Dealing with TXDOT

General Real Estate Investing
1

Hi folks –

I understand that that TXDOT has some new regs that give them added authority (and autonomy) to “take” public road frontage. Anybody heard anything about that?

I have a couple of strips that could be impacted (road work currently scheduled for 2005) in the short term and at least one that could be affected permanently (roadway will take most of the customer parking). And the construction will last about a year.

Of course, this has the tenants completely freaked. I’ve seen projects like these completely bankrupt small businesses. After all, we live in the era of convenience.

Plans are now to meet with the TXDOT folks and try to pin down the timing of the project which will be done in phases.

Worst case is to relocate some of the tenants, use the construction project as a means to purchase even more road front property (because of the lower values caused by the distress), take the opportunity to remodel and rennovate some of the buildings, and prepare for the day when the project is completed.

So, while I’m not worried (financially) since all the props are paid for (F&C), suggestions are welcome.

Thanks,

Eric C

2

EC,
This is an expansion of the eminent domain rules or something? I haven’t heard anything, but then I’ve been fairly buried lately. Payments are based on assessed values or specific appraisals?

Tenants are on 5 year terms with renewals, but likely not to renew? Any ideas for drive-throughs or other use changes? :mrgreen:

Any way to help spread the rumors, buy some larger plots right in the target area at distressed prices prior to confiscation and pocket the cash from the state?

I tried to pull that one off once, but couldn’t get it done. Deal was no money in on SFH and city was expected to pay 40k for what was basically a third of the yard for road expansion. It wasn’t going to affect the structure and wouldn’t have affected my rent too much. I’m not sure it would have worked out that way, but it would have been fun. :eyes

Anyway, just thinking out loud here…

3

Hi Tim -

Here’s an article I found in an old copy of the Austin Biz journal :

http://austin.bizjournals.com/austin/stories/2003/03/17/story7.html?t=printable

The question is really who has the ultimate say over these issues – the State agency or the local government.

In some states, VA, for example the State retains considerable authority over every roadway (pretty much).

As you can see from the article, the problem has been ongoing for awhile.

In my particular situation, what’s scheduled to happen is a widening of the highway, installation of new sidewalks, and the replacement of “lay-down” curbs with concrete curbs and gutters.

The project is scheduled to take a year to complete and will be done in threee block phases.

The widening will take some parking (not such a big deal, but both the construction time frame (and length) as well as the the replacement of the curbs is a very big deal.

One of my prime tenants is a tax prep firm (imagine that) whose annual business occurs almost entirely in the first quarter of the year. More than that – fully 80 percent of their revenue comes in the door between Jan1 and Feb 28.

A three month period of construction (limited access – at best)would be damaging to any business, but should it fall during that first quarter, it would be devastating to these folks.

And those curbs limit access big time. In many cases, the curb cuts will be severely restricted. Those who rate a curb cut will be OK; those who don’t…

Now, not all is lost here. I have meetings scheduled with the locals, TXDOT, etc. and so we’ll see where we go from there.

Of course, the contrarian in me says that this also may be a great time to buy more property along this highway.

Actually, my tenants will probably be fine – at worst we’ll move them into a new facility or a temp – their choice. But it won’t be cheap – new facades, new parking, new signage, etc.

You get the picture.

Thanks for the reply.

Take care,

Eric C

4

EC,
What brilliant mind decided on half a mile for the curb cuts? Can you say “done”? Now, I get it…

5

Hi Tim -

The only issues for me (right now) on this project is the “curb cut” availability and the time frame.

But you can see from the article that TXDOT has some wide ranging plans that could impact a lot of development in the future. One point of particular concern is that of frontage road access.

It may seem strange, but think of I-35 between Georgetown and Austin. As late as 1993, there was very little development (one hotel – a Radisson, one good restaurant – La Margarita, and one small office center) along the highway itself. How much of that development (and growth) would have been slowed if these new regs had been in place then?

Maybe it would have changed nothing. But it would have changed the players – those who could spend the time and money to lobby effectively would have a definite advantage over those who could not.

Also, think of the time element. In most areas (CA comes to my mind), a dramatic increase in the time needed to obtain the proper clearances, permits,etc also translates into increased holding costs and increased construction bills too. Translation: everthing will cost more – period.

Again, this would tend to “weed out” the little guy and favor those who understand the system or who are big enough to get the rules changed.

Take care,

Eric C