Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:05):
Welcome to Dallas Dirt.
I'm April Towery the City Hall Editor for CandysDirt .com.
And I am here today for Dallas Dirt with Matt Segrest, the President and CEO.
What is your actual title of Alamo Manhattan?
President.
Okay.
President of Alamo Manhattan.
Tell us a little bit about, thank you for being here today, and tell us about AlamoManhattan and what you all do here in Dallas.
(00:27):
Sure.
So Alamo Manhattan is based in Dallas, and we're a multifamily and hotel developer.
We find sites and we visualize a project that could be there and then we hire great peopleto design it and build it and manage it and we oversee the whole process.
And how long have you all been in Dallas?
We started in 2010.
(00:49):
I see you're wearing an Aggie ring.
I have to disclose our history.
I have known Matt and I grew up together on the mean streets of Bryan College Station andboth went to A &M
Bonded over baseball.
Bonded over baseball still to this day.
And you're going to catch some Aggie baseball this weekend, right?
(01:10):
Well, cool.
It's glad that we ended up in the same place.
cool to see what you're doing with Alma Manhattan.
You guys are credited with reviving or rebuilding the Uptown area.
what kind of projects have you had there?
Well, certainly others would before us to start Uptown.
But we probably were the most active developer this last cycle.
(01:32):
And so, you one thing we did, I came from a Texan, as you know, but before I moved back toTexas, I lived in Seattle.
And so that's where I learned development.
So learning urban infill, mixed -use development on small dense sites.
It's something I learned in Seattle and Portland and San Diego.
And so we kind of brought that product type, that thinking and viewing of sites when wecame back to Texas.
(01:55):
And so my partner in the business is going to Wade Johns.
He's also an Aggie.
And Wade and I have known each other for 30 years years.
so when we started out, Manhattan Wade it was there from the beginning.
And we brought this, we saw sites differently than would say than a typical, know,Southwestern, Southeastern developer.
So we saw smaller sites.
(02:16):
We could look at them as a lot.
We felt like the conventional thinking at the time was people saw a certain site, didn'tit have to be high rise or a wrap.
We bought this idea of podium project with subgrade parking, which is very common in theNorthwest.
that was fairly unique in Dallas.
So we just saw sites differently.
So we were able to find some great sites in Uptown and found some great partners to buildthese projects with.
(02:39):
I think we did a good job and made our partners money.
so it's just snowball from there.
We were multi -family developers, apartment developers, and we'd have investors come totown.
We always officed at Uptown.
We have investors come to town and they loved Uptown.
They wanted to be there.
We'd always ask them, where are you staying?
They'd say, we're at the west of the Galleria or at the Hilton Anatol.
(03:02):
And we always realized, man, everybody loves Uptown, but there's not a place for them tostay.
They stay elsewhere because they can't put the Ritz or the Crescent on their expensereport, generally.
And some of the boutique hotels are really cool, but you don't get your loyalty rewardpoints.
So we always thought there was this gap in the market for that professional businesstraveler.
so we were moving along the cycle.
(03:24):
tied up the side across the street.
And it was a time in the cycle where we thought the neighborhood wasn't real favorabletowards big multifamily rezoning.
So we thought, you know, why don't we test the hypothesis on this hotel idea?
And so we got initial design done, went out to all the major hotel groups and they alljust pounced on it.
And so we thought, okay, maybe this is something.
And so we kind of made a bet.
(03:46):
One thing we pride ourselves on, Alamo Manhattan, is we run a very disciplined developmentprocess.
So I am a former Marine, Wade Johns is a former Marine.
we run a development process like you'd expect Marines to run.
We hit schedules, we hit budgets.
And so we made a bet that maybe what we're doing on our multifamily process could overlaywell in the hotel business.
And so we made the bet, we found partners willing to make the bet with us.
(04:10):
And that's where the Marriott Dallas Uptown came from.
And it was a great, great experience.
We came in under budget, the hotels been fantastic.
Right now it gets the highest average daily rate.
of any hotel in the central US, Marriott Hotel in the central US, including Chicago.
And so it's just been fun.
You know, we office across the street, so it's kind of become part of our daily lives ofgoing over there, getting coffee or lunch and having meetings over there.
(04:36):
But that's been a great experience, that, the hotel.
Yeah, it's a cool little area.
So what is the future of Uptown?
Yeah, the future of Uptown is going to be continued development, continued density.
There's a tremendous amount of office under construction right now, about 2 .6 millionsquare feet, not planned, but under construction.
And so that's going to drive more people to live there, more people to be, morerestaurants, more retail.
(04:59):
And so we want to be part of that.
So as part of that, where our office currently is, which is across the street from theMarriott, we've rezoned that site from a 2 .5 FAR to a 9 .4.
And that's floor area ratio.
And you taught me that term, actually.
a while back.
So basically, you could do a two story building to a 31 story apartment tower, which isvery appropriate for what's happening in Uptown now, and that especially that area.
(05:25):
So you always spend a lot of time and effort investing in the community as far as, youknow, trying to make designs that are appropriate and trying to respond to people's
concerns.
And so it was a really we didn't have any opposition to rezoning.
And so we're really excited about it when the market turns to start
You've done a really good job with community engagement and that doesn't always go welland it didn't go well for you at the beginning with it was a Victor Prosper that was in a
(05:51):
tax increment financing zone and you had some hostile neighborhood meetings and tell mehow you kind of turned that around.
Yeah.
Good question.
So yeah, Victor Prosper, which is our project, Bishop Arts, it's at Davis and Zang.
You know, I guess one thing, having cut our teeth developing in Seattle and Portland,
Those are really rigorous public processes to do, to get a new development.
(06:15):
You know, there's no by right development there.
You have to go through a design review process and get the communities buy it.
So that's a process we're used to.
So when we started Victor Prosper, we went out with initial designs.
And again, you know, one thing our company tries to focus on is not having an ego andwe're always learning.
That's really important to us.
We always want to listen.
We know we are not the smartest people in the room.
(06:36):
And so we want to listen.
And so we gave initial design and there was a lot of,
strong feedback.
Strong feedback.
Some of it was more personal because people had personal interests at stake but that'sfine.
so, what we really wanted to do is we wanted to listen.
We took a lot of feedback, dozens of meetings with different stakeholders, and we toldthem, thanks, we heard you, let us come back to you.
(06:58):
And so, it was probably one of the most satisfying parts of my development career when wewent back to, I think we had those meetings initially starting in May, and we went back to
them in September to represent the project.
It was a large forum, a few hundred people there.
And what we really tried to do was create a project that connected with the fabric and thearchitecture that was historically in the Bishop Arts District.
(07:20):
And that felt like it fit.
It didn't feel like some new project that was created that stood, and as a contrast ofwhat was there already.
And so we spent a lot of time in the architecture with that and the building design.
And when we re -presented the project, the community, we got a standing ovation.
And so that was just, that's how we wanted to do
We really care about the places that we develop in.
(07:42):
And the reason we want to be there is because they're special.
And so we want to fit there.
We want to make things better.
That's our goal.
We want to things better.
so, know, Victor Prosper, if you might have seen it, it looks like it's an old building.
We've built it with styles that were more early 1900s to fit the neighborhood.
And the best compliment we'll get on that project is pretty often people will say, man,
(08:06):
That renovation you guys did, the Bishop Arts, it's fantastic.
And so that's just, it's new construction.
So that's just a great, great, great comment.
And I went to a groundbreaking there.
Was that about a year ago?
Yeah.
Okay.
And so what's going on with phase two?
Yeah.
So phase two, it's another 210 apartments.
It's the same thing.
It's a long street, a long seventh between Zang and Madison.
(08:28):
And so to make it not feel like a long, monolithic building, we broke it apart into sixdifferent buildings
So you'll look down the street again, what we want people to think is, this has been herea hundred years and these are the buildings that have been added on over the years.
you know, the bricks going up right now is probably half done and it looks great.
We're super excited about it.
(08:48):
It's the same kind of model that we did on the first phase.
Now tell me, are these considered luxury condos or is this market rate?
market -rate apartments.
typically the model we use is we like to do smaller unit sizes.
(09:10):
And so what that does is that drives a smaller price point.
And so the places we develop, the number one amenity we have is the location.
And so people want to be there.
And so we try to provide units at a price point that allows the most people to be there.
Now they're luxury, but if you look at, for a developer, developers think in terms of adollar per square foot of a
(09:32):
Well, normal people don't think of that way.
There's the price point, the amount they're paying.
So we each have a strategy where if we can have a high dollar square foot for our units,and it's a lower price point because our units are well designed, it's fully functional,
the smaller footprint that we can be both win.
People get the price point they want, we get the dollar square foot, and it creates avibrant dynamic community.
We hear a lot about affordable housing, is not affordable housing.
(09:57):
What are the needs in Dallas and what is the market asking Do we need just housing?
Do we need diversity of housing different sizes and types and density?
What's the market asking for?
Yeah, there's a tremendous amount of housing that's needed.
(10:23):
But as far as affordability, the best thing, just putting my economics hat
The best thing that's going to provide affordable housing is more supply.
And so, you know, for a developer that you, you you obviously want to higher rent, but asfar as public policy, the way you're going to get the most affordable rents is to let
people build.
Because the more product comes online, then people have to compete with what's there.
(10:43):
And so the stuff that's class A today becomes class B.
The stuff that's class B becomes class C.
And so just the more supply will help alleviate the housing crisis in general.
then the pricing will adjust to what people can pay.
How is it to work with Dallas in terms of permitting and just getting things done as theseother cities that you work in, Austin and Washington and Portland?
(11:12):
Well, the bar's set pretty low.
We do stuff on the West Coast.
That's very, very rigorous.
But that's what we're used to that.
So that's, again, that's what we're used to.
So in our mind, Dallas is a...
in the middle of fairway type city to work with.
I know there's a lot of delays right now.
We haven't personally experienced delays in permitting or rezoning, but I know they're outthere.
(11:32):
I know the reasons for each case.
But we've gone to great lengths to develop good relationships to the city, supporting us.
We're local people.
We want to be pleasant to work with.
We don't have any problems with the city right now.
We don't.
And we got our huge rezoning done at Fairmont Tower.
(11:54):
without any, the city didn't cause us problems there.
Does it take a long time from filing the paperwork to get something rezoned, to get it tocity plan commission?
Yeah, and it depends.
Maybe a less experienced group will have a longer time.
They just don't know where to send things or how to fill out things or how to present.
(12:15):
So it's tough to know, but it's not abnormally long for Dallas to where other cities were
(13:32):
What do you have coming up?
What's in the pipeline for the future?
Yeah, well, we thought we had a lot coming this past year.
We thought we were going to break ground on seven different projects.
Because of the financial markets, though, we didn't break ground on any last year.
And so we've got projects that are designed and teed up and are ready to go.
And when the capital markets come back, mainly debt comes back, then we'll push forwardthose projects.
(13:58):
What we want to be, our goal is right now, real estate markets are kind of dislocated.
Interest rates have hurt everybody.
Even great product is hurt because of high interest rates.
That's just the reality of the world.
That's real estate cycles.
And so right now the opportunity is to stress deals.
Deals that aren't making their debt service, they're in foreclosure.
(14:18):
Those are the deals that you can buy today.
We're developers.
And so we think part, we don't think we play in that space the best.
For us, we see the next opportunity and that's being an early mover of next developmentcycle.
So we're trying to position ourselves as a development company to deliver a lot of productearly in the next development cycle.
We're not there yet, but we think in our mind, if you're waiting till everything's fullyrecovered, you've missed the opportunity, you're late.
(14:46):
So
We're trying to find partners that have the same vision with us, you know, that we candeliver, you know, 10 to 20 projects early in the cycle and hopefully, you know, do all
our development in innings one through six and then decide to play or not in late innings.
that's how that's how we're focused right now.
We're always as you know, as a development firm, we're very forward looking and we'relooking at the next opportunity and that's what we see.
(15:07):
So what happened to those seven projects that you were planning to build over?
they could be in the first wave of this next group.
Okay.
So they're just kind of.
Okay, well I have a couple of starts this
Okay.
know, the Fed announced possibly three rate cuts this year, which hopefully will pushlenders more amenable to giving construction debt.
I was going to ask you about the office market.
(15:28):
You said that it's kind of booming in the Uptown area.
are you seeing, you know, we used to talk a lot about post -COVID and sort of that bounceback.
Are people looking for office space?
Are people working in offices again?
So I'm not an office expert, but I do know that
The problems are in suburban class B office.
(15:49):
They let the older stuff, they build the 80s or 90s.
And it entices people to come back to work.
The new space is doing well because it entices people to come back.
They'll give them this great new office space with all the amenities.
And that's what Uptown is delivering.
And so that's going to be healthy.
It's going to suck things from outside, but it's going be great for Uptown.
What are you doing in some of these other cities?
(16:10):
Very similar projects, the housing
Yeah.
Hospitality.
Hospitality.
we're, yeah, the Marriott was the first of what we hope is many hotels.
It's a, you know, this urban hotel model we kind of developed there is it's fun, it'ssuccessful, and everybody likes it.
And so we're working on a Renaissance hotel in Raleigh -Durham right now.
We're tying up a couple of apartment sites in Raleigh -Durham.
(16:33):
And basically, as we expand as a company, we want to be in all the markets where theyoung, talented Generation Z kids want to be.
So that's where we want to build going
Can they afford your stuff?
yeah.
OK.
Well, I am so in the realm of hearing about affordable housing, hearing about the fear ofdensity creeping into established neighborhoods.
(17:01):
The city is working on their comprehensive land use plan.
think we're also hearing from developers, even on the affordable housing side andcommunity development, that they have to make a
(17:50):
Yeah, I have probably strong counter thoughts on this.
I think if affordable housing is really a societal good that we're looking for, then Ithink that government should be willing to invest in that.
If that's that important,
And what that means, I think the programs are set up now, it's like, how much can youpunish a developer to allow them to still go for the project?
(18:13):
I personally think a mindset that would really have a larger impact would be one of, youincentivize developers to actually do it?
So what if developers actually made a little more profit by doing affordable housing thanif they did market rate?
That would solve your problem like that.
And you know, they push back on that as well.
We don't want to pay developers profit to do that,
(18:34):
you want to solve the problem, that's a good way to do it.
Incentives are very strong.
And I think that the mentality of the...
Again, we do stuff in Portland.
In 2017, Portland passed the inclusionary housing ordinance.
And that says for any apartment project over 20 units, have to have a 20% affordabilitycomponent, 20% at 80% AMI.
That's 20 % of the area median income.
(18:56):
And that sounded great.
We got this great affordable housing policy in place, and it killed development becausepeople can't make deals work
And so that's counter to what the goal is.
And so in my mentality, I think I would love to see a shift in the whole thinking on thematter to see if we create incentives to actually make people want to do that, it's going
to take care of itself.
(19:17):
Do you actually think that we need more affordable housing?
Because it seems like sometimes these projects come up depending on the location.
And we hear from residents or council members that they don't want a huge
low income apartment complex adjacent to their neighborhood because of issues like crime.
(19:40):
Yeah, yeah.
So the trend is to have a percentage of a market rate deal.
That's obviously incentivize that.
Incentivize people to have 20% of the units or 25% of a deal in Uptown Hey, I could do aproject in Uptown and get a 6% return, for example, if I do all market rate, but I'll get
six and a quarter through government incentives, probably tax exemptions or TIF paymentsor whatever.
(20:03):
and actually it's a better deal.
So that'll make me do that, and this is a natural thing.
And so, you know, it's a different way of thinking about it, but that's what I just seewould work.
just, I see the programs that are happening across the country, and I don't see whenthat's really effective yet.
Cause I think on that line, you're trying to punish somebody just enough to make them goforward with the project.
That's not a good way to incentivize people.
(20:24):
Right.
And affordable housing developers are typically trying to do something good, Like, providea need, meet a need, but they still have to, it's their job.
Yeah, you've got to its not a charity.
I some of them, guess, charities, but in general, the most developers are.
know, it's a lot of, these things cost a lot of money to do, and people investing moneyare going to demand a return for it.
(20:45):
Well, tell me a little bit more.
You have talked about how you have no ego, and I know when we've talked before, or youwork toward this, yes, that's the goal.
You've talked about your ethos of your company and kind of how y'all operate.
What's your strategy for just day to day doing business and how you get things done?
Well, good question.
(21:16):
Outcomes are always tough to control, but we can control how we do it.
And so that's what we focus on.
So our ethos is tough.
professional discipline, cheerful.
It was sounding very military.
That's why you said cheerful.
Cheerful.
No ego, absolute integrity, savvy, always learning.
(21:38):
So those encapsulate how we want to do business.
And so we want to be tough, professional, and this is one of how we approach things.
(22:29):
So it's a drive to get better and better and the next deal is better than the last one.
you have your eye on any sites and are you always looking for...
Yeah.
Always.
Yeah.
What are you particularly attracted to?
Like what makes a piece of land good land?
Great urban location for us.
(22:50):
We like that.
We like stuff that, know, main to main fortress locations.
We like dense projects, you know, we like high rise, going this next cycle, that'sprobably not going come back for a while.
It's probably going to be more your wood frame, podium type deal, wood frame construction.
That's going more affordable at first.
We're looking for lot of hotel sites.
You know, we think there's a great opportunity for hotels in Uptown Dallas.
(23:13):
And so, yes,
We're always looking, many cities, always looking to get, that's one thing our company'sgood at, is finding sites.
It won't always be this way, but every single development deal our company's done has beenan off -market deal, we just kind of found it.
So again, I don't expect it to always be that way, but that's indicative of our companybeing good at Are you on like a secret email list?
(23:35):
Okay, okay.
Conspiracy.
I figured.
You tell me what else is going on with you and your business.
No, it's challenging times for commercial real estate.
It really is.
And projects are getting started, and you're looking at situations where how do you, formy company, it's like, how do you get through this stretch to get to the other side?
(24:03):
And that's what all these development companies across the country are doing right
I was going to ask you, is it that way just in Dallas or this is how it is everywhere?
It's everywhere.
It's too challenging.
Some places are worse than others.
Dallas is still Dallas.
We grow.
And so this is a great place to be.
When do you think it will bounce back?
I think we've always said a condition precedent, any change is the dropping of interestrates.
(24:27):
So we started easing cycle come that's going to start perking people up.
And so maybe the fourth quarter things start making sense, but hell, we don't know.
You know, the future is unknowable and we'll see.
You've talked about urban development and that site where your office is across from theMarriott is a pretty walkable area.
(24:50):
There are some parking spaces, but maybe depending on what time of day, it may be achallenge.
What do you think about, there's kind of been some dialogue about reducing or eliminatingparking minimums for new development.
You have any thoughts on that?
Yeah, I think the idea of reducing parking minimums just allows developers to park as theysee adequate.
(25:13):
Developers on incentivize underparked projects, have trouble leasing it out.
He or she will have trouble leasing it out.
So I think that's fine.
I'm comfortable with that.
We are in developing cities where they park 0.5 per unit.
In some of those markets, it works.
In some of those markets, people try that and they'll end up parking and they can leasetheir units.
So, you know, the market will cover that.
(25:34):
I do think Dallas is over -parked right now, like in Uptown PD193.
It's over -parked, given what the markets become.
So I think reducing those parking ratios is great.
What's the value in putting underground parking?
Well, the value is you get more density above grade.
And it's only expensive to go sub -grade though.
(25:55):
OK.
Yeah, that's, you know, it's twice as much per parking space to build if you're having todig it out and...
But sure, How much per space.
It's probably difference between 25,000 space to 50-60,000 space.
But there's all sorts of risk when you start digging down, you never know what you'regoing to hit.
Right?
So there can be contamination, there could be some kind of underground well, there couldbe, that's one of the big risks of urban development is when you start digging down, what
(26:24):
do you find?
And it's always a little scary.
Have you had any experience
Finding gold or?
Not gold.
I found contamination.
Yeah, so we've spent a lot of money on cleanups and that's just part of risk of urbandevelopment.
Just in the ground, not even in a building.
(26:45):
No, like in the ground.
You know, finding the ground, you find the groundwater, you sometimes you do a lot ofstudies beforehand.
So you're rarely ever caught completely unaware, but you don't know.
You do probe a site, but you don't know until you start digging.
So
It's fun.
Fascinating day in the life.
All right.
Well, that is all for this episode of Dallas Dirt.
(27:05):
We thank you Matt for joining us today and we will see you next week.
Welcome to Dallas Dirt.
I'm April Towery the City Hall Editor for CandysDirt .com.
And I am here today for Dallas Dirt with Matt Segrest, the President and CEO.
What is your actual title of Alamo Manhattan?
President.
Okay.
President of Alamo Manhattan.
Tell us a little bit about, thank you for being here today, and tell us about AlamoManhattan and what you all do here in Dallas.
(00:27):
Sure.
So Alamo Manhattan is based in Dallas, and we're a multifamily and hotel developer.
We find sites and we visualize a project that could be there and then we hire great peopleto design it and build it and manage it and we oversee the whole process.
And how long have you all been in Dallas?
We started in 2010.
(00:49):
I see you're wearing an Aggie ring.
I have to disclose our history.
I have known Matt and I grew up together on the mean streets of Bryan College Station andboth went to A &M
Bonded over baseball.
Bonded over baseball still to this day.
And you're going to catch some Aggie baseball this weekend, right?
(01:10):
Well, cool.
It's glad that we ended up in the same place.
cool to see what you're doing with Alma Manhattan.
You guys are credited with reviving or rebuilding the Uptown area.
what kind of projects have you had there?
Well, certainly others would before us to start Uptown.
But we probably were the most active developer this last cycle.
(01:32):
And so, you one thing we did, I came from a Texan, as you know, but before I moved back toTexas, I lived in Seattle.
And so that's where I learned development.
So learning urban infill, mixed -use development on small dense sites.
It's something I learned in Seattle and Portland and San Diego.
And so we kind of brought that product type, that thinking and viewing of sites when wecame back to Texas.
(01:55):
And so my partner in the business is going to Wade Johns.
He's also an Aggie.
And Wade and I have known each other for 30 years years.
so when we started out, Manhattan Wade it was there from the beginning.
And we brought this, we saw sites differently than would say than a typical, know,Southwestern, Southeastern developer.
So we saw smaller sites.
(02:16):
We could look at them as a lot.
We felt like the conventional thinking at the time was people saw a certain site, didn'tit have to be high rise or a wrap.
We bought this idea of podium project with subgrade parking, which is very common in theNorthwest.
that was fairly unique in Dallas.
So we just saw sites differently.
So we were able to find some great sites in Uptown and found some great partners to buildthese projects with.
(02:39):
I think we did a good job and made our partners money.
so it's just snowball from there.
We were multi -family developers, apartment developers, and we'd have investors come totown.
We always officed at Uptown.
We have investors come to town and they loved Uptown.
They wanted to be there.
We'd always ask them, where are you staying?
They'd say, we're at the west of the Galleria or at the Hilton Anatol.
(03:02):
And we always realized, man, everybody loves Uptown, but there's not a place for them tostay.
They stay elsewhere because they can't put the Ritz or the Crescent on their expensereport, generally.
And some of the boutique hotels are really cool, but you don't get your loyalty rewardpoints.
So we always thought there was this gap in the market for that professional businesstraveler.
so we were moving along the cycle.
(03:24):
tied up the side across the street.
And it was a time in the cycle where we thought the neighborhood wasn't real favorabletowards big multifamily rezoning.
So we thought, you know, why don't we test the hypothesis on this hotel idea?
And so we got initial design done, went out to all the major hotel groups and they alljust pounced on it.
And so we thought, okay, maybe this is something.
And so we kind of made a bet.
(03:46):
One thing we pride ourselves on, Alamo Manhattan, is we run a very disciplined developmentprocess.
So I am a former Marine, Wade Johns is a former Marine.
we run a development process like you'd expect Marines to run.
We hit schedules, we hit budgets.
And so we made a bet that maybe what we're doing on our multifamily process could overlaywell in the hotel business.
And so we made the bet, we found partners willing to make the bet with us.
(04:10):
And that's where the Marriott Dallas Uptown came from.
And it was a great, great experience.
We came in under budget, the hotels been fantastic.
Right now it gets the highest average daily rate.
of any hotel in the central US, Marriott Hotel in the central US, including Chicago.
And so it's just been fun.
You know, we office across the street, so it's kind of become part of our daily lives ofgoing over there, getting coffee or lunch and having meetings over there.
(04:36):
But that's been a great experience, that, the hotel.
Yeah, it's a cool little area.
So what is the future of Uptown?
Yeah, the future of Uptown is going to be continued development, continued density.
There's a tremendous amount of office under construction right now, about 2 .6 millionsquare feet, not planned, but under construction.
And so that's going to drive more people to live there, more people to be, morerestaurants, more retail.
(04:59):
And so we want to be part of that.
So as part of that, where our office currently is, which is across the street from theMarriott, we've rezoned that site from a 2 .5 FAR to a 9 .4.
And that's floor area ratio.
And you taught me that term, actually.
a while back.
So basically, you could do a two story building to a 31 story apartment tower, which isvery appropriate for what's happening in Uptown now, and that especially that area.
(05:25):
So you always spend a lot of time and effort investing in the community as far as, youknow, trying to make designs that are appropriate and trying to respond to people's
concerns.
And so it was a really we didn't have any opposition to rezoning.
And so we're really excited about it when the market turns to start
You've done a really good job with community engagement and that doesn't always go welland it didn't go well for you at the beginning with it was a Victor Prosper that was in a
(05:51):
tax increment financing zone and you had some hostile neighborhood meetings and tell mehow you kind of turned that around.
Yeah.
Good question.
So yeah, Victor Prosper, which is our project, Bishop Arts, it's at Davis and Zang.
You know, I guess one thing, having cut our teeth developing in Seattle and Portland,
Those are really rigorous public processes to do, to get a new development.
(06:15):
You know, there's no by right development there.
You have to go through a design review process and get the communities buy it.
So that's a process we're used to.
So when we started Victor Prosper, we went out with initial designs.
And again, you know, one thing our company tries to focus on is not having an ego andwe're always learning.
That's really important to us.
We always want to listen.
We know we are not the smartest people in the room.
(06:36):
And so we want to listen.
And so we gave initial design and there was a lot of,
strong feedback.
Strong feedback.
Some of it was more personal because people had personal interests at stake but that'sfine.
so, what we really wanted to do is we wanted to listen.
We took a lot of feedback, dozens of meetings with different stakeholders, and we toldthem, thanks, we heard you, let us come back to you.
(06:58):
And so, it was probably one of the most satisfying parts of my development career when wewent back to, I think we had those meetings initially starting in May, and we went back to
them in September to represent the project.
It was a large forum, a few hundred people there.
And what we really tried to do was create a project that connected with the fabric and thearchitecture that was historically in the Bishop Arts District.
(07:20):
And that felt like it fit.
It didn't feel like some new project that was created that stood, and as a contrast ofwhat was there already.
And so we spent a lot of time in the architecture with that and the building design.
And when we re -presented the project, the community, we got a standing ovation.
And so that was just, that's how we wanted to do
We really care about the places that we develop in.
(07:42):
And the reason we want to be there is because they're special.
And so we want to fit there.
We want to make things better.
That's our goal.
We want to things better.
so, know, Victor Prosper, if you might have seen it, it looks like it's an old building.
We've built it with styles that were more early 1900s to fit the neighborhood.
And the best compliment we'll get on that project is pretty often people will say, man,
(08:06):
That renovation you guys did, the Bishop Arts, it's fantastic.
And so that's just, it's new construction.
So that's just a great, great, great comment.
And I went to a groundbreaking there.
Was that about a year ago?
Yeah.
Okay.
And so what's going on with phase two?
Yeah.
So phase two, it's another 210 apartments.
It's the same thing.
It's a long street, a long seventh between Zang and Madison.
(08:28):
And so to make it not feel like a long, monolithic building, we broke it apart into sixdifferent buildings
So you'll look down the street again, what we want people to think is, this has been herea hundred years and these are the buildings that have been added on over the years.
you know, the bricks going up right now is probably half done and it looks great.
We're super excited about it.
(08:48):
It's the same kind of model that we did on the first phase.
Now tell me, are these considered luxury condos or is this market rate?
market -rate apartments.
typically the model we use is we like to do smaller unit sizes.
(09:10):
And so what that does is that drives a smaller price point.
And so the places we develop, the number one amenity we have is the location.
And so people want to be there.
And so we try to provide units at a price point that allows the most people to be there.
Now they're luxury, but if you look at, for a developer, developers think in terms of adollar per square foot of a
(09:32):
Well, normal people don't think of that way.
There's the price point, the amount they're paying.
So we each have a strategy where if we can have a high dollar square foot for our units,and it's a lower price point because our units are well designed, it's fully functional,
the smaller footprint that we can be both win.
People get the price point they want, we get the dollar square foot, and it creates avibrant dynamic community.
We hear a lot about affordable housing, is not affordable housing.
(09:57):
What are the needs in Dallas and what is the market asking Do we need just housing?
Do we need diversity of housing different sizes and types and density?
What's the market asking for?
Yeah, there's a tremendous amount of housing that's needed.
(10:23):
But as far as affordability, the best thing, just putting my economics hat
The best thing that's going to provide affordable housing is more supply.
And so, you know, for a developer that you, you you obviously want to higher rent, but asfar as public policy, the way you're going to get the most affordable rents is to let
people build.
Because the more product comes online, then people have to compete with what's there.
(10:43):
And so the stuff that's class A today becomes class B.
The stuff that's class B becomes class C.
And so just the more supply will help alleviate the housing crisis in general.
then the pricing will adjust to what people can pay.
How is it to work with Dallas in terms of permitting and just getting things done as theseother cities that you work in, Austin and Washington and Portland?
(11:12):
Well, the bar's set pretty low.
We do stuff on the West Coast.
That's very, very rigorous.
But that's what we're used to that.
So that's, again, that's what we're used to.
So in our mind, Dallas is a...
in the middle of fairway type city to work with.
I know there's a lot of delays right now.
We haven't personally experienced delays in permitting or rezoning, but I know they're outthere.
(11:32):
I know the reasons for each case.
But we've gone to great lengths to develop good relationships to the city, supporting us.
We're local people.
We want to be pleasant to work with.
We don't have any problems with the city right now.
We don't.
And we got our huge rezoning done at Fairmont Tower.
(11:54):
without any, the city didn't cause us problems there.
Does it take a long time from filing the paperwork to get something rezoned, to get it tocity plan commission?
Yeah, and it depends.
Maybe a less experienced group will have a longer time.
They just don't know where to send things or how to fill out things or how to present.
(12:15):
So it's tough to know, but it's not abnormally long for Dallas to where other cities were
(13:32):
What do you have coming up?
What's in the pipeline for the future?
Yeah, well, we thought we had a lot coming this past year.
We thought we were going to break ground on seven different projects.
Because of the financial markets, though, we didn't break ground on any last year.
And so we've got projects that are designed and teed up and are ready to go.
And when the capital markets come back, mainly debt comes back, then we'll push forwardthose projects.
(13:58):
What we want to be, our goal is right now, real estate markets are kind of dislocated.
Interest rates have hurt everybody.
Even great product is hurt because of high interest rates.
That's just the reality of the world.
That's real estate cycles.
And so right now the opportunity is to stress deals.
Deals that aren't making their debt service, they're in foreclosure.
(14:18):
Those are the deals that you can buy today.
We're developers.
And so we think part, we don't think we play in that space the best.
For us, we see the next opportunity and that's being an early mover of next developmentcycle.
So we're trying to position ourselves as a development company to deliver a lot of productearly in the next development cycle.
We're not there yet, but we think in our mind, if you're waiting till everything's fullyrecovered, you've missed the opportunity, you're late.
(14:46):
So
We're trying to find partners that have the same vision with us, you know, that we candeliver, you know, 10 to 20 projects early in the cycle and hopefully, you know, do all
our development in innings one through six and then decide to play or not in late innings.
that's how that's how we're focused right now.
We're always as you know, as a development firm, we're very forward looking and we'relooking at the next opportunity and that's what we see.
(15:07):
So what happened to those seven projects that you were planning to build over?
they could be in the first wave of this next group.
Okay.
So they're just kind of.
Okay, well I have a couple of starts this
Okay.
know, the Fed announced possibly three rate cuts this year, which hopefully will pushlenders more amenable to giving construction debt.
I was going to ask you about the office market.
(15:28):
You said that it's kind of booming in the Uptown area.
are you seeing, you know, we used to talk a lot about post -COVID and sort of that bounceback.
Are people looking for office space?
Are people working in offices again?
So I'm not an office expert, but I do know that
The problems are in suburban class B office.
(15:49):
They let the older stuff, they build the 80s or 90s.
And it entices people to come back to work.
The new space is doing well because it entices people to come back.
They'll give them this great new office space with all the amenities.
And that's what Uptown is delivering.
And so that's going to be healthy.
It's going to suck things from outside, but it's going be great for Uptown.
What are you doing in some of these other cities?
(16:10):
Very similar projects, the housing
Yeah.
Hospitality.
Hospitality.
we're, yeah, the Marriott was the first of what we hope is many hotels.
It's a, you know, this urban hotel model we kind of developed there is it's fun, it'ssuccessful, and everybody likes it.
And so we're working on a Renaissance hotel in Raleigh -Durham right now.
We're tying up a couple of apartment sites in Raleigh -Durham.
(16:33):
And basically, as we expand as a company, we want to be in all the markets where theyoung, talented Generation Z kids want to be.
So that's where we want to build going
Can they afford your stuff?
yeah.
OK.
Well, I am so in the realm of hearing about affordable housing, hearing about the fear ofdensity creeping into established neighborhoods.
(17:01):
The city is working on their comprehensive land use plan.
think we're also hearing from developers, even on the affordable housing side andcommunity development, that they have to make a
(17:50):
Yeah, I have probably strong counter thoughts on this.
I think if affordable housing is really a societal good that we're looking for, then Ithink that government should be willing to invest in that.
If that's that important,
And what that means, I think the programs are set up now, it's like, how much can youpunish a developer to allow them to still go for the project?
(18:13):
I personally think a mindset that would really have a larger impact would be one of, youincentivize developers to actually do it?
So what if developers actually made a little more profit by doing affordable housing thanif they did market rate?
That would solve your problem like that.
And you know, they push back on that as well.
We don't want to pay developers profit to do that,
(18:34):
you want to solve the problem, that's a good way to do it.
Incentives are very strong.
And I think that the mentality of the...
Again, we do stuff in Portland.
In 2017, Portland passed the inclusionary housing ordinance.
And that says for any apartment project over 20 units, have to have a 20% affordabilitycomponent, 20% at 80% AMI.
That's 20 % of the area median income.
(18:56):
And that sounded great.
We got this great affordable housing policy in place, and it killed development becausepeople can't make deals work
And so that's counter to what the goal is.
And so in my mentality, I think I would love to see a shift in the whole thinking on thematter to see if we create incentives to actually make people want to do that, it's going
to take care of itself.
(19:17):
Do you actually think that we need more affordable housing?
Because it seems like sometimes these projects come up depending on the location.
And we hear from residents or council members that they don't want a huge
low income apartment complex adjacent to their neighborhood because of issues like crime.
(19:40):
Yeah, yeah.
So the trend is to have a percentage of a market rate deal.
That's obviously incentivize that.
Incentivize people to have 20% of the units or 25% of a deal in Uptown Hey, I could do aproject in Uptown and get a 6% return, for example, if I do all market rate, but I'll get
six and a quarter through government incentives, probably tax exemptions or TIF paymentsor whatever.
(20:03):
and actually it's a better deal.
So that'll make me do that, and this is a natural thing.
And so, you know, it's a different way of thinking about it, but that's what I just seewould work.
just, I see the programs that are happening across the country, and I don't see whenthat's really effective yet.
Cause I think on that line, you're trying to punish somebody just enough to make them goforward with the project.
That's not a good way to incentivize people.
(20:24):
Right.
And affordable housing developers are typically trying to do something good, Like, providea need, meet a need, but they still have to, it's their job.
Yeah, you've got to its not a charity.
I some of them, guess, charities, but in general, the most developers are.
know, it's a lot of, these things cost a lot of money to do, and people investing moneyare going to demand a return for it.
(20:45):
Well, tell me a little bit more.
You have talked about how you have no ego, and I know when we've talked before, or youwork toward this, yes, that's the goal.
You've talked about your ethos of your company and kind of how y'all operate.
What's your strategy for just day to day doing business and how you get things done?
Well, good question.
(21:16):
Outcomes are always tough to control, but we can control how we do it.
And so that's what we focus on.
So our ethos is tough.
professional discipline, cheerful.
It was sounding very military.
That's why you said cheerful.
Cheerful.
No ego, absolute integrity, savvy, always learning.
(21:38):
So those encapsulate how we want to do business.
And so we want to be tough, professional, and this is one of how we approach things.
(22:29):
So it's a drive to get better and better and the next deal is better than the last one.
you have your eye on any sites and are you always looking for...
Yeah.
Always.
Yeah.
What are you particularly attracted to?
Like what makes a piece of land good land?
Great urban location for us.
(22:50):
We like that.
We like stuff that, know, main to main fortress locations.
We like dense projects, you know, we like high rise, going this next cycle, that'sprobably not going come back for a while.
It's probably going to be more your wood frame, podium type deal, wood frame construction.
That's going more affordable at first.
We're looking for lot of hotel sites.
You know, we think there's a great opportunity for hotels in Uptown Dallas.
(23:13):
And so, yes,
We're always looking, many cities, always looking to get, that's one thing our company'sgood at, is finding sites.
It won't always be this way, but every single development deal our company's done has beenan off -market deal, we just kind of found it.
So again, I don't expect it to always be that way, but that's indicative of our companybeing good at Are you on like a secret email list?
(23:35):
Okay, okay.
Conspiracy.
I figured.
You tell me what else is going on with you and your business.
No, it's challenging times for commercial real estate.
It really is.
And projects are getting started, and you're looking at situations where how do you, formy company, it's like, how do you get through this stretch to get to the other side?
(24:03):
And that's what all these development companies across the country are doing right
I was going to ask you, is it that way just in Dallas or this is how it is everywhere?
It's everywhere.
It's too challenging.
Some places are worse than others.
Dallas is still Dallas.
We grow.
And so this is a great place to be.
When do you think it will bounce back?
I think we've always said a condition precedent, any change is the dropping of interestrates.
(24:27):
So we started easing cycle come that's going to start perking people up.
And so maybe the fourth quarter things start making sense, but hell, we don't know.
You know, the future is unknowable and we'll see.
You've talked about urban development and that site where your office is across from theMarriott is a pretty walkable area.
(24:50):
There are some parking spaces, but maybe depending on what time of day, it may be achallenge.
What do you think about, there's kind of been some dialogue about reducing or eliminatingparking minimums for new development.
You have any thoughts on that?
Yeah, I think the idea of reducing parking minimums just allows developers to park as theysee adequate.
(25:13):
Developers on incentivize underparked projects, have trouble leasing it out.
He or she will have trouble leasing it out.
So I think that's fine.
I'm comfortable with that.
We are in developing cities where they park 0.5 per unit.
In some of those markets, it works.
In some of those markets, people try that and they'll end up parking and they can leasetheir units.
So, you know, the market will cover that.
(25:34):
I do think Dallas is over -parked right now, like in Uptown PD193.
It's over -parked, given what the markets become.
So I think reducing those parking ratios is great.
What's the value in putting underground parking?
Well, the value is you get more density above grade.
And it's only expensive to go sub -grade though.
(25:55):
OK.
Yeah, that's, you know, it's twice as much per parking space to build if you're having todig it out and...
But sure, How much per space.
It's probably difference between 25,000 space to 50-60,000 space.
But there's all sorts of risk when you start digging down, you never know what you'regoing to hit.
Right?
So there can be contamination, there could be some kind of underground well, there couldbe, that's one of the big risks of urban development is when you start digging down, what
(26:24):
do you find?
And it's always a little scary.
Have you had any experience
Finding gold or?
Not gold.
I found contamination.
Yeah, so we've spent a lot of money on cleanups and that's just part of risk of urbandevelopment.
Just in the ground, not even in a building.
(26:45):
No, like in the ground.
You know, finding the ground, you find the groundwater, you sometimes you do a lot ofstudies beforehand.
So you're rarely ever caught completely unaware, but you don't know.
You do probe a site, but you don't know until you start digging.
So
It's fun.
Fascinating day in the life.
All right.
Well, that is all for this episode of Dallas Dirt.
(27:05):
We thank you Matt for joining us today and we will see you next week.
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