Scott Nishimura snishimura@bizpress.net
For years, the historic T&P Warehouse on West Lancaster Avenue downtown, built in 1931 to house freight for the Texas Pacific Railway, has sat vacant and deteriorating.
But the property owner’s longstanding plan to redevelop the massive eight-story, 580,000-square-foot building into apartments faces key financing requirements next year that could lead to the termination of an incentive agreement reached in 2007 with Fort Worth’s Lancaster tax increment finance district. It also faces questions about the planned level of low-income tenants.
Fort Worth officials, frustrated by the lack of movement on the T&P redevelopment, say the property is a critical piece of revitalization in the rapidly emerging West Lancaster corridor. Local leaders have long envisioned a lively mixed-use avenue, given its major historic buildings, vacant available lots mostly owned by city entities, access to public transit, easy walking distance to downtown’s hot Sundance Square, and nearby amenities like the Fort Worth Water Gardens and Fort Worth Convention Center.
“It’s been frustrating,” said City Councilman Jungus Jordan, chairman of the Lancaster tax district, which in 2007 granted T&P owner Cleopatra Investments of Dallas what today is worth an estimated $11.6 million in promised reimbursements for future infrastructure expenses.
“It’s time to do something with that property,” Jordan said. “In the best interests of Fort Worth, it’s time to develop that property to its highest and best use.”
Cleopatra President Ola Assem, who bought the property in 1998 and owns it with her sons Ramy Shoukry and Nadeem Shoukry, has said the challenges of meeting historical preservation guidelines and external factors like road construction around the property have hindered financing and development.
In 2012, represented by attorney Wendy Davis, Assem sought and received a schedule extension on the TIF agreement. Assem said then a temporary easement she had to give up for construction of the city’s planned Hemphill Connector project next to her property was hindering financing, because a parking garage she planned was on top of part of the easement.
State application
Assem in October applied to the Texas Department of Housing and Community Affairs for $51 million in tax-exempt bond financing and 4 percent tax credits against qualified expenses, both federal programs administered by the state.
In a 257-page “pre-application,” she asked for up to 36 months to close on the bond financing, given the complicated adaptive reuse project and unusual $106 million package of bond, tax credit, bank loan, tax increment and deferred developer fee financing she said she is assembling.
But Assem also faces a deadline with the TIF next summer or fall, after the temporary easement for the Hemphill Connector – a road, bridge and tunnel project that will link downtown to the Near Southside and speed train traffic – expires.
When it expires, likely in June or July, Assem will have 90 days from then to complete the financing for her development. If she doesn’t make that deadline, the TIF board can terminate its agreement with Assem.
Assem can ask the TIF for an extension of the schedule, but she’ll face resistance.
“I’m just one member [of the 11-member board], but I would oppose an extension,” Jordan said in an interview. “We want to give her the full benefit of the property she owns, but at the same time, the property is becoming derelict.”
He said he fears the property could get to the point where it can’t be redeveloped economically. “It’s time to move on,” he said.
“I believe the city as a whole would oppose an extension,” Mayor Betsy Price said in an interview. “We’re ready to move forward.”
Assem, in written answers to questions posed by the Business Press, declined to say whether she intends to seek an extension from the city.
“Cleopatra intends to comply with the terms of the TIF Agreement, which requires coordination with the city on the Lamar-Hemphill connector project schedule,” she said. Construction on the Hemphill project is due to begin in January and be complete by July 2016.
“Cleopatra’s TDHCA pre-application seeks the maximum allowable flexibility on this project in order to accommodate the timeline for the Lamar-Hemphill connector project’s construction schedule and the coordination process,” Assem said.
Bond review
At some point in the bond review process, the Fort Worth City Council would have to approve a resolution of no objection, or the state financing process could not proceed. The city is not obligated to support Assem’s financing application to the state, Jay Chapa, Fort Worth’s housing and economic development director, said in an interview.
City officials said they believe another developer would step forward if the property were available, given the growing demand for apartments and hotels downtown and the availability of incentives.
“I have heard from a dozen or more reputable developers who have a history of being able to execute these kinds of projects that I have referred to her,” Chapa said of Assem, in response to a Business Press question about other development interest in the property.
The architect Wyatt Hedrick designed the building, and it’s noted for its zigzag flourishes. Texas & Pacific sold the complex in 1977, according to Historic Fort Worth and the Tarrant County Historic Resources Survey. It was listed on the National Register of Historic Places in 1978, and it’s regularly appeared on city and statewide most endangered property lists.
Assem bought it for $6.4 million, according to closing documents she provided in her state filing.
Besides the skepticism over whether she can pull off the project, city officials are also skeptical of the development plan.
Under her agreement with the TIF, Assem agreed to develop 260 apartments and ground-floor retail at a total $45 million investment. That plan also called for setting aside part of the building for future development into office or another use. That was not part of the TIF agreement.
Assem’s plan today, according to the state filing, calls for a development of the entire building into 500 efficiency, one-, two- and three- bedroom apartments with rents aimed at people who make 60 percent of area median income or less. The apartments would be targeted at artists, and the development would be called Artist Loft at Fort Worth Town Square. The development would include ground-floor commercial and potentially a boutique hotel, Assem says in the filing.
The financial targets allow Assem to apply for the bond and tax credit financing.
Criteria for the bond financing requires at least 50 percent of certain development costs go toward the generation of affordable housing, Cameron Dorsey, the TDHCA’s deputy executive director of multifamily finance and fair housing, said in an interview.
The tax credit financing Assem seeks requires 40 percent of the units be targeted at residents earning 60 percent of area median income or less, Dorsey said.
In residential projects where city and tax districts assist, Fort Worth’s standards call for mixed-income populations with 80 percent market-rate rents and 20 percent “affordable.” By blending market and affordable rent tenants within properties, it should be impossible to tell who has the affordable rents, business and city leaders say.
“We pretty much have gone away from housing projects across the city,” Price said. “We want to have it as mixed-income as we can possibly manage.”
Assem’s pre-application has drawn several letters of response so far with the TDHCA.
Mixed-income
Downtown Fort Worth Inc. and Historic Fort Worth said a mixed-income tenant mix is vital to West Lancaster’s revitalization. The Fort Worth Downtown Neighborhood Alliance said it favors affordable housing that’s “consistent with the strategic plan for downtown,” and is opposed to Cleopatra’s proposal.
According to Assem’s pre-application, rents would range between $646 and $949 per month, including the subtraction of some of the utility bills tenants would pay. Apartments would range between 617 and 1,213 square feet.
“The concentration of either poverty or extremely low-income residential tenants has proven to be a mistake in cities around the country,” Andy Taft, president of the Downtown Fort Worth Inc. economic development nonprofit, said in an interview.
Assem said she believes Fort Worth leaders will come to embrace her plan.
The property will become a “premier location to live, work, play, practice, produce and display,” she said. “It will contribute to and enhance the necessary cultural infrastructure through the direct assistance of artists (the most valuable cultural resource) by providing them with the necessary environment and stability, allowing them to contribute to the rich heritage of Fort Worth.”
Taft also questioned whether Cleopatra has the depth of management skill to maintain a mixed-income tenant mix. “The management has to be at an extremely high level,” Taft said.
Assem, in her answers to the Business Press, said “Cleopatra is adding a co-developer to its team. More details on the co-developer will be available in the near future.”
In her state filing, she identified the Atlanta Pacific Cos., a Miami, Fla., property management firm as “100 percent member” of a limited liability corporation that will be co-developer. Atlanta Pacific could not be reached to comment.
Supporters of Assem’s pre-application include State Sen. Wendy Davis, State Rep. Nicole Collier, and Cathy Neece Brown, the Arts Council of Fort Worth’s interim president.
Davis represented Cleopatra in 2012 in successfully asking the Lancaster TIF board for a schedule extension and is the law partner of Brian Newby, the former chief of staff to Texas Gov. Rick Perry who today is one of Cleopatra’s attorneys. Newby deferred questions from the Business Press to Assem.
Davis, who could not be reached by the Business Press for an interview, said in her letter to the TDHCA that Fort Worth’s growth continues to surge and create a growing need for downtown affordable housing and the “high costs of land and construction makes it difficult to develop affordable housing for low-income persons wanting to live close to where they work.” Brown of the Arts Council said in an interview that Newby approached her a few weeks ago about the development plan. What struck her: the dearth of affordable live-work and display spaces for local artists, particularly as real estate values in the central city have continued to escalate.
“The inventory is very limited,” said Brown, who added she hasn’t met Assem. “Local artists have a hard time finding places where they can display their work and spaces where they can live and work.”
Areas on the Near Southside such as Magnolia Avenue and South Main Street, for example, are pricing artists out, she said. A final draft of the Arts Council-led update to the city’s Cultural Plan due to be presented to the City Council in January, raises the question.
Asked about fear that a property with a concentration of low-income residents could regress, she said, “I think it’s the developer that would define the criteria for residents.
“Artists are not unemployed,” she added. “They’re usually underemployed.”