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ROWLETT RAMBLINGS

Commercial vs. Residential

2/22/2014

2 Comments

 
In one of my earlier posts, I suggested there were some numbers that would burst the myth of commercial real estate being more valuable than residential real estate.  I'd like to tell another story. 

Approximately  two years or so ago, a zoning request  came before city council. I was on city council at the time.  It was a request to rezone a property to residential.  The proposed development was to contain 234 residential lots with the housing to be built ranging from $280K to $500K.  There was some additional commercial development along the front of the project.  A good average sales price of the houses could be reasonably $350K.  The zoning request was made by Jim Douglas.  The site was on the south side of Liberty Grove Road, approximately 300 yards east of the tollway.

  Mr. Douglas is a very well respected developer that has developed many major subdivisions in the metroplex over the years.  He has been around a long time and is held in high esteem by builders.  He's a class act.

The 58 acres that Mr. Douglas wanted to develop was zoned "mixed use," I believe, and he requested appropriate residential zoning to accommodate his development plan.  His engineers worked  with Rowlett's zoning department for many months.  He spent several thousands of dollars designing to meet the zoning department's wishes.  Erin Jones, Director of Zoning, wrote in the staff report to council that the engineering firm did a good job and is even on tape saying the engineers did a good job meeting her department's requirements.  It's all public record.

The Zoning Department then recommended that the zoning request be denied.  The P&Z Commission followed suit and recommended that the zoning request be denied.   This defied logic. 
The most recent development to the east was the Lennar subdivision where homes were selling at the rate of  one a week in the $320K average price range.  The land immediately to the east was the low lying land belonging to the City of Dallas and was and was part of the headwaters of Lake Ray Hubbard.  It was an excellent place for a wildlife park and much more suitable for residential use than commercial. A simple crushed rock pathway thru the park would have been ideal.  It would never ever be commercial land. There were other residential rooftops immediately to the south.  The land to the west would have been (and is) commercial of some type.  However, the subject 58 acres screams "high dollar residential."

The arguments presented by staff against zoning was the very familiar "it is in the Northshore area and we don't know what we're going to do, yet."  Altho this land is zoned as part of the Northshore area, it is bizarre.  It gerrymanders south off Liberty Grove road while all the balance of the land in Northshore is north of Liberty Grove.  This land looks like an appendage, hanging down from the "real" Northshore.  
Also, as the council meeting progressed it was announced that a credit card company had once inquired about this land as a possible site for a service center.  Now, that was a surprise.  dI had never heard that before.  It might even explain the "appendage" look.  I then began to inquire about the credit card service center.  The answers from anyone who confessed to know anything about it became very vague.  No one who knew about the inquiry could tell me when the inquiry was made.   It could have been 10 years ago.  All of a sudden, no one could tell me much of anything.  Then, the conversation went to other "commercial needs."  More blah, blah, blah, blah.  There is an agency in the State House in Austin that keeps track of such inquiries.  I called them the following day to find out what they knew.  I was informed that  Jim Grabenhorst, Economic Develepment Advisor of the City of Rowlett, was the only one that was authorized to inquire.  A sitting City Councilman was not authorized to inquire.

Then, back to the meeting,  the zoning request promptly failed to muster the votes necessary to grant the zoning.  Council members voting in favor of the development was the Mayor, Todd Gottel, Chris Kilgore, and myself.  The request failed 3 in favor and 4 against.  You're resourceful.  You can figure out who voted against the zoning request.  It's public record.  If you can't find out, let me know and I will tell you.

One other thing you need to know.  I am a real estate agent.  There is nothing illegal about that.  I had taken a listing on a 52 acre tract about 1/4 mile west and south of the above property.  I had contacted a major DFW developer and builder and we were working on combining this land with another tract and presenting a zoning request for both parcels.  It was a work in progress.  I voted for the approval of the Douglas project even tho I knew it would be in competition with land I represented.  However, I felt the two developments would be really good for Rowlett.  They would generate each other's traffic, combined would add millions of dollars to the tax base, and would actually compliment each other.  Both developments would be selling houses in the $300K and up range and would be an excellent image for Rowlett. 

Now, finally, lets talk about the math I promised. 

In the city council meeting, it was finally concluded that maybe what the Zoning Department and P&Z really wanted was a office "campus" type use.  That's cool.  I like that look.  Of course, they didn't have a clue who was going to do it, but it was a nice picture to conjure up..  Also, they didn't know when it was going to happen.  Pesky details always get in the road.  But, these are really nice things to know.  So, I put the numbers to it.

I decided that if someone burst thru the door with a roll of construction plans containing six buildings, each with a 10,000 square foot footprint and all buildings were  three stories high and built in a serene campus setting, that is precisely what Zoning and P&Z were looking for.  So, I put on my developer hat. 

Of the 58 acre site, I would spend $100,000 per acre (every 208'9" x 208'9") grading, installing utilities, installing light standards, and paving streets.  Parking around each building is covered in the building costs.  That work totals $5,800,000 in value (tax base). 

The buildings would each have 30,000 square feet, totaling 180,000 square feet total in the project.  Be assured, I can build a nice building for $250/sq. ft.  Therefore, 180,000 square feet at $250/sq. ft. = $45,000,000.  When adding the two numbers, $50.800,000 would have been added to Rowlett's tax base.  Everyone can jump up and shout and offer hurrays and pop  corks on the bubbly and rejoice for the people that created the office park and banished forever the dreaded residential development.  Rowlett's paid  consultants fought vigorously against the zoning.  Rowlett's Zoning Department recommended denial.  Rowlett's P&Z recommended denial.  The City Manager was against the zoning request.  The reason cited was that it was part of Northshore.   Well, maybe it might become a credit card processing center some day.  I have been around re-zoning issues for nearly 50 years.  This demonstration of opposing rationale  was the most pathetic I had seen up to this date.  But just think.....if someone wanted a 180,000 sq. ft. office complex built in a campus style, we're just the place.  Of course, that's assuming there is a market for it.

The math on the residential development as proposed is below:

234 units @ $350K =  $81,900,000.  Residual commercial buildings along Liberty Grove Road = $10,000,000.  Total, not including impressive disposable income of residents = $91,900,000.  We left more than the $41 million on the table compared to the office numbers.  The $50 million office compound probably has very little chance...... ever.  We had the $91 million in our hands.

Am I angry?  You betcha.  We really can't afford much more good advice.  I think a good investment for the Zoning Department and the P&Z Commission are  brand new calculators.  I know most of the City Council has the very latest in portable computer technology.  However, I don't know if they use them.
2 Comments
Pony Keg Smith
2/22/2014 08:36:50 am

Thanks, again. This is fun. I never dreamed. I moved here 17 years ago, but I admit I took little interest in local politics. You are creating a great interest. Keep going.

Reply
Ron
2/24/2014 06:35:10 am

Welcome to Rowlett.

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