By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
By Jeff Balke
One of our primary economic development strategies must be to return these [vacant] properties to productive use and get them back on the tax rolls.
Oh, you're early -- I wasn't expecting the two of you until one. How was your flight? Fast, I'm guessing. No, no, I usually don't come to the office in my robe. Like I said, you're early.
Anywho. Welcome to Houston. As I explained last week, although I'm a reporter, I'm very civic-minded. Call me a communitarian. Have I got some properties for you. This one right here is the old Central Bank building, 2100 Travis. It's in our Midtown section. This baby's a stone's throw from the rail line, and it's got a swell parking garage.
These two over here are technically in our downtown. This one, the Savoy, is 1616 Main, which puts it right on the rail line. Over here, you've got your old Holiday Inn-slash-Heaven-on-Earth-Inn. Again, practically right on the rail line.
All of these have been vacant for some time. But as any good entrepreneur knows: "There are no such things as enormous, pus-filled, weeping eyesores; there are only fixer-uppers."
Can I get you some coffee?
Now, one of you pointed out that you believed I had access to these buildings. Well, I can see how you might have drawn certain conclusions, but unfortunately, the owners have not given me access. Like I said, I'm a communitarian, not a broker. But I feel so strongly that, based on the information I have compiled, you'll be reaching for your checkbooks faster than you can say, "Crackheads stripped the copper wiring." What? Oh, it's just an expression we have down here.
What's that? Why have these buildings been vacant for so long? What's so bad about the market that these perfectly located buildings haven't been snatched up like that? Why can't the city do anything about it? I'm not sure what you mean. You mean, can the city take a proactive approach to spur redevelopment or demolition, rather than just sit back and wait for something to happen? Well, now, that's not really a city's job, is it?
So -- how about that coffee?
Conduct periodic tests of being a tourist/visitor in downtown, and work to fix missing parts of the visitor experience. (Operating: $5,000/$25,000)
--Houston Downtown Management District goals, 2006–2010 Service and Improvement Plan
So, you visitors say you drove in from the south end and were surprised to see three big vacant buildings in the downtown area of the fourth-largest city in the country? Good question.
I called the Downtown Management District folks the other day to ask them about those buildings, but their spokeswoman, Angie Bertinot, just said she didn't know anything about them. And then she wished me luck. Honestly, I was surprised, because everyone I talked to about the downtown real estate market referred me to the DMD.
Oh, but they share an office with Central Houston, Inc., and those people were pretty helpful. What? Why, if they're in the same office, can one talk and the other can't?
Well, let's start with the Central Square building, shall we? Interesting bit of history here. It was built in 1957 and was the site of the second famous Cork Club. Remember that old movie about Texas oilmen, Giant? Well, the James Dean character was based on a famous wildcatter named Glenn McCarthy. He built a historic hotel called the Shamrock. What? Uh, no. They tore that sucker down in the '80s.
Anyway, the Cork Club was the place to be. The ground floor was occupied by Central Bank. True story: When Lee Harvey Oswald came back from Russia, the FBI checked all the banks in the downtown area to see if he had a security deposit box here. And he didn't. Well, I said "true story," I didn't say "interesting story," did I?
In the early '90s, a guy named Alfred Antonini bought the building. He owned a bunch of apartment complexes in Louisiana, California and Houston. Back in '97, a city councilwoman called him a slumlord. So get this -- he sued her for defamation, but the case was dismissed.
In 2001, Antonini and one of his associates, Jim Lomonaco, pleaded guilty in federal court to charges of fraud. The feds said those two had a nice little check-kiting thing going. Antonini was sentenced to 60 months in the pen, but he had time shaved for good behavior and was released early, in 2005.
Funny story: the indictment alleged that Antonini and Lomonaco threatened an employee who found out about the scheme by sending him letters that said "What's the next sound you hear when you put your key in the ignition?" and "Who's watching your back?"
Oh, sorry, ma'am. I didn't mean to get you nervous. Don't worry -- he no longer owns the place. At least, I'm pretty sure he doesn't own it. It's a little confusing. Before I forget, Harris County is suing the owners to recover $192,000 in back taxes.
What's that? Did the former owner's incarceration obstruct its marketability? Well, that's what I was trying to find out. But Antonini didn't want to talk to me unless I could keep his name hush-hush. He was nice enough, but I told him I couldn't agree to that. Well -- here's how it went.
Antonini: "If I give you some data, what's the feasibility you don't use my name, but just say 'the former owner's representative'?"
Me: "Well...I've got to name all the former owners."
Antonini: "But the former is a corp."
Me: "Uh, right...but..."
Antonini: [chuckles] "but...you're stuttering."
Me: "That doesn't tell anyone anything, 'a corporation'...What matters are the individuals involved, not 'ABC, Inc.'"
Antonini: "I don't know that I totally agree with that."
I really wish we could've compromised, because Antonini assured me that he had some serious insight as to why all three of these buildings have been vacant for so long.
Anywho. The property is owned by HDW S.A. Partners, L.P., of Bronxville, New York. There are a bunch of different "HDW" entities operating out of that same office. Stands for Harvey D. Wolinetz, who also runs a company called Park National Mortgage. Central Square's lienholder is Park National Capital Funding, incorporated in Texas.
Antonini had a bunch of liens on his properties, and some of his corporations filed for bankruptcy while he was in the pen, so Wolinetz stepped in, via "HDW" entities and Park National.
Let's get down to brass tacks: Wolinetz told me he's asking $10–$12 million. He's got two brokers on it -- Cushman & Wakefield and Bejjani. I called Sandy Harris at C&W to see if I could take a tour, but she said something about "tortious interference," so that was pretty much a no. What's that, sir? The building is conducting tortious interference on your eyes? Well, that's just one more reason you should consider stepping up to the plate!
Hey, here's a spot of good news: Fred Ghabriel at Bejjani had no problem discussing the property.
Here's what Fred says: "It's my favorite vacant building in Houston." He says the structure is really two connected buildings, 12- and 14-stories, with a clear view of downtown, the Galleria and the Medical Center. He sees it as an oasis for mixed-use. Maybe retail on the first or second floor, then condos or lofts. And the top floor? It would still be a great place for a club.
What's that? Why hasn't it sold if it's such a peach?
Ghabriel thinks it might have to do with the lack of vision of many Houston developers.
"There's only a few people in Houston that have that kind of redevelopment experience," he said. "If this building was in Chicago, New York, Miami, L.A., it would've been long gone and redeveloped."
But when I told Charles Le Blanc, executive director of the Midtown Management District, how much they were asking for the building, he said it sounded a bit high.
"I don't know what they're waiting on, to be quite honest with you," he said. "I guess $10 million. I think they might have to wait a long time to get there."
He also had this to say: "The building is a detriment because it's got to be demo'd. And it's going to cost probably a half a million dollars or better to tear the damn thing down."
I know what you might be thinking: Does the Midtown Management District do anything proactive to bring buyers and sellers to the table? No. They do have expense abatement programs you can apply for, but you've gotta go to them.
As Le Blanc says: "The city of Houston doesn't go out and solicit companies all over the United States and say, 'We'll give you tax credits if you come to Houston.' They don't readily go on tour to do that sort of thing. If they're approached, they consider it."
What's that, ma'am? The sit-back-and-wait-approach might be one reason why these buildings look like they do? Well, you're certainly entitled to your opinion.
One of the things you can apply for is partial reimbursement for public right-of-way improvement if you want to create a mixed-use development. Le Blanc says mixed-use is probably the only thing his board would consider ponying up for. Pardon? Yes, as a matter of fact, I did just tell you that Fred Ghabriel thinks mixed-use is the best idea, too. Hmm. Maybe one day those two will talk to each other.
Maybe you should hear from Doug Childers at Morris Architects. He said he tried to make something happen with the building about three years ago. He wanted to move his office to midtown, near the rail line.
"We explored two or three options, mostly in conjunction with developers, where they would basically do the project and we would be a prime tenant, [which] would kind of make the project feasible," Childers said.
He considers it to be about a $3.5 million land deal, with maybe $1 million for the frame. Only the parking garage has real value.
"The typical Houston problem, actually, with old buildings is: there's a notion that people don't value the old buildings or the historical buildings, and they'd rather be in something new if they're going to spend the same amount of money," he said. "Houston developers are really tough; they're really risk-averse. And Houston's not an easy market, because there's not protection for developers. You never know what's going to happen next -- around you or behind you or down the street."
What's that, sir? Well, I think he's talking about, for example, you might develop a really cool building and then suddenly they put a Greyhound station next door. That sort of thing.
But Childers also sensed there might be other barriers to selling the building.
"I don't know if he really wants to sell it," he said. "Given what...our experience was, it was very sketchy what the real price was...He never came clean on that. And even the broker was kind of flabbergasted at times, not really understanding kind of whether they really want to sell it, or are they just kind of holding it."
An annual abandoned building survey identifies newly abandoned buildings, examines the causes of abandonment and prioritizes properties for action....The objective is to encourage potential developers to contact the building owners and initiate a private renovation of property.
-- Boston Mayor Thomas Menino, U.S. Conference of Mayors, 2006
Okay, since I knew you were going to ask what city leaders had to say about these buildings, I called Frank Michel in Mayor Bill White's office. And I hope you're happy, because I don't think I'm going to be invited to the Michels' for dinner anytime soon.
When I asked him if the city ever talked to the owners of these three properties to see what might be done to move things along, he directed me to the city's FAST Team. Those are the guys who, if a complaint is made about code violations like vagrants, rats, broken windows or tall grass, take enforcement actions. But I clarified that I was asking about any city interest outside enforcement.
Michel told me: "If someone has a building that they're not occupying and they're not using, and they keep it up to standards, and it's just sitting there empty, as long as it's boarded and posted and [they] follow the requirements, then we would not typically step in and seize that property. There'd be no reason to seize private property."
To which I said: "The understanding I have from what you said is: As long as it's boarded up, up to code and they pay taxes on it, they can sit on a vacant property for as long as they want, and the city's not going to do anything."
I think that's when Michel wanted to reach through the phone and throttle me.
He told me the mayor's office has a definite interest in taking an active role in renewal. He cited the mayor's initiative for downtown's Discovery Green Park, funded with $50 million in private contributions. The city also helped the Hispanic Forum secure a Community Development Block Grant to renovate the old Light Guard Armory building. (The city had to take over the building when the Forum wasn't able to fulfill the terms of the grant, he said.)
He said: "We do those kinds of things from time to time, yes. We work with a number of private developers, all the while we respect people's private property rights...Do we drive around from block to block identifying every single building and reaching out and saying, 'We have a plan for your building'? No."
Fair enough. But I wanted to check with At-Large City Councilman Peter Brown, an architect, to hear what he thought.
"I cringe every time I drive by those," he said of the buildings.
He continued: "Why can't the city create some incentives to get those buildings occupied and on the tax rolls the way they should be?"
So, does Brown drive around, looking for vacant buildings, as Michel alluded to? No. But he did say that when he notices a sweet piece of property for sale, he'll get on the horn to developers he knows. He did that the other night, as a matter of fact.
"You can't just sit back and think there's some invisible hand out there that's going to make all this stuff work. You need smart intervention by the city and we need to create incentives for private investors and...developers to come in and do these things."
He also said this: "They blight the area. They retard the development within proximity to those buildings."
But I don't like the word "retard." I prefer "special opportunity."
The Louisville Vacant Property Review Commission was created to stem the proliferation of blight within the urban core through the imposition of an "abandoned urban property tax"...this tool taxes derelict property owners at three times the regular rate.
--Louisville Mayor Jerry Abramson, U.S. Conference of Mayors, 2006
Okay, I guarantee that you guys are going to love these next two properties. We've got the old Savoy Hotel, which also is actually two buildings. The original seven-story structure was completed in 1906 and was Houston's first high-rise, according to Rice's architectural historian, Stephen Fox. The 17-story second structure was completed in the mid-1960s, along with the parking garage.
Unfortunately, the hotel's owners filed for bankruptcy in the late 1970s and it was vacant by the mid-1980s. For a time, it was used as housing for South Texas College of Law students and was known as The Barrister Club. If you're into sketchy vans, there's a Barrister Club van still parked in the garage, next to a bunch of discarded fuel pumps. Anywho.
To be honest with you, I wasn't able to get much out of the owner, Michael Nassif. He bought it in 1999 and says he's open to reasonable offers. He wouldn't give me a price, but said it's in keeping with nearby buildings.
And Vickie Rivers of the Main Street/Market Square TIRZ (Tax Increment Reinvestment Zone) said whoever owns the Savoy could apply for a local, state or federal historical facade designation for the original structure. If granted, they could get a tax break. Pretty cool, huh?
Here's something else: Laura Van Ness of Central Houston, Inc. -- the conjoined twin of the Downtown Management District who actually wanted to talk -- said there are tax breaks for developers who convert historic buildings into residential use. This was done with a kick-ass property here called Commerce Towers.
You know what else is cool? Unlike some old hotels, the Savoy isn't haunted. You know that movie The Shining? With the creepy little girls and bloody elevators and shapeshifting undead hag in the bathtub? None of that here. You know how I know? Well, I can't show you the inside, but I did talk to a guy who squatted in the building about three years ago. He says he lived there, on and off, for about a year. I found him through the Houston Architecture Information Forum. He has since moved back to his home state of California and, since he was living here illegally, he did not want to reveal his last name.
His name's Sean, and he was about 22 when he lived there. He met a girl from Houston and moved here with her. I'll let Sean take it from here.
"One day, she had kicked me out of her house, and I was walking down the road to go to Food Not Bombs, and I looked up at the Savoy -- I was walking down Main Street...and there was a very large broken open window up at the top and I saw a giant chandelier in there. And I looked up at the whole building, and [I was] amazed that a 17-story building would be completely abandoned. We're not used to that kind of thing in California."
He said the inside of the older building was "completely thrashed," but was pleasantly surprised to find the newer structure's interior in nice condition. It had completely furnished rooms and two libraries stocked full of Texas law books. Plus, the electricity was on. So Sean moved into a room on the 16th floor, mostly for the great view. After a while, he got tired of the long hike upstairs, so he settled into a room on a lower floor.
"I went to one of the lower floors and picked a room that had a Murphy bed...And honest to cartoon form, it tried to fold me up into the wall the first time I slept on it."
He eventually made friends with some other homeless people, and they made the Savoy their HQ. They put a hot plate in one room and called it their kitchen, watched TV and created a "bouncy room" with a bunch of mattresses. Yes, he said "bouncy room."
All right, now on to another non-haunted hotel. This one's the old Holiday Inn. This baby's got 31 floors with 600 rooms and sits on top of a parking garage. Now, I really like the owners of this one. They're very interesting folks. You know the Maharishi Mahesh Yogi? The guy who the Beatles were pals with for a while till enthusiasm subsided?
Well, the Maharishi was the pioneer of Transcendental Meditation. You know, "om," and all that stuff. Yogic flying. They have people who can actually levitate. What's that, sir? Has anyone ever seen them? Well, no. That's just for insiders. And it takes a while to get to where you can actually fly. First, you have to bounce. See, a bunch of people sit in the lotus position on a mattress and they all practice hopping around. They believe that if you get enough people hopping around at the same time, you can achieve world peace. They say once, in the early 1990s, they decreased Washington, D.C.'s crime rate. In the early '80s, a bunch of yogic fliers convened in Israel and decreased unrest in neighboring Lebanon.
They also have a host of all-natural health products that have been tested in clinical trials for 5,000 years. What's that, ma'am? No, I'm not sure what kind of clinical trials they were conducting 3,000 years before the birth of Christ. But I did call their 800-number, and the operator assured me that, unlike Viagra, their all-natural boner pills will not produce a four-hour erection. Pardon? I'm sorry, ma'am. I meant no disrespect.
This Transcendental Meditation is popular stuff. They've got their own little town in southeast Iowa, where their university is. And they're building "peace palaces" throughout the country. There's one about 40 miles north of here, in a very nice community called The Woodlands. An oilman named Howard Settle bankrolled it, and he offices there as well. These palaces are designed under the principles of "Vedic" architecture. All the main entrances face east, and the actual design of the building itself promotes harmony. What's that, sir? No, you're absolutely right -- there's not a touch of Vedic architecture in the old Holiday Inn. But I talked to Tom Hayden, the guy who keeps the premises secure.
Here's what he told me: "I take care of properties like this. You know, secure them from entry. Do the cleanup. Like, if you walk by that building, sometimes when you walk by a vacant building, you smell urine and stuff like that? You never find that on a property like this."
You heard that right, folks. This building does not reek of urine. Go ahead, take a whiff. Pardon? Do I think they have to worry about piss on the Peace Palace? No, sir, I don't. But you know, I have a saying: "World peace is achieved one white-flight community at a time."
In the early 1990s, the ol' Maharishi went on a spending spree and bought a bunch of vacant hotels throughout the country, including this one, which they picked up for $2 million in 1992. The plan was to convert them into Heaven on Earth Inns and have spaces designated for TM students. It didn't really work out, though.
An ad in the Houston Business Journal last year listed the price for this hotel at $10 million. The building actually changed hands briefly in 2004. The Maharishi people sold it for $8.5 million to a group of investors that included a Colorado Springs outfit called LandCo. Michael Raider, a Houston native who works for LandCo, told the Houston Business Journal in 2005 that the property would be slated for apartments or condos.
Unfortunately, the swan kicked the bucket when the investors defaulted on the $8.5 mill, and the hotel went back to the yogis. I tried to talk to Michael Raider to see what happened, but he didn't return my calls. And Nicholas didn't want to talk on the record. Go figure.
I got in touch with Dave Humphreys, a lawyer who's handling the sale. But it was kind of difficult talking with him. After most of my questions, all I heard was the chirping of crickets and the forlorn rustle of tumbleweeds. And some of the answers were...well, they were a little weird. Like, I asked him why the Maharishi hasn't been able to unload the building in nearly 15 years.
Here's what he said: "We've only owned it for a year and a half. No, just a year."
Here's what he was referring to: The Maharishi organization that bought the building in 1992 was the World Plan Executive Council. But LandCo bought the property from a Maharishi organization called the Maharishi Global Development Fund. And when LandCo defaulted, the hotel went back to the Global Fund. So it appeared that that change in corporate filing therefore canceled out the entire previous decade.
So after a few tumbleweeds floated by, I tried phrasing the question along these lines: In the 15 years that the property has been owned by a Maharishi-affiliated entity, why has it been so hard to move?
Chirp. Chirp. Chirp.
"Well, depends on how you define that," he said. "I can only speak for Global Development Fund. That's who I work for."
What's that, sir? You need an Advil? Me too.
Here's a little history for you: Houston's Heaven on Earth Inn closed on Labor Day weekend 1994, along with its counterparts in Tulsa and Detroit. The plan, the Houston Chronicle reported, was to convert it into the Maharishi Vedic School. In 1998, city fire inspectors ordered the building closed after numerous health and fire code violations were never addressed.
The yogis also had trouble with one of the nicer properties they owned, in Chicago. In most cases, the hotels weren't much to look at, but in the Windy City they snatched up the Blackstone, which has a rich history. Lots of presidents stayed. Anyway, the Maharishi folks made some pretty bold announcements, according to newspaper reports from the time. They planned on investing $120 million in it to turn it into sweet condos.
As it turns out, the Maharishi people can reduce war in Lebanon, but there were two forces they could not overcome: Chicago building inspectors and the Occupational Safety and Health Administration. In November 2000, the city ordered the hotel closed after discovering asbestos exposure and a troubled electrical system, according to the Chicago Sun-Times. And then OSHA fined Heaven on Earth Inns, Inc. $157,350 for "allegedly exposing workers to asbestos." They sold the hotel a few years later.
In 2004, after the Maharishi folks had sat on a dilapidated Avon Lake, Ohio country club for years, that city's mayor tried to get the property declared a blight so it could be seized under eminent domain. But the Maharishi folks finally sold the property to a developer who razed the sucker.
And the mayor in Hartford, Connecticut, is getting a bit fed up with the yogis. See, they've been sitting on a vacant hotel for 12 years, in an area that's becoming a hub for corporate development.
Mayor Eddie Perez told the Hartford Courant he would probably "propose a redevelopment zone encompassing the two buildings," which would "give the city the option of acquiring the hotel by eminent domain."
What's that? How can their mayor talk about seizing the property if there aren't any outstanding violations? Good question. After all, it's private property, right? Well, I guess that mayor's a bit different than ours. As a matter of fact, I called the Hartford mayor's office, and they put me in touch with John Palmieri, director of the Department of Development Services. He's also the executive director of the Hartford Redevelopment Agency.
"We're concerned because the Maharishi has done very little to show us that he's interested in actively trying to sell it or develop it himself," Palmieri told me. "Typically...states empower redevelopment agencies or development authorities with certain powers that would permit a city or the agency...to take a property through eminent domain, through condemnation. A property that might be current in its taxes, a property that may be sound and secure but nevertheless a blight."
Palmieri wanted to make it clear that the city's not a land-hungry bully, and that the most important thing is to try to reach an agreement with the owner.
"It's the action of last resort," he said. "But if nothing else works...it's a legitimate means to an important public end."
The Cenikor Building on Texas Avenue, the King George Hotel on Preston Avenue and the Savoy Hotel on Main Street also are being considered as future single-room occupancy sites in the downtown area. Come back in 15 years, [Mayor Bob] Lanier suggested, and Houston will be a national leader in helping homeless residents keep from living on street corners and get their lives back on track.
--Houston Chronicle, 1995
So, what do you folks say? Are these not the sweetest pieces of property you've seen in some time? What's that? You're going to sleep on it? Oh, okay. But you better not sleep too long. But I have a saying: "You snooze, you lose the opportunity to talk to a levitating transcendental meditator about buying an old Holiday Inn with eight-foot ceilings for $10 million."
Before I forget, I had one last thing to talk about, vis-á-vis the Central Square building. See, our friend Sean squatted there for a while, too, after he grew restless at the Savoy. And I think his experience there might make you a lot more interested in writing that $12 million check. Sean and some of his homeless buds were walking down the street and, well, I'll let him take it from here:
"Again, we're just walking by the building, looking up, [and] 'Oh my gosh, it's another [tall] building, completely empty.' That place was incredibly easy to get into...After the first few nights of sleeping there, I was hearing noises at night, and thinking it was raccoons or something. And I went upstairs and scared the shit out of two guys that were ripping out the plumbing and copper and whatnot."
Sean said they turned out to be pretty good guys. And he got a kick out of exploring the place. Up in the remains of the old Cork Club, he found some sweet black leather couches and a few massage tables.
As for the latter, he chuckled, "I don't know if that was a later-on thing, or if that fit in the club somehow."
He said there was a huge leak from about the third floor down, and he discovered two or three feet of water in the basement. Of course, Sean's a clever dude, so he said he fashioned a raft out of some spare boards and a few 2.5-gallon cooking oil jugs.
"Pretty standard flotation device," he said.
So he paddled around the basement of the old Central Bank, seeing what treasures were hidden there. Nothing turned up. He had more luck rummaging around in a small office near the basement staircase. He crawled over a graveyard of old election signs to get to an exercise bike, which he hoped had usable parts for his bike. That's when he hit the jackpot.
"The cognac was up on a shelf out of sight," he told me in an e-mail. "I only saw it because I was about four feet taller, due to the election signs. I believe the brand was Rmy Martin. I shared it with the guys stripping the copper, Larry and Liberty. Nicest crackheads I ever met."
If you're really interested in this building, I bet we could get the owner to throw another bottle in, gratis.
All right, folks. You have a safe trip back.
I'll be waiting for your call.