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A year has passed since the city of Houston promised $3.4 million in public money to a nonprofit agency fronted by a bankrupt developer to build affordable housing in a poverty-scarred section of the Fourth Ward.
As a self-styled philanthropic organization, Houston Renaissance has always had a few credibility problems, not the least of which is the moldering reputation of its insolvent founder, Julio Laguarta. He's been sued for unpaid debts and breach of contract so many times that the only mark he could hope to touch at this point is an unwitting taxpayer.
Indeed, Laguarta and Houston Renaissance have tapped the quasi-public Houston Housing Finance Corporation for that $3.4 million, plus another $5 million in tax-exempt bond proceeds, to buy about 1.3-million square feet of Fourth Ward property. When all the transactions are complete, Laguarta will have earned close to $400,000 in brokerage commissions, and Houston Renaissance will own a large chunk of the Fourth Ward, including a historic neighborhood first settled by freed slaves.
Meanwhile, Renaissance's board of directors has been elbowed aside by Michael Stevens, the $1-a-year housing adviser to Mayor Bob Lanier and the president of the Houston Housing Finance Corporation (HHFC). Stevens has assumed control of the nonprofit's Fourth Ward land and has shopped it around to private developers, leaving Houston Renaissance's continued presence in the Fourth Ward as tenuous as that of the neighborhood's low-income residents.
Stevens's first choice to take over the Fourth Ward project is apparently the Dallas-based real estate investment trust (REIT) formerly known as Columbus Realty Trust, which recently merged with Post Properties, a well-endowed REIT headquartered in Atlanta.
According to sources close to the Fourth Ward project, Stevens has offered all 1.3-million square feet currently under contract by Houston Renaissance to Columbus Realty-cum-Post Properties for $7 to $7.50 a square foot. Should the transaction proceed, the implications are threefold:
First, the financial clout of Post Properties would obviate the need for a do-or-die $7.2-million loan that Renaissance has been trying to secure for a year now. The prospective lenders, a three-bank consortium led by Bank United -- whose board of directors includes Michael Stevens -- are wary of Renaissance's ability to carry out its 80-block redevelopment plan, which was unveiled last week. Even attempts to sweeten the deal -- such as reducing the number of affordable housing units required to be built in the Fourth Ward -- have failed to ease those concerns.
Second, the sale would net Stevens and the HHFC a significant return on its investment in Houston Renaissance, as well as allowing HHFC to recoup some $2 million in guarantees Stevens has put up to secure other financing for the nonprofit.
Finally, and perhaps most significantly, the deal would confirm what critics of the Fourth Ward project have always feared -- that the historically hallowed, minority-populated area would be taken over by a private for-profit developer. Indeed, Columbus Realty could profit handsomely from the public money that's already been invested in the Fourth Ward. At $7.50 a square foot, the company would be paying below-market rates for the land, which could eventually be sold at considerably more than that to builders.
Stevens acknowledges that Columbus Realty has expressed an interest in the Fourth Ward project, along with other developers and builders. He denies, however, that he ever approached the company with a specific offer to sell Renaissance's land.
"I would say that kind of speculation is absolute baloney," Stevens says. "And I don't think anybody else has discussed it with them, either."
It should be noted that Stevens told the Press earlier this year that Houston Renaissance had "no choice" but to develop 350 affordable housing units in exchange for the $3.4-million city grant. But at Stevens's urging, City Council revised that agreement on November 5 to reduce to 150 the number of affordable units that must be built. In the kind of strained logic that has shadowed the nonprofit's existence from the beginning, Stevens tried to show that Houston Renaissance will, in fact, provide more affordable homes in the Fourth Ward than it originally promised.
Likewise, Stevens's claim that Columbus Realty hasn't been contacted about the Fourth Ward may not be totally reliable. Last month, Robert Boyd, who was hired as Renaissance's executive director in September, traveled to Dallas to visit with Columbus Realty officials. Boyd says the trip was simply to check out the company's existing projects, and that the future of Renaissance's Fourth Ward project was never seriously discussed.
"I didn't go up to talk to them about land," Boyd insists. "I went up to see their product -- that was the purpose of my trip. With respect to buying any land, I told them that now is not the time to sell any land."
That time may be rapidly approaching, however.
Beth Morian, a member of Renaissance's board of directors, says that unless Houston Renaissance secures a total of $15 million in financing, the nonprofit would have to sell its land to pay back the HHFC and its $3.4-million grant from the city -- which would probably kill any possibility that affordable housing would be built in the Fourth Ward.
"The sad thing is," Morian says, "we would go away. We would have to sell the land to pay everyone back."