The Texas Tea: Texas Creditors Fall Out Of Love With Elon
Love him or hate him — let's face it, it's hard to be indifferent — it is undeniable that Elon Musk has branded an indelible X on Texas commercial real estate.
The world’s second-richest man famously abandoned California and brought his Tesla headquarters to Austin, already home to his 10M SF Tesla Gigafactory and facilities for SpaceX, The Boring Co. and Neuralink Corp. Musk’s empire spans 167M SF of Central Texas factories, office space and undeveloped land, including 3,500 acres set aside for what has been described as “a Texas utopia” by some and a modern-day company town by others.
Despite some grumbling that Musk’s outsized footprint in the state represents “a Texas takeover,” it’s hard to argue he hasn’t been good for its CRE ecosystem.
Until now.
According to a Reuters report this week, the man who has been racing to build has moved at a snail’s pace to pay his bills. Builders and suppliers for SpaceX projects have filed more than 72 liens against the company and its contractors since 2019, seeking payment of more than $2.5B.
This isn’t the first time Musk-run companies have stiffed creditors, including landlords and vendors, leading some Texans owed money to denounce them in terms not appropriate for tea time: “If they were to call me today, I'd tell them to f*** off,” one told Reuters.
In other Texas-sized drama this week, one of Fort Worth’s most prominent buildings sold at auction for a shocking 90% haircut, a REIT that came to prominence when it foreclosed on four Houston apartment complexes was accused of fraud, and the end could be nigh for small developers hoping to build master-planned communities in North Texas.
We promised hot tea — and hope we delivered this week.
— Katharine Carlon, Bisnow Central Editor
What's The Big Deal?
Nestled in the meticulously curated heart of Houston’s Post Oak Boulevard at the southwest corner of the intersection with BLVD Place, a prime 6.3-acre parcel has long awaited its chance to be developed.
Now three Houston natives and longtime friends are seizing the opportunity to do just that. The newly formed 1750 Post Oak Partners LLC acquired the land with plans to build a luxury mixed-use development that includes office, hospitality, residential and retail components. One of the friends said this will be “a legacy project for all of us.”
The Best Of Bisnow
- Embattled, Now Bankrupt: A Galleria-area office building that Jetall Capital CEO Ali Choudhri showed off to Bisnow during a tour last summer is slated for a court-ordered bankruptcy sale. Hilco Real Estate Sales is running the auction. The building is one of only two in Houston designed by renowned architect I.M. Pei.
- Size Matters: As high interest rates stymie lending, publicly traded developers with well-padded pocketbooks are chasing smaller DFW-area developers out of the master-planned community business. Those with deep pockets are amassing thousands of acres and playing an effective game of keep-away that is icing smaller developers out. The land rush could alter the ownership of large housing developments for decades to come.
- New Allegations Against Arbor: Arbor Realty Trust, the mortgage REIT that first came under the spotlight when it foreclosed on a quartet of troubled Houston multifamily complexes last year, has been dogged by short sellers ever since. Now, one of those short sellers is accusing Arbor of fraudulently hiding losses by financing the purchase of assets from its own foreclosures in off-balance-sheet transactions. Arbor denies any wrongdoing, but the accusation was enough to temporarily send its stock tumbling.
- Creativity Crunch: The financial market is challenging, but that isn’t going to stop the group of Houston-area developers who spoke at Bisnow’s Houston State of the Market event last week. Whether it’s public-private partnerships, syndication or enticing investment from their own tenants, creative financing is helping to keep things moving.
- All Eyes On Retail: Also at Bisnow’s Houston State of the Market event, panelists made it clear that retail is emerging as H-Town’s darling asset class. This means getting into retail spaces and keeping them open has become fiercely competitive.
Best Of The Rest
- How Low Can You Go: Pretty low, it turns out. In a story that got a lot of ink this week, Fort Worth’s tallest building sold at auction May 7 for the rock-bottom price of $12 per SF. Lender Pinnacle Bank Texas bought back the 40-story Burnett Plaza for about $12.3M at a foreclosure auction, the Dallas Business Journal first reported, a whopping 90% drop from the $137.5 Burnett Cherry Street paid in 2021. The UK’s Daily Mail called it evidence of a “ticking time bomb” for CRE, while hometown paper the Fort Worth Star-Telegram argued the “doomsday headlines” were overblown.
- Later, Lobsters: Three Houston-area Red Lobster locations are among the dozens of stores closing due to the company’s financial difficulties, the Houston Business Journal reported. Three chains in Lake Jackson, Pasadena and on FM 1960 West in Houston are listed as temporarily closed on Red Lobster’s website. The Lake Jackson store closure was abrupt, and workers didn’t receive any advance notice, local newspaper The Facts reports.
- No Use For Reuse? Three months ago, Bisnow reported that three Texas cities led the nation in empty office space, exploring why things were likely to get worse before they get better. Staring down a vacancy rate of nearly 24% in Q1, one of those cities is edging closer to reckoning with the fallout. Community Impact reports on Austin taking its first steps toward converting some vacant offices to other uses — and how that effort could easily falter in a metro that still has abundant open space.
- Betting On A Boom: Private equity real estate fund manager Velocis is wagering the Lone Star State’s industrial future is bright. The Dallas-based firm is gearing up to raise $500M to spend on speculative ground-up industrial development in major Texas cities and select U.S. markets, CoStar reports.
- Immersive Dining: Toca Madera, a concept from Miami-based Noble 33 that offers Mexican cuisine in a “high-energy atmosphere,” is opening its first location in Houston on June 4, the Houston Business Journal reported. The 14K SF restaurant will take up the ground floor of The Pavilion at 1755 Allen Parkway, while Noble 33 also plans to open a 10K SF eastern Mediterranean restaurant on the top floor of the building.
Quote Of The Week
“I don’t think there’s ever going to be another theater that you won’t be able to get a cocktail in.”
— NewQuest Properties partner Dean Lane on the new retail imperative to constantly innovate and keep offerings fresh and exciting for consumers in search of the next shiny object.
Hot Tea, Fresh And In Person
Grab a cuppa, network and learn about the latest trends at these upcoming events:
May 22: Transformations in Central Texas Healthcare Real Estate
June 4: DFW Experiential Retail & Mixed-Use Conference
June 6: State of Austin Office
June 18: Austin Women Leading Real Estate
June 26: Dallas Architecture & Design Summit
June 27: Houston Property Management Conference
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So how's the Tea? As we brew up next week's edition, send us your feedback, including what kind of content you'd find valuable in this newsletter. And don't forget, we love news tips.
Katharine Carlon, Central U.S. Editor: katharine.carlon@bisnow.com
Olivia Lueckemeyer, Dallas-Fort Worth Reporter: olivia.lueckemeyer@bisnow.com
Maddy McCarty, Houston Reporter: maddy.mccarty@bisnow.com
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