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."
Stevens has already brought Columbus Realty into one high-profile city project. The company is the general partner of a joint venture that is renovating the Rice Hotel into loft-style apartments. Stevens angered some Council members in September 1996 by negotiating the HHFC's purchase of the Rice Hotel without their input. In February, Stevens bypassed Council completely and sold HHFC's share of Rice Ventures, a partnership with developer Randall Davis, to Columbus Realty for $1 million. In return, Columbus -- now Post Properties -- will oversee the redevelopment, operate the Rice and assume HHFC's obligation for a $20-million construction loan from -- where else -- Bank United.
The deal for the Rice Hotel project also freed up several million dollars in HHFC funds, which Stevens immediately committed to Houston Renaissance so it could begin purchasing properties in the Fourth Ward. In the meantime, Columbus Realty joined the action by purchasing eight acres on the southeast boundary of Renaissance's proposed redevelopment zone for a 600-unit apartment complex.
A spokesman for now-defunct Columbus Realty Trust referred questions to Kent Collins, a development associate from Dallas, who was traveling and unavailable for comment.
The Fourth Ward project appears tailor-made for the REIT. Since 1990, Columbus Realty has transformed Dallas's historic State-Thomas neighborhood, including that city's Freedmen's Town, from an urban eyesore into a mecca of yuppiedom. Roughly 5,000 people have settled in the so-called Uptown area just north of downtown Dallas, where they pay the highest rental rates in the city.
Apartments in the Meridian, a 132-unit luxury complex that was Columbus Realty's first project in the old neighborhood, command upwards of $2,000 a month. Studio apartments at the 332-unit Worthington cost $1,200 a month. Recently, Columbus Realty finished the Heights of State-Thomas, a tightly packed arrangement of apartments and townhouses priced to sell between $200,000 and $250,000.
The high concentration of upper-middle-class professionals has spurred a commercial boom in the area. Columbus has begun incorporating a significant amount of retail space into many of its residential developments -- a concept that is at the core of Houston Renaissance's Fourth Ward strategy.
Columbus Realty also has some experience dealing with the burdens history often imposes on development. Two months ago, the company settled a year-long dispute with Dallas preservationists over a planned 6.1-acre project on land that was once a paupers' cemetery. Public pressure mounted after graves were discovered on the site, forcing Columbus Realty to scale back plans for an apartment complex.
Houston Renaissance has already faded most of the heat from the local African-American community over the Freedmen's Town Historic District, leaving a for-profit developer to enter the game at a particularly opportune time. Currently, city officials are trying to finalize a tax-increment financing district that would divert future property-tax revenues to pay for infrastructure improvements in the Fourth Ward, such as sidewalks, street lamps and small parks.
Dallas created a similar district, known as a TIF, in the State-Thomas area in 1988 to repair crumbling streets and sewer lines. Those types of improvements are already under way in the Fourth Ward, thanks to an $8-million commitment from the city of Houston. Beth Morian, the Renaissance board member, says more public assistance should be available soon.
"We are desperately trying to get this TIF done by the end of the year," she says.
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Houston Renaissance, however, may not be around to enjoy it. Without the $7.2-million bank loan or some other source of financing, "the project will die," says Boyd.
That would be an ignoble end for the nonprofit, which has been bumbling around the Fourth Ward, angering elected officials and frightening anxious residents since Julio Laguarta went before City Council in October 1996 to ask for the $3.4 million from the city.
Other than occasional self-righteous posturing, councilmembers have been unable to exert much control over the project, while Stevens has been free to manipulate the terms of the Fourth Ward's redevelopment at will. And according to at least one councilman, if the mayor's housing adviser wants to hand redevelopment of the Fourth Ward over to a for-profit developer, there's nothing to stop him.
"There's nothing in the contract with the city that says the deal can't be transferred," notes Councilman Rob Todd. "And if there's nothing in the contract, I presume it can be transferred at will. As far as I know, if Columbus wanted to come in and buy the land, they could do it with no problem.