1031 TAX GROUP BANKRUPT
SAN ANTONIO (mysa.com) – With an estimated $151 million owed to more than 300 investors across the country, the 1031 Tax Group LLC filed for Chapter 11 bankruptcy earlier this week.
The Virginia-based company cited a “liquidity crisis” in its filing. It lists $154 million in assets, but most of those are in the form of $132.4 million in outstanding notes to a company called Investment Properties of America. Investment Properties is owned by Toronto native Edward Okun, who also owns the 1031 Tax Group and has been active in real estate development and property management for more than 30 years. According to court documents, Okun borrowed money from the pool of exchange money for his other businesses, then placed that money in long-term investments.
San Antonio investors caught up in the financial turmoil used a company called National Exchange Services QI Ltd., the local subsidiary for The 1031 Tax Group. National Exchange Services was supposed to act as a safe harbor from capital-gains taxes, but when investors tried accessing their money last month to purchase other real estate, they were told it was not available and that the third-party company was having “a financial crisis.”
Investors placed between tens of thousands and $10 million with the LLC and its subsidiaries. The average amount entrusted to the company was $550,000. Eight of the top 20 creditors with the largest unsecured claims against the company are in San Antonio, Boerne and Uvalde. They are owed more than $26.6 million. Another two investors in Houston are owed $4.2 million.
Judon Fambrough, a lawyer with the Real Estate Center at Texas A&M University, said this is a reminder of how careful real estate licensees must be when recommending intermediaries for 1031 exchanges.
“Make sure they are bonded or have other security in place to cover the ‘fleeing’ intermediary,” Fambrough said. “Evidently, these intermediaries are not regulated by any security laws. The clients are taking a double whammy. They are losing their money, and they are still liable for the taxes on the sale of their property because it cannot be reinvested within the designated period.”
For more information about 1031 exchanges, read the Tierra Grande article “1031 Tax-Deferred Exchanges.”
RENOVATIONS ROCKING MUSIC HALL
AUSTIN (Austin American-Statesman) – Renovations have begun on the Austin Music Hall at 208 Nueces St.
Formerly a warehouse, the landmark has been hosting musicians such as Bruce Springsteen, Bob Dylan and Eric Clapton since 1995.
The $5 million renovation will update the building's exterior, expand seating capacity to 4,000, add a full-service restaurant and improve the acoustics.
Direct Events, which manages the hall, and the developers of the nearby 360 Condominiums are paying for the renovation. Grand reopening is slated for October.
MOVE TO MOVE, TEXAS TOPS
CONNECTICUT (RISMedia) – Fort Worth–Arlington topped a recent list of “Best Cities for Relocating Families.” Two other Texas cities also made the list.
Fort Worth–Arlington was named number one for large metropolitan areas (those with populations of 1.2 million or more). Austin–Round Rock came in at number five.
Corpus Christi also ranked number five, but for cities with populations between 350,000 and 575,000.
The list was compiled by Worldwide ERC and Primacy Relocation. The organizations worked with Bert Sperling of Sperling's BestPlaces to rate cities based on factors such as home prices, home affordability index, appreciation rates, property taxes, recreation and leisure, arts and culture, air quality, watershed quality, sales tax and unemployment rate.
Full more information on the survey, including the complete results, visit www.primacy.com.
NEW 'BURB DEVELOPING
RICHMOND (globest.com) – Aliana Development Co. has begun work on a 2,000-acre mixed-use development on the east side of Grand Parkway, just west of Sugar Land.
The $1.5 billion first phase will be townhouses and condos starting at $200,000, and single-family residences.
Up to 500 acres is set aside for two million square feet of commercial space. At buildout, the commercial component's value is estimated at just over $500 million, with plans calling for office, retail, spa, hotel and restaurants as well as a Polo Club.
San Antonio-based H.E. Butt Grocery Co., which bought 21 acres, will build a 150,000-square-foot HEB grocery store with a fueling station. Completion is targeted for 2010.
The Houston-based developer estimates the entire buildout will take ten to 12 years.
TOWN SQUARE AT BAYLOR
WACO (globest.com) – SWB Heritage Square Partners LP will break ground in July on 17 acres between South Third and South Fourth streets for phase one of the $76.5 million Waco Town Square.
Construction begins with the $23 million, 400-bed student housing complex, which is within walking distance of Baylor University. The second and third phases will have almost 62,000 square feet of retail and restaurants, almost 69,000 square feet of Class-A office space and about 35,000 square feet of loft-style residences.
The development will also include the 100 percent leased, 100,000-square-foot River Square Center, which SWB recently purchased.
Subsequent phases will start by year's end. The overall project is targeted for completion around the middle of 2010.
Waco Town Square's architect is Pierce Goodwin Alexander & Linville in Houston. EE Reid Construction Co. of Sugar Land is the general contractor. Coldwell Banker Commercial in Waco is handling office and retail leasing while Frank Cromwell, also from Waco, has been hired to manage River Square Center and the lofts.
TEXAS RANKS HIGH IN MINORITIES
WASHINGTON, D.C. (www.census.gov) – According to recent estimates from the U.S. Census Bureau, the nation's minority population reached 100.7 million last year, and 12 percent of those were right here in Texas.
Hispanics remained the largest minority group, with 44.3 million (14.8 percent of the total population) as of last July. Blacks were the second-largest minority group, totaling 40.2 million, followed by Asians at 14.9 million.
With a 3.4 percent increase between July 2005 and July 2006, Hispanics were also the fastest-growing minority group. Asians were second at 3.2 percent.
Minorities made up 52 percent of Texas’ population.
Other key findings:
Hispanics
- At 1.4 million, Hispanics accounted for almost half of the national population growth of 2.9 million.
- Texas followed California with the second-largest Hispanic population, at 8.4 million. Texas had the largest numerical increase in Hispanics, at 305,000.
- The Hispanic population in 2006 was much younger, with a median age of 27.4 compared with the population as a whole at 36.4.
Blacks
- The black population increased by 1.3 percent, or 522,000.
- Texas had the third-largest black population in 2006, at 2.9 million, and the largest numerical increase, at 135,000.
- The black population in 2006 was younger, with a median age of 30.1, compared with the population as a whole at 36.4.
Asians
- The Asian population rose by 3.2 percent, or 460,000.
- Texas had the third-largest Asian population, at 882,000, and the second-largest population increase, at 43,000.
- The Asian population in 2006 was younger with a median age of 33.5, compared with the population as a whole at 36.4.
For more survey findings, visit www.census.gov.
MAIN STREET CLOSING
SAN ANTONIO (San Antonio Business Journal) – The city has officially closed the block of Main Street between West Commerce and Dolorosa streets as part of the ongoing redevelopment of Main Plaza.
The permanent street closure, which borders the west side of Main Plaza, will allow workers to perform utility improvements and expand pedestrian traffic once the project is complete in 2008.
The Main Plaza Redevelopment Project provides for the development of a master plan for Plaza de las Islas, the historical center of downtown, as well as landscape design and the redevelopment of the area as a pedestrian plaza.
TEXAS HOLDS 'EM ON HOUSING FRONT
WASHINGTON (The Dallas Morning News) – Nationwide home sales prices dropped in the first quarter — down 1.8 percent from a year ago.
According to the National Association of Realtors' quarterly home price survey, more than a third of the U.S. housing markets that the Realtors surveyed saw drops in home prices during the quarter.
It was the third consecutive quarter of lowering prices. Elmira, N.Y., down almost 15 percent from a year ago, experienced the largest decrease.
Median home sales prices fell a scant 0.6 percent in the Dallas–Fort Worth area, which stood out as Texas’ only declining market.
Beaumont led the gains with a 16.5 percent jump, the third highest in the nation. San Antonio prices were up just over 11 percent.
While prices have decreased, the nationwide decline in first-quarter home prices was one percentage point lower than last year’s fourth quarter.
HOSPITAL TO RECEIVE CARE
SEGUIN (KENS 5 Eyewitness News) – To keep up with the area’s growing population and increasing health care needs, the Guadalupe Regional Medical Center will be receiving a multimillion dollar expansion.
The $93 million upgrade will include 16 new emergency room beds, more private rooms, a new medical floor and dining facilities, as well as additional outpatient operating suites. The emergency room currently has just nine beds, where doctors and nurses treat 26,000 patients a year.
The hospital, which was built in 1965, is not funded by tax dollars so the improvements should cost residents nothing.
The financing could come together as soon as September, with construction beginning later this year.
GREATER LA TUNA
SAN ANTONIO (San Antonio Express-News) – The area just west of La Tuna icehouse is slated to become a neighborhood hub now that NRP Group LLC has purchased ten acres on East Cevallos Street between Probandt and South Flores Streets.
The Ohio-based company is planning a $60 million development that will include almost 500 apartments and 20,000 square feet of retail space.
NRP’s project will blend with the famous icehouse by adding picnic tables and planting trees on the eastern end of the property, closest to the bar.
"It should read like an extension of SoFlo and the loft district," said Daniel Markson, a San Antonio–based partner with NRP Group.
Thurlow & Co. Urban Properties brokered the transaction. The seller was developer Charlie Acuña.
Alamo Architects is designing the project. Demolition and site work are expected to begin by summer, with the first phase of 200 apartments expected to be completed sometime in 2009.
EAST DALLAS RENTAL REDEVELOPMENT
DALLAS (The Dallas Morning News) – According to filings at city hall, United Dominion Realty Trust plans to clear an 8.2-acre tract in east Dallas and build a new rental community consisting of 469 apartments.
The tract includes about 300 rental units in buildings along Bennett Avenue at Belmont and Capitol Avenues and Manett Street. The buildings date back to the 1960s and early 1970s.
The tracts are owned by real estate partnerships that have invested in the area over the years.
United Dominion recently purchased nine complexes in Addison for razing and redevelopment.
GOOD EATS IN SAN ANTONE
SAN ANTONIO (mysa.com, The Culinary Institute of America) – The Culinary Institute of America (CIA) and local entrepreneur and philanthropist Kit Goldsbury announced this week a partnership that will make the city’s Center for Foods of the Americas (CFA) the CIA’s third campus.
Goldsbury's $35 million contribution includes $20 million for scholarships, $7 million for a new facility and $3 million to assist in the expansion at the Pearl Brewery, where CFA’s pilot program originated. In addition, $5 million will be the lead matching gift to fund a center for Latin cuisine at the main campus in Hyde Park.
Since it opened last year, two classes have graduated from CFA. The third class will graduate next week, bringing the combined number of graduates to about three dozen.
TOWN CENTER DOCKS IN HARBOR
KINGWOOD (globest.com) – Harbor Group International LLC has purchased the 518-unit Town Center Apartments from Equity Residential Properties Trust for $40.5 million.
Town Center, which is on more than 20 acres at 2727 Ben's Branch Dr., includes a mix of one-, two- and three-bedroom units averaging 877 square feet. The rent is 94 cents per square foot. The Virginia-based investment group plans to invest $2,300 per unit to freshen up the 95 percent leased complex.
Harbor Group was self-represented and will handle leasing and management. CB Richard Ellis brokered the transaction for the Chicago-based seller.
MORTGAGE APPLICATIONS DOWN
NEW YORK (Reuters) – U.S. mortgage applications fell after climbing for three straight weeks, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted index of mortgage application activity.
The index, which includes both refinancing and purchasing loans, dipped 0.8 percent to 675.5 for the week ending May 11. The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was up 1.7 percent.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.13 percent, up 0.03 percentage points from the previous week. Interest rates, however, were significantly below year-ago levels of 6.66 percent.
The seasonally adjusted purchase index fell 1.4 percent to 432.3 after hitting 438.3 the previous week, which was its highest level since mid-January. The index, however, was above its year-ago level of 426.7.
The group's seasonally adjusted index of refinancing applications rose slightly to 2,115.5. A year earlier the index stood at 1,546.8.
The refinance share of applications increased slightly to 42.1 percent. The adjustable-rate mortgages (ARM) share of activity decreased just over one-half of a percent to 17.4 percent.
Fixed 15-year mortgage rates averaged 5.81 percent, down from 5.82 percent. Rates on one-year ARMs decreased to 5.61 percent from 5.71 percent.
The MBA's survey covers about 50 percent of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.
JMG CHUGS INTO DEPOT
FORT WORTH (globest.com) – JMG Realty Inc. of Atlanta has purchased the 210-unit Depot from Cotton Depot Associates LP for more than $24.5 million.
The 95 percent leased Depot, located near Sundance Square, includes one- and two-bedroom units averaging 894 square feet. It also features recycled wood and artifacts from the St. Louis Southwestern Railway of Texas and Cotton Belt Railroad depot, which was built in 1915. Rents average $1,200 per month.
Cotton Depot Associates’ general partner is Dallas-based Carleton Realty Advisors Inc. Affiliate Carleton Residential Properties completed work on the 5.7-acre asset last year; Lincoln Property Co., also of Dallas, oversaw it until the sale.
JMG closed with a more than $20.5 million, five-year loan from North Carolina–based Wachovia Securities LLC. The financing was arranged by Holliday Fenoglio Fowler LP.
TYLER'S RETAIL MARKET SURVEYED
TYLER (burns-noble.com) – The vacancy rate for the area’s 39 area retail centers surveyed stands at just under 8 percent, slightly better than last year’s 8.2 percent rate, according to the 2007 edition of the annual market survey completed by Burns & Noble Commercial Real Estate.
Additionally, the strong space absorption observed in the previous two years has slowed significantly. Only 2,824 square feet of retail space was absorbed, compared to 96,039 square feet in last year's survey.
The total available space is about 190,000 square feet, down from almost 202,000 last year.
While the vacancy rate dropped, the current average lease rate of $11.66 per square foot was a slight change from last year's $11.72 per square foot.
Eighteen of the 39 centers have occupancy rates of 95 percent or better. Fourteen of the centers are 100 percent occupied.
The spread in lease rates between older properties and new centers range from $5.87 to $26 per square foot in the developing far South Broadway Avenue corridor. Recently, several vacancies have occurred in these centers, indicating that some tenants may be having difficulty justifying rental payments at these levels.
According to the economy section of the Real Estate Center’s Texas Real Estate Market Reports for the Tyler area, retail sales per capita were $15,199 in the city in 2005, making Tyler the sixth highest in the state in this category.
FOURTH CHASEWOOD RISING
HOUSTON (Transwestern.net) – GenCap Partners LP and Transwestern Houston have begun construction on Four Chasewood.
Located in the 32-acre Chasewood Technology Park on SH 249 at Chasewood Park Drive, Four Chasewood will be a five-story, Class-A, “green” office building housing just over 105,000 square feet.
Transwestern will lease and manage the project. Construction is expected to be completed in late summer of next year.
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