(COMMENTARY By Ralph Bivins)
The City of Houston is considering skipping over the highest bidder in selling off a prime development tract, just west of downtown.
The 10.5-acre city-owned tract, which is vacant, is located on West Dallas at Gillette. The West Dallas area has been ground zero for a boom in multifamily development in recent years.
Alliance Residential, a major apartment developer, bid $39.5 million to buy the land from the city. However, Houston developer John Beeson of Beeson Properties, offered to pay $367,000 more than Alliance for the land, formerly the site of municipal waste incinerator.
The city’s chief development officer Andy Icken told Mike Morris of the Houston Chronicle that Alliance Residential’s bid was recommended because Icken and “four other city employees who evaluated the bids judged Alliance to have a better chance of closing the deal.”
Beeson has been doing deals in Houston for four decades, developing over 5 million square feet of office and retail, including the redevelopment of the Tower Theater on Westheimer. A Beeson-led group recently bought a 621-acre tract in northwest Harris County – one of the biggest land deals so far in 2014. John Beeson is no lightweight.
I’m not saying Beeson is ready to be canonized. But he is a Houston businessman with a fat checkbook and a long track record of doing large transactions. Why is the city taking a pass on Beeson’s higher offer?
Phoenix-based Alliance Residential, which includes a number of former Trammell Crow executives, is undoubtedly one of the strongest multifamily developers in the nation. Alliance’s offer has $1 million in earnest money, the Chronicle reported, compared to Beeson’s $600,000. But at the end of the day, it’s sales price that’s going into the City’s bank account.
Nine bids were received for the site, which was formerly the site of a solid waste incinerator. An environmental clean-up has been administered by the Coastal Water Authority, which owns a stake in the parcel. David Cook of Cushman & Wakefield is handling this deal for the sellers.
The City Council is preparing to consider this sale this week. Alliance Residential is an excellent apartment developer, no doubt. But who knows? Houston’s apartment market could reach overbuilt status before Alliance breaks ground.
Somebody on the City Council needs to be asking why Beeson’s higher offer being passed over? I’m thinking $367,000 could patch a lot of potholes.
By Ralph Bivins, Editor, RealtyNewsReport