Todd Howard

This past weekend marked another opportunity for us to exercise our right to vote. Personally, voter apathy bothers me and it seems to be more and more prevalent in our society. On the one hand, I understand that people may not be involved in the issue du jour. On the other, shouldn’t they simply appreciate their right to exercise an opinion?

This past weekend the citizens of Dallas had the opportunity to elect three new Dallas Independent School District board members. I was happy to see my candidate win. To me, this is an opportunity to provide a report card on my representative. After all, I pay my property taxes regardless of where I choose to educate my children. But isn’t it interesting that I do not write that check directly to the school district? Let me go even further. As is not my case, but may be that of many, that tax could also be escrowed in my mortgage. Is it possible that this tax is so hidden that I don’t even care?

I suspect if I had to write my check directly to the DISD, I might take a little more interest in who represents me. Whether it is $200 or $20,000, property owners pay taxes, but they do so as an obligation and, for most people, there isn’t the time to break it down into silos and study the math.

For the sake of conversation, let’s discuss my DISD taxes. I paid the DISD $3,207 on my last tax statement. When I looked at this, I began to ask myself, how often do I write a check for that amount and not even take time to think about it. Not very often. That’s a lot of money, for anyone.

If I hire someone to work on my car for $3,207, I make sure they are a pretty good mechanic. If I was to hire someone to paint my house for that amount, I will certainly make sure they will do so with quality in their work and legitimacy in their operation. So, if I am paying the DISD $3,207, you can make damned sure I am going to vote for the person who, in my opinion, is going to be the best steward of that money, and encourage my friends to do so as well.

I believe that if our school district taxes were not buried in the tax bill or our escrow, if we had to write the check to the district ourselves, we would probably pay a little more attention to who we elect as our “mechanic.”

John Zikos

Each May, retail brokers, developers, and tenants make an annual pilgrimage to Las Vegas for the International Council of Shopping Centers’ deal-making convention. The last three years have not been a lot of fun. Attendance fell to less than half of 2008 levels, but it was the tone and the mood that were the worst part.

Most of the meetings you scheduled, which were comparatively few, were with people complaining about how tough their business had been. The more optimistic meetings were with brokers or developers pushing their new developments. The only problem is, those meetings were repeated over and over again these past three years, with no progress in between.

Well this year, it appears the good mood is back.

Attendance at the 2012 conference—to be held May 20-22 at the Las Vegas Convention Center—will be back up near post-recession levels, and my convention schedule is jam-packed again. I’m having to split my 30-minute meeting slots into 15-minute times. And I’m even having to convince my wife that five cocktail parties and two dinners for three straight nights is not as fun as it sounds!

ICSC’s annual convention has become a great barometer of the retail real estate industry. I’m hopeful that the convention is as fruitful as the pre-event mood indicates.

It will be another great sign that the retail real estate industry is back!

Chris Teesdale

The circulating buzz in the industrial real estate market is, “Who will be the first to build spec?” The last such project came more than three years ago, when White Rock Development built a 445,000-square-foot facility on Interstate 20 in Lancaster.

Early speculation was that the first to build spec this time around would either be USAA, with an 814,000-square-footer planned in Sunridge Business Park on Pleasant Run off Interstate 45 in Wilmer, or Duke, with an 800,000-square-foot building on a site it recently acquired off Interstate 35 near Danieldale Road in Lancaster. Turns out it’s neither one of them—it’s Prologis, in South Dallas at its Park 20/35 in Lancaster!

Yes, in June Prologis will break ground on a shiny new 653,582-square-foot, 32′ clear, 550′ cross-dock building, expandable up to 1 million square feet. It will be ready in the first quarter of 2013.

Not only is Prologis the first to break ground, but it’s setting the bar high by offering optimum flexibility for prospective tenants. By starting with 653,582 square feet, the developer still achieves economies of scale for construction, yet it avoids competing with USAA and Duke, which will initially seek full-building users. And if a larger tenant comes along, Prologis can easily expand its building to compete.

It’s offering the same flexibility with off-dock trailer parking, initially providing 162 spots, expandable up to 259 or more. (In the industrial world, that means more than 1.5 trailers per dock door, or nearly 3 per dock door if totally maxed out.)

Prologis has brilliantly thought this one through. In the past, a developer would maximize the square footage it could jam on a site, often resulting in poorly conceived projects. I am sure there was much internal debate at Prologis on what size to build, as the site can accommodate a much larger building. However, in the end, this will give big-box tenants flexibility for more square footage or more trailer parks, or perhaps nothing more, leaving Prologis the ability to add an adjacent smaller facility on the site.

By the way, Prologis will be quoting $3.10 per square foot triple net, with $1.05 operating expenses and a $3 tenant improvement allowance.

So who will be next to build spec? We might anticipate a run of new construction with Prologis’ announcement, assuming history repeats itself. For those of us who were around, you might remember that after the crash of the 1980s, which peaked in 1988, it wasn’t until four years later, in 1992, that the first spec building was built: IDI’s 300,000-square-foot facility at 2220 North State Highway 360 in Great Southwest. It leased upon completion to Office Depot, and shortly thereafter, a wave of speculative construction ensued.

You might be asking if Prologis paid me for this endorsement. Nope, I just think the company has hit the nail on the head with what it’s able to offer prospective tenants, and I applaud its decision to move forward with this development. It’s a gutsy move, but one that I bet pays off for the effort and starts a momentum of new industrial construction here in North Texas.

HOTI stands for Housing Opportunity Total Index. It’s simply the sum of the U.S. unemployment rate and the average rate on a 30-year single-family mortgage. My HOTI is a play on the “Misery Index” developed by economist Arthur Okun when he was an adviser to President Lyndon Johnson in the 1960s.  His index was the sum of the rate of inflation and the unemployment rate; as the index moved higher, economic conditions were thought to be getting worse. He was usually right on that front, and his Misery Index is still quoted today.

My HOTI follows this same economic thought, but it is related specifically to the housing market. In my 40 years in the business, which began on the residential side, I have found the following to be true: If one is gainfully employed and has a low interest rate on one’s own home, one is happy—very happy. And this observation seems to cross over all economic boundaries, from the very rich to those just getting into the market. That’s the genesis of my HOTI.

My pitch was that the U.S. economy—and its elected leaders—should strive for a 10 percent HOTI. That 10 percent blended rate would be comprised of a 5 percent unemployment rate (generally considered full employment) and a 5 percent mortgage rate (which, up until about 2009, would be at or near historical lows.) Note that I promote a balanced HOTI. Currently, our HOTI is hovering near recorded lows, but it is out of balance as a result of the sudden and dramatic loss of more than 8 million jobs.

If history is any lesson, however, I am betting my HOTI will start to balance over the next 18-24 months, with unemployment edging down and interest rates ticking up. These factors notwithstanding, I’m thinking that getting in the balanced range of 10-12 percent over the next two to three years bodes well for the housing market—at least that’s what my Lil’ HOTI is telling me.

Shannon Brown

CBRE is continuing its raid of Jones Lang LaSalle. The most recent JLL alum to join CBRE is Shannon Brown, who has been named vice president in the firm’s office leasing group.

“By recruiting high-level professionals like Shannon, we truly raise the bar on the quality of services we provide to our owner and institutional clients,” said Chris Hipps, managing director, in a statement.

A 15-year industry veteran, Brown has worked with owners such as JPMorgan, L&B Realty, RREEF, and LaSalle Investment Management. She previously was vice president in JLL’s agency leasing group. Prior to that she was with Cushman & Wakefield for seven years.

Brown is the latest in a series of JLL departures, with most brokers landing at CBRE. In January, office tenant rep Josh White joined CBRE as an executive vice president. A week later, JLL industrial specialist Kacy Jones joined CBRE as first vice president.

In April, former JLL partner Chelby Sanders joined CBRE as senior vice president, and Steve Everbach, who headed up the firm’s leasing and management group, took the helm of Cushman & Wakefield’s Dallas office.

Last week, John Alvarado was named senior vice president of CBRE’s investment sales team. He previously served as managing director of JLL’s capital markets group in Dallas.

John Alvarado

News leaked out Tuesday that investment sales executive John Alvarado had left Jones Lang LaSalle to join CBRE. Today the company confirmed the report. Alvarado has been named senior vice president on CBRE’s investment sales team, which also includes Jack Fraker, Gary Carr, Russell Ingrum, and Josh McArtor.

Chris Hipps, managing director of institutional services at CBRE, praised Alvarado’s reputation and connections: “His relationships with institutional investors and private equity groups will enhance our investment sales reach locally and nationally.”

Alvarado said he was attracted to CBRE’s world-class platform, extensive resources and the opportunity to work with some of the most respected professionals in the industry.

At Jones Lang LaSalle, Alvarado was managing director within the firm’s capital markets group in Dallas. He has transacted more than $4.2 billion in office property sales during his career.

From left, Chamber CEO Chris Wallace, C&W's Dean Collins, Chamber chairwoman Jo Ann Goin; economic development advisory council chair YaLonda Lockett, and C&W's Mark Collins.

KidKraft has been named the Commercial Real Estate Deal of the Year by the Greater Irving-Las Colinas Chamber of Commerce. The children’s furniture maker was recognized for its 401,510-square-foot consolidation and relocation to DFW Trade Center II at 2525 Esters Blvd. in Irving.

Dean Collins and Mark Collins of Cushman & Wakefield of Texas Inc. represented KidKraft in the transaction. Other honorees included the landlord, Bentall Kennedy, and its brokers, Steve Trese and Scott Krikorian of Trammell Crow Co.

The award was presented at a May 3 gala, which also celebrated the chamber’s 80th anniversary. Here’s a rundown on other corporate and individual award-winners:

• Outstanding Chamber Corporate Partner: AT&T

• Technology Leadership Council Innovation Awards: Alan Benitez, Cody Patton

• The Clayton Dobson Irving Sister Cities / International Trade Development and Assistance Center Award: Thom Davis, Omega Environmental Technologies

• Ambassador of the Year Award: Leo Hull

• Commercial Construction / Project of the Year Award: Sfuzzi

• Residential Real Estate Professional Award: Beth Phillips, Ebby Halliday Realtors

• Economic Development Partner of the Year: Four Seasons Resort and Club

• Small Business of the Year: Larsen Dye Architects

• Chamber Volunteer of the Year: Ricky Stephenson, Rick’s Car Kare

• MVP/Employee of the Year: Ryan Pafford, Director of Communications and Technology

• Chairman’s Award: David Park, Atmos Energy

To see additional photos from the chamber event, click here.

Caleb Smith

Growing up in New Jersey, we had spring storms, but nothing like the ones we have here. Hail was somewhat synonymous with freezing rain. Electrical storms were fun and rarely life-threatening, and the post storm clean-up was minor. Sure, parts of the state would go without power for a day or so, but rarely were the lights still out when I got home from school. As a result, we did not have the spring assault of questionable roofers trolling the neighborhood looking to perform repairs. (I should note here that although we did not have the roofers, we had other pests, like gypsy moth caterpillars and inchworm webs that would appear like magic out of thin air and touch just enough of your face to feel like a bird drooled, or worse, on you.)

Any North Texas homeowner knows what I’m talking about. It starts with the flyers left in your door handle. Soon it turns into those irritating weekend door bell rings with men in work clothes posing as good Samaritans who will gladly perform repairs for a nominal fee. As many of you know, these are not Samaritans and rarely do they know what they are doing. The name of their game is to get the job, do it as cheaply and quickly as they can, and then move onto the next job. Heaven forbid they take too much time on one roof and lose two other jobs as a result.

What makes matters worse is that by the time the next storm hits, the roof is leaking again and now insurance won’t cover the damage because you did not have an approved contractor perform the work. As for recourse, good luck finding the individual or company that performed the original repair work, they have moved on to the next neighborhood of unsuspecting dupes.

Well, Dallas commercial real estate is in a similar position today. We have just weathered a massive economic storm, and now the Samaritans are at it again. Downtown Dallas got hit harder than most of the city; there were plenty of buildings in questionable repair prior to the storm but now, much of downtown is in need of real repair. Proudly, we at Spire were mostly unaffected—we saw the storm coming, battened down the hatches, taped the windows, and settled in for a barn burner.

Unfortunately, many building owners were unable or unwilling to do the same. As a result, many properties have neglected any real repairs and are being foreclosed upon as a result. Just last week, there was an article mentioning a handful of sizable towers as buildings in or about to be in foreclosure. Believe me, this will be a story told all too often over the next few years. This is when the Samaritans enter the game.

Many tenants looking for downtown office space are being proposed rents that are too low. (I’ll explain the “too” part in a bit.) They are being enticed to go into these damaged buildings with the promise of $12 rates. What they’re not being told is that no capital improvements have been made to the building in years. As a result, they have higher repair costs while getting lower and lower efficiency.

They don’t mention that their contractors aren’t getting paid in a timely manner, which results in poorer future service. They don’t mention that their lenders are breathing down their neck and the only reason they haven’t foreclosed is because they are receiving more money renegotiating a failing loan than the interest they would normally collect. Most important, they are not telling the tenants that they won’t be around in a few years, and therefore don’t give a crap about your comfort or tenancy. They are just looking for a way out without losing their shirt. Obviously, no tenant wants to be in this scenario, but many who fall for the low rent trap will be.

The reason I say $12 rent is too low is because no quality downtown building can make its interest payments with that rate. Bear with me here. The typical building downtown has operating expenses around $9 per square foot. The typical Tenant Improvement allowance for a new 10-year deal is approximately $40 per square foot. This means that after just these two expenses, the landlord needs a minimum of $13 per square foot just to break even. ($40 divided by 10 years = $4 per square foot. $4 + $9 = $13 per square foot. This does not include commissions, legal expense, landlord work to be performed, etc. This is all before the minimum $3 of interest and debt expense a building carries.
As you can see here, in order for a building to cover expenses and interest, an absolute minimum of $16 per square foot is needed.

Why should I, as a tenant, care you ask? Because unless you want to deal with the figurative repair guy to repair the original work, fight insurance, and have the time suck of dealing with it, you should care. It’s true that in an office building you don’t actually have to do the repairs yourself, but this is what you will deal with: Elevator service that is questionable (at best), ugly repairs that lower the quality of the building, poor customer service because the staff is fleeing like rats on a sinking ship. You will be asked to fill out SNDA’s and Estoppels at least twice a year, and you will be embarrassed to have a client show up and see what crappy digs you are in. My suggestion, you get what you pay for.

So when looking for office space consider this, are you going to hire the Samaritan or an approved contractor? A $5,000 roof is a lot less important than a multi-million dollar lease. Now why would you do less for your office where you spend more time than anywhere else?

Caleb Smith is president and owner of Spire Realty Group LP. Contact him at calebs@spirerealty.com.

Tom Lynn

So there I was, cruising down a two-lane East Texas country road around 1 p.m. on a recent Friday afternoon. I was trying to escape the commercial real estate world and was 15 minutes from my destination. The problem was, my iPhone kept ringing, beeping, and vibrating while calls, emails, and texts kept coming in. I had already pulled over twice to type replies (yes honey, I actually stop instead of doing it while I’m driving). Instead of a enjoying a relaxing trip, I was only getting more worked up as the volume of activity increased with each mile.

Was I crazy to think I could escape for a long afternoon? I finished a call and laid my phone on the dash, rolled down all the windows in my Jeep, changed the channel to Radio Margaretville , and turned up the volume. Then it happened … my iPhone began to fly.

Wait. Before I finish the story, you need to understand that I love my iPhone and its amazing capabilities. I embrace technology and the way it can improve our lives. I was one of the very first to own a BlackBerry, back in the day when BlackBerrys were really black! Having the BB in 1999 gave me a huge time advantage over most of my competition. But now, everyone has a smartphone, and the advantage is gone.

Between emails, phone calls, voicemails, and texts—not to mention all the other social media “opportunities”—it’s truly a 24/7 workday. Connectivity has become a major pain. Am I the only one who wakes up and feels like I’m jumping on to a moving treadmill? The intensity of the workday in 2012 is so strong that between meetings, you never have enough time to check all of the messages you’ve been left.

Clearly the smartphone has become our most treasured material possession that we wouldn’t even considering leaving home without. A few weeks ago my 23-year-old daughter and I were trading texts when she wrote, “Hey daddy, I’m going for a run so I’m putting my iPhone on airplane mode.” At that time, I didn’t think that much of it. But why do we feel we need to notify people when we are going to be offline for just 45 minutes?

OK, back to my story …

Magnum

My iPhone lifted off the dashboard as if being raised by the hand of God, and flew right under my nose out my driver’s window. Apparently, it was its maiden flight, because no sooner did it start to fly when I caught a glimpse of it in my rear mirror crash landing on the runway (in this case a farm road). I literally saw it explode upon landing. I looked at my passenger (my dog, Magnum) and he looked back at me as if to say “Did you see that iPhone fly?”

I slowed down from my 60 mph cruising speed and pulled over to the shoulder. Oops, no shoulder on farm roads. Instead, I pulled into 4 feet of weeds and jumped out of the Jeep. I was semi-frantic, so in my flip flops, I sprinted back down the road while pickups whizzed by. I ran up and down the road searching for the wounded but brave flying iPhone.

I found the ‘black box’ first—the protective case. It was in the middle of the road, nearly undamaged. There was hope! After about 15 minutes of knee-deep searching, and waving politely to several farmers on tractors passing by, I found the flying iPhone deep in the weeds. It was face down and looked virtually unhurt. I slowly turned it over, but it was shattered. It seemed to breathe one last breath by turning on, but the screen was frozen.

Then suddenly, my grief gave way to a sense of absolute peace. I had my iPhone, Apple Care, and all my data on the iCloud (come to think of it, maybe the iCloud was my fearless iPhone’s ultimate destination- think E.T.?).  Anyway, so there I am in the middle of nowhere with a completely useless smartphone and no way to communicate with the commercial real estate world or anyone else. But instead of being upset and stressed about it, I was completely peaceful.

I turned back on to the farm road and continued on my brief but now tranquil journey. As Jimmy Buffet sang in the background, Magnum and I shared a laugh about the previous 15 minutes and what I must have looked like running down the highway. Other than vacations, the next 24 hours were the most relaxed that I’ve experienced in many years. I had no choice but to be completely disconnected. And guess what? As I suspected, everything at the office was OK when I was finally able to reconnect.

So that’s the true story of my Flying iPhone and the serenity it created. Now I’m not suggesting you experiment to see if your iPhone flies, but maybe, if you’re lucky, someday it will.

Thomas T. Lynn is president of the office division for NAI Robert Lynn. Contact him at tlynn@robertlynn.com.

JPMorgan Chase Bank Tower

American Fidelity Assurance Co. has acquired JPMorgan Chase Bank Tower in Arlington. The 267,780-square-foot, 12-story office tower was sold by Brookfield Real Estate Opportunity Group for an undisclosed sum.

Gary Carr, Russell Ingrum, Eric Mackey, and Robert Hill of CBRE represented the seller in the deal.

The office building sits on 11 acres at 500 E. Border in Arlington, and is 95 percent occupied. Lead tenants include JPMorgan Chase, Texas Health Resources, and Trend Micro, a global technology firm.

Along with a recent $1.2 million upgrade, amenities at the property include an on-site bank, deli, conference center, and easy access to the University of Texas at Arlington’s campus and Arlington’s entertainment district, including Dallas Cowboys Stadium, Texas Rangers’ Ballpark in Arlington, Six Flags over Texas, and the Arlington Convention Center.