embarrassment, a survey was underway. It was totally unprofessional. There were as many questions about politics as there was Bayside. My wife got a call. She hung up after the questions went to politics. Larry Beckham’s wife did the same. That leads me to another question. How did Larry Beckham and I both be selected in a random survey? The odds are astronomical.
Now, if the above isn’t enough to suggest pure inexperience, how about this? They know nothing about marina design and small shallow draft water craft. I have boated on this lake for 41 years. I have owned 4 sailboats and still own one. I also own a ski boat, and two kayaks. I have MADE 13 BARE BOAT CHARTER TRIPS TO THE Caribbean island hopping. I am in two major charter companies as a “qualified skipper.” I had a canoe, but I sold it. My son had his own sailboat at age 12. I know something about boating and Lake Ray Hubbard. The proposed design for the kayak boating area is a disaster. Kayaks around here are designed for quiet water, and access to inlets, creeks, slews and shorelines where, if lucky, some wildlife can be observed. That’s what kayakers and canoeists do. That’s what they like. Bayside, on the other hand, has a kayak landing that they say will expand from 4 acres to 8 acres. Big deal. All they do is move the boat slips, which are already way too far away from the parking area, to achieve this. Do they think kayakers are going to enjoy paddling around an 8 acre arena in the big water? Talk about boring!! The sailboaters want that 8 acres. Very bad design.
The City of Rowlett has potentially a much better kayak and canoe park at Paddle Point Park. They need to expand into some other water front parks. There is great potential for a state wide kayak basin in Rowlett.
Conclusion.
Admittedly, this piece is far too long. However, it has only hit some high spots. It should be apparent that the City of Rowlett deserves more that the Bayside owners are offering. The City does not have to settle for the bait and switch, which this most definitely was. There are some things the city can give up…….BUT CAN NOT CHANGE THE IMAGE THAT THE ORIGINAL PROPOSAL OFFERED. That must remain intact. Furthermore, it is of concern that the developers have little experience in the marina business and have made some very poor business decisions.
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