Why is it so rare for Dallas to ever truly say “no” to developer-led upzoning? It always seems most often to be “yes, but …” And while I’m all for a good negotiation, if you enter a negotiation where the other side knows you’re unlikely to really say “no,” then it’s not really a negotiation, is it?
And when the real estate community understands they can’t really lose, it’s dangerous for residents who have to live with the outcome. We expect elected and appointed leaders to say “no” sometimes.
$13 Million An Acre – No Mule
Enter 4011, 4021, 4031, 4033, and 4039 Cole Avenue. It’s a 2.09-acre site across from Cole Park north of Cambrick Street that encompasses 40 two-story condos and two smaller apartment buildings. The lots are bracketed by 1999’s Cambrick townhouses and the 1976 Esplanade Condos. The area is zoned MF-2 limiting heights to 36-feet.
The Cole properties for sale are 1960s apartments-turned-condos that rarely break 1,000 square feet and $200,000 in assessed value (or roughly $8 million in total). So why is this land priced at $27,300,000 or roughly $13 million an acre?
Let’s see what listing agent Logan Waller of Waller Group Properties has to say …
“The existing zoning is MF-2, however multiple comparable sites in the area have successfully rezoned for planned development zoning. This would allow a developer to achieve the highest and best usage for the land and optimize the site with a 20+ story luxury multifamily or luxury condo development.”
What’s the playbook to upzone? Waller tells prospects …
“The city of Dallas will likely grant this zoning change with 10% of developed units set aside for affordable housing (80% of area median income).”
“The city would also likely grant the zoning change with parking variances as well due to proximity (0.6 miles) to City Place DART station (Dallas Area Rapid transportation).”
I was shocked by the brazenness of Waller’s “shop window” but I don’t think he’s inaccurate.
Setting Precedent
I often hear city representatives say that zoning cases stand alone and that precedent is pretty irrelevant to their judgements. If that’s true, why is it part of so many winning strategies?
Lincoln Katy Trail presents their precedents that include the nearby Post Katy Trail and the high-rise Taylor buildings. Thing is, all of their “precedent” buildings were built by-right, having had zoning rights that predated the 1983 founding of the Oak lawn Committee and its PD-193. So, yes, they’re oversize in an MF-2 area, but there was no stopping them as they didn’t require a zoning case.
But let’s return to Waller, who rips off the Band-Aid:
“Precedent has been set for these zoning changes north and south of the site, most recently and notably the Broadstone Cole on 4444 Cole Ave (0.5 miles from subject site). Previously MF-2 zoning, developer achieved full entitlements within 12 months. This 333-unit luxury multifamily project is scheduled for completion in early 2022.”
What Waller failed to say is that the Broadstone, while upzoned, isn’t a 20-plus story high-rise. In fact, a high-rise was proposed twice but was shut-down at the Oak Lawn Committee.
The City is a Pushover; DCAD Harder to Fool
So, how does it feel City Plan Commission and Dallas City Council to have your playbook so blithely and assuredly marketed as a soft touch to developers? Essentially Cole Avenue prospects are being told, “Sure, you’ll have to give a little affordable but you can skimp on parking because you’re technically considered a transit-oriented development.” Oh, and you should be able to accomplish your upzoning in under a year.
But it’s not just developers who know. In 2014 and 2015, both the smaller Cole properties were purchased by Viceroy Living LLC. Pre-2014 sale, DCAD valued 4031 Cole’s land at $5 per square foot. The following year it increased to $50 per square foot and today is assessed at $105 per foot – in five years (the same $105 as the already redeveloped townhouses next door). The smaller property’s land values have more than doubled since its sale a year later to $105 per foot.
The asking price for the lots today values them at $300 per square foot because they’re not building no stinking townhouses.
DCAD is far, far from perfect. For example, look at Mansion Park (area in back of The Mansion on Turtle Creek) where un-redeveloped land is valued at $85 per square foot – even though it’s already zoned MF-3 with unlimited height. For reference, the high-rise Plaza condos land is valued at $125 per foot yet The Mansion Residences land is only valued at $110 per foot (so it’s not all brains over at DCAD).
Why Upzone?
Upzoning is a more difficult and uncertain process in Dallas’ suburbs and Mid-cities (unless it’s for a stadium) – it’s next to impossible in the Park Cities. I mean, imagine if Highland Park Village wanted to swap swanky boutiques for a couple of high-rises?
The reason to upzone in Dallas is economic. There is a ton of property already zoned for high-rises. To name a few, there’s all of downtown, the aforementioned Mansion Park area and in Uptown, blocks from the Cole Avenue properties there is the swath of land between the Lemmon Avenues from the Katy Trail to Central all zoned for 240-foot heights.
The problem is that those property owners know what those rights are worth (but I hear some are complaining the city’s easy upzoning makes their land worth less). Non-high-rise property owners don’t understand the economics. So they sell for less.
Let’s say high-rise zoned land would cost $1. Developers and investors might pick-up a good candidate to upzone for $0.65 and spend another $0.10-0.15 getting it rezoned. At $0.75-0.80 all in, that’s a 20-25 percent discount handed out free by the city representing millions of dollars in rights.
After springing for some scraps of affordable housing (a fraction of the number they’ll bulldoze), developers cry all the way to the bank.
15 Blind Mice
A lot of the time, these deals are struck with eyes wide open, but sometimes Plan Commission and Council are blinded to what’s up. Take Crescent Communities’ Novel Turtle Creek. The city didn’t require Crescent and AT&T to tell them why the parcel was being re-platted (in fact, Plan Commissioners told me they are barred from seeing/asking about plans in such cases).
Who knows, the city may have acted differently had they known they were approving a 20-story high-rise obscured when the lots were re-platted to enable it. Other municipalities would have required they spill the beans on the re-plat – not Dallas.
