Builders
utlook
www.elpasobuilders.com
2014: issue 2
IMPACT FEES: How do you justify more costs and how do you see El Paso’s future? By Ray Adauto, EPAB The issue of impact fees for water and wastewater resurfaced and this time around the Public Service Board (PSB) or El Paso Water Utilities as most of you know them, requested to nearly double the fees already in place. According to the utility the request is necessitated by the projected growth and needs for infrastructure to meet the growth projections provided to them by the City of El Paso. Impact fees are fees allowed under Texas Local Government Code 395 and are subject to the rules in that code. In El Paso City limits the fees are designated for water and wastewater, not for any other cause. Some states allow impact fees for things like schools, fire stations, police stations, roads and other things associated with new areas. In El Paso the PSB designed the boundaries of the impact fees on open or raw land primed for growth according to the information from the City of El Paso challenged the development industry by saying that growth did not pay for itself and made public comment espousing that view. The local news media was bombarded with what the city referred to as facts, but in fact the city commissioned study
done internally by John Neal and supported by an National Association of Home Builders study shows that new growth pays for itself in about seven years, then continues to pay for the maintenance of the infrastructure for decades more. In addition new residential development brings retail and commercial growth providing more sales tax and property tax benefits to the City. Additionally jobs are created and those people spend money enhancing the local economy. Proponents of zero growth chided the reports as more rhetoric from the building/development community and urged council to adopt impact fees. Under Chapter 395 a citizens committee on capital improvements must be formed and members of the affected industry must be represented. In El Paso that committee is comprised of one appointment by each of the city council representatives and one by the Mayor. By full disclosure to you I currently serve as Chair of the committee. I have been a member of the CIAC since it was established. Others in our industry have also been on the CIAC and one of the most knowledgeable is Bobby Bowling IV,
who chaired the committee as well. Mr. Bowling knows the law and the intent of the law and has taken issue with how the City of El Paso and PSB implemented the impact fees in the first place. “One thing that we have in Texas is Chapter 395, a rule book if you will on the definition and allowable rules of engagement for impact fees in Texas,” Bowling said to the Outlook. “Government subdivisions have use of an impact fee if they can prove that what they are using the impact fees falls under the rules in 395. We fought the original assumptions proposed by the PSB and its consultants because our industry is really the experts on growth and the expansion of proposed growth,” he said. “The industry told the city council at that time that the population numbers and proposed growth were too optimistic and that therefore the CIAC voted to recommend only 50% of the proposed impact fee be implemented at the time,” Bowling continued. “No one believed us and in that case Mayor John Cook and PSB President Archuleta worked to get a 75% fee approved and it was,” he continued. “Our five years down the road have proven that we were right and the city was wrong in
estimating the growth, and as a result the PSB is woefully short on recovery of costs they have made so far,” said Bowling. In fact the PSB reported over $20,000,000 was spent and only $1,900,000 was collected, or about a 10% collection rate. According to CIAC this is bad for the city, falling way short of the anticipated collection. The CIAC, in its report to the Mayor and Council as dictated by Chapter 395 reported a 9-0 vote to hold the line on the fees while looking for alternative methods of collection as allowed by the law. City Council will take public comment and may take action on the proposed fees presented by the PSB and consultants. Whatever the city council does will have significant impact on future growth, and they will ultimately decide if growth occurs inside the city limits or continues outside in the county and other communities surrounding El Paso. The impact fee issue will have a significant impact on the future taxpayer inside the city limits, since new homes and businesses will either pay taxes in the city or outside it.
Cold Weather Drives Housing Starts Down
permits, which are often a harbinger of future building activity, posted a modest 1.3 percent decline to a seasonally adjusted annual pace of 602,000 units. “Cold weather clearly put a chill on new home construction last month and this is also reflected in our latest builder confidence survey,” said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del. “Further, builders continue to face other obstacles, including rising materials prices and a lack of buildable lots and labor.” “Though the decline in starts is largely
weather related, it is worth noting that on the upside housing production for the fourth quarter was above 1 million for the first time since 2008 while singlefamily permits held relatively steady,” said NAHB Chief Economist David Crowe. “The less weather sensitive permits data suggests that our forecast for solid growth in single-family housing production in 2014 remains on track, as pent-up housing demand is unleashed.” In January, single-family housing starts posted a 15.9 percent decline to 573,000 units while multifamily production fell 16.3 percent to 307,000 units.
Regionally, single-family starts activity rose 10.7 percent in the West and 2 percent in the Northeast and fell 13.8 percent in the South and 60.3 percent in the Midwest. Overall permit activity fell 5.4 percent to 937,000 units in January. The decline was due primarily to a pullback in buildings with five units or more, where permits fell 13 percent to 309,000 units. Regionally, overall permit issuance was down 10.3 percent in the Northeast and 26 percent in the West, but rose 8.6 percent in the Midwest and 3.4 percent in the South.
NAHB
Due largely to unusually severe weather, across much of the nation, housing starts fell 16 percent to a seasonally adjusted annual rate of 880,000 units in January, according to newly released figures from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Meanwhile, single-family
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Builders Outlook
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2014 issue 2
2014 issue 2
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Builders Outlook
President’s Message | Frank Torres
El Paso Disposal
President, El Paso Association of Builders
It’s barely February and there are a lot of things already happening at our association. I was honored to lead our first Board of Directors meeting in January, our financial report and the 2014 operating budget were approved by the board. The 2014 budget passed with the condition of generating more revenue on other activities due to the fact that it appears we will not have the income from the Parade of Homes (trouble finding a single site); everybody on the board agreed to increase the membership by bringing at least two more members each either by asking some to renew or find new ones. I will like to extend this idea to all the members, and not only to the Board of Directors. Call the office if you need an application for either associate or builder member, it will be delivered to you by fax, email, etc. I will ask Ray if we can post them on our website in order to be printed directly from there. Many other ideas were proposed like casino night, adding a golf tournament, Yard sale, were just some things brought up. We can have the best ideas but, without your participation, they are nothing but ideas. We will keep you informed on all these activities when they happen, thanks in advance for your participation. We had our Board orientation on 01/11/2014 thanks for all of you that participated but those of you that couldn’t make it pick up a Board Orientation package from the office. As you probably noticed by now, this year we changed our meetings to the second Wednesday of the month. Several of us attended the International Builders Show on Las Vegas on February, and speaking of Home Shows, I like to personally thank Rassette Homes for building the home inside the Civic Center for the Home and Garden Show, happening from February28th to March 2, 2014. Thanks also for all of you members that will participate on it. We are working on the issue of Impact Fees, something that we feel our industry can’t afford to absorb. I am sure Ray Adauto will have more of this on his outlook article specially the impact fee isuue. And don’t forget: do business with a member.
772-7495
Showroom: 2131 Missouri 915 • 533 • 6045
fax • 533• 6096
Thomas R. Brown, Owner
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Builders Outlook
2014 issue 2
Perspective
Ray Adauto, Executive Vice President EPAB
If you have never experienced a super large product show with a major conference attached to it then it is hard to explain to you what the International Builders Show is like. However if you are struggling under the current economy then brothers and sisters take heart because the big show was really about one thing: commitment. I don’t mean to say that the show was anything less than spectacular because this 2014 version had all the trappings and feel of something big and beautiful. There was so much to see on the exhibition floor that you literally cannot see all of the displays or visit with all the exhibitors. It’s that big. It’s so big that there really are only two places in the entire country where this show can be held, either Las Vegas or Orlando. Frankly for me Las Vegas is my choice for a variety of reasons. But first I want to transport you to some very interesting things that went on at the conference. The education portion of the IBS is an integral part of the overall experience.
Las Vegas IBS huge, industry commitment is bigger It’s where experts come to educate or offer advice to those of us who don’t know it all. I ran into expert writers, economists, housing experts and the like. There was a class going on for almost everybody. You could go to the 50+ Housing Council education and editorial committee meeting at 7:15 am on Sunday. Yes, 7:15 am on a Sunday in Las Vegas. Or you could attend Construction Codes and standards on Green building at 7:30 that same morning. As a matter of fact I counted 16 different meetings going on that Sunday morning between the hours of 7 a.m. and 8:30 am. Again this was a full two days before the “official” opening of the exhibition hall. An interesting aspect of the IBS is that the International part isn’t just a marketing ploy like when we say El Paso “INTERNATIONAL” airport, but we only fly domestic routes from here. No the International part is real. I met a home builder from Africa while working the NAHB Book store as an ambassador. He had come to the
show to learn and to make connections for supplies and training. He was a quiet man, a long way from home, but on a mission to soak in everything the IBS had promised. Mr. Dele Abraham, Vice President of Delly Lordford & Company, LTD., Llupeju, Lagos, Nigeria. He traveled 7,495 miles one way to attend. A full 15,000 miles round trip. Soak that in as you read it. Compare that with the 742 miles it’s from El Paso to Las Vegas. I was humbled. So I wondered why the talk at the show was about the economy and frankly how it just hasn’t gotten better. The mood was a mixed bag of anticipation and caution. No one was saying anything really super about the national economy and instead I got the sense that there was more of a militant defiance, a kind of selfcommitment to making it better for myself. Shows like this can be frowned upon as too frivolous, but I didn’t see or hear that at this show. No what I heard was a call to action and to getting housing back to work.
The attendees and exhibitors all were there for business. Yes it’s Las Vegas and all but the members that I saw there were focused on finding new ways to generate income. As with all organizations some people used the IBS to lobby against more government, some lobbying to change the organization itself. This was to me an activist IBS where you couldn’t help but feel that this country has got to get housing moving again and until then the great recession won’t go away. There was also some concerns voiced on the NAHB itself and frankly a good organization always has to have discussions and transparency on its actions. To that I was glad to see that TAB past president and friend Granger McDonald got on the NAHB ladder as the third VP. Granger and the board have a lot of work ahead of them. They have a committed group who goes to meetings at 7 a.m. on a Sunday in Vegas. That my friend, along with visitors like Mr. Abraham reminds us what home building means.
2014 issue
Builders Outlook
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Industry News Texas Builder Elected to Leadership of NAHB
Granger MacDonald, a Kerrville, Texas-based builder and developer with 40 years of experience in the home building industry, was elected as the 2014 third vice chairman of the National Association of Home Builders (NAHB) during the association’s International Builders’ Show in Las Vegas. MacDonald is president of the MacDonald Companies, a diverse development, construction, and management enterprise with more than 35 neighborhoods completed throughout
Texas. “We expect the housing industry to continue to strengthen in 2014 and will work with Congress and regulators to ensure we do not impede the ongoing recovery,” said MacDonald. “Specifically, we will be urging policymakers to protect the mortgage interest deduction, maintain a federal backstop for housing to ensure a reliable and adequate flow of credit to keep homeownership and rental housing affordable, and resolve a flawed appraisal process that has negatively affected property values.” MacDonald has been active in the NAHB leadership structure at the local, state and national levels throughout his career. A senor life director, he has served on the NAHB Board of Directors for more than 30 years and is a member of the NAHB Executive Board. He has also served as chairman on several influential NAHB committees and councils, including the Federal Government Affairs Committee, the State and Local Government Affairs Committee, the Housing Credit Group, the Multifamily Council and BUILD-PAC,
the political action committee of NAHB. MacDonald was elected president of the Texas Association of Builders in 2010 and is a member of the Texas Hill Country Builders Association, the Greater San Antonio Builders Association, the Home Builders Association of San Angelo and the Home Builders Association of Greater Austin. Actively involved in his community, he has had years of experience working with and serving on governmental commissions and boards. He served on the Kerrville/Kerr County Airport Board and the City of Austin Planning Commission. He was also chairman of the City of Austin Environmental Board and president of the Upper Guadalupe River Authority. He and his wife, Kathy, reside in the Texas Hill Country. His second-incommand in the MacDonald Companies is his son, T. Justin MacDonald, also a long-term member of NAHB. NAHB’s newly elected senior officers serve on a multi-year leadership ladder. MacDonald will become chairman of NAHB’s Board of Directors in 2017.
A W A R D E D
TEXAS BUILD E R O F THE Y E AR 2013
We build so you can GROW
Housing Affordability Holds Steady in Fourth Quarter Slightly lower median home prices along with a small uptick in mortgage rates contributed to housing affordability holding steady in the fourth quarter, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI), released today. n all, 64.7 percent of new and existing homes sold between the beginning of October and end of December were affordable to families earning the U.S. median income of $64,400. This is virtually the same as the 64.5 percent of homes sold that were affordable to median-income earners in the third quarter. Meanwhile, the national median home price dipped from $211,000 in the third quarter to $205,000 in the fourth quarter while average mortgage interest rates rose from 4.45 percent to 4.54 percent in the same period. “Housing affordability is stabilizing at a time when pent-up demand and ongoing job growth are helping housing markets across the nation to gradually strengthen,” said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. “While this bodes well for housing in 2014, builders continue to face challenges, including tight credit for home buyers, inaccurate appraisals, and a shortage of workers and buildable lots.” Youngstown-Warren-Boardman, OhioPa was the nation’s most affordable major housing market, as 89.4 percent of all new and existing homes sold in this year’s fourth quarter were affordable to families earning the areas’ median incomes of $53,900. Meanwhile, Kokomo, Ind., claimed the title of most affordable smaller market, with 96.3 percent of homes sold in the fourth quarter being affordable to those earning the median income of $60,100. Other major U.S. housing markets at the top of the affordability chart in the fourth quarter included HarrisburgCarlisle, Pa.; Syracuse, N.Y.; BuffaloNiagara Falls, N.Y.; and ScrantonWilkes-Barre, Pa.; in descending order. Smaller markets joining Kokomo at the top of the affordability chart included Springfield, Ohio; Monroe, Mich.; Vineland-Millville-Bridgeton, N.J.; and Cumberland, Md.-W.Va. For a fifth consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. held the lowest spot among major markets on the affordability chart. There, just 14.1 percent of homes sold in the fourth quarter were affordable to families earning the area’s median income of $101,200. Other major metros at the bottom of the affordability chart included Santa Ana-Anaheim-Irvine, Calif.; Los AngelesLong Beach-Glendale, Calif.; New YorkWhite Plains-Wayne, N.Y.-N.J.; and San Jose-Sunnyvale-Santa Clara, Calif.; in descending order. All of the five least affordable small housing markets were in California. At the very bottom of the affordability chart was Santa Cruz-Watsonville, where 18.6 percent of all new and existing homes sold were affordable to families earning the area’s median income of $73,800. Other small markets at the lowest end of the affordability scale included Salinas, San Luis Obispo-Paso Robles, Napa, and Santa Rosa-Petaluma, respectively.
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Builders Outlook
2014 issue 2
2014 ISSUE 2
Builders
Builders Outlook
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utlook on the scene |
More Than 75,000 Attend 2014 International Builders’ Show More than 75,000 builders, remodelers and suppliers packed the aisles at Design & Construction Week, which ends today at the Las Vegas Convention Center. For the first time, NAHB’s International Builders’ Show, the Kitchen and Bath Industry Show (KBIS) and the International Window Coverings Expo co-located to offer an unparalleled exhibition and education program for all facets of the residential construction industry. IBS exhibitors filled 440,000 square feet of exhibit space with everything from millwork to marketing services, a significant leap from last year’s total of 355,000 square feet. In all, Design & Construction Week offered attendees more than 650,000 square feet of exhibit space. How was the show? “Fantastic,” said exhibitor Joe Dote of KP Building Products in Holly Springs, La. “The way it was laid out, the leads, the crowds – everything was fantastic.” “Fantastic,” agreed Frank Thompson, of Sweetwater Builders in Cranberry Township, Pa. “I had one guy tell me he needs twice as much space next year for his booth. I even had someone say there were too many people in the aisles – but that is such a good thing.” “It’s the energy,” said Jake Whittaker of Delaware Siding Company in Bear, Del. “It’s just a world of difference from the last
several years. You could just tell when you walked in the hall.” “It’s great to see the economy coming back, the exhibitors coming back and the members building again,” said Randy Strauss, chair of the NAHB Convention & Meetings Committee, who gave the IBS report to a jubilant Board of Directors on the show’s last day. Strauss reported that plans are already under way to incorporate more residential construction suppliers and their trade shows into next year’s Design & Construction week, which is set for Jan. 20-22, 2015, again in Las Vegas. “This thing is getting better and better.” While most home builders continue to see their markets brighten, IBS euphoria was tempered by the remaining headwinds preventing a full recovery. Tight credit conditions, building supply price increases and the limited availability of buildable lots are three obstacles, and one builder from South Dakota warned of a fourth. “We saw a lot of good people leave the industry during the downturn,” and it’s getting harder to find skilled labor to fill needed construction jobs, said Dwight Bickett of Bickett’s Construction in Rapid City. “We’re becoming a complete industry of older people and young kids,” with skilled middle managers and trade partners harder to find, he said.
el paso development news In store for 2014 Major Projects to Look Forward to This Year It’s a new year in El Paso, and several major development projects are scheduled to get underway or be completed in 2014. From freeway projects on the West Side to major medical facilities on the East Side, most parts of the Sun City should see major activity. Here’s a look at some of the larger developments that should see progress this year. I-10 Collector-Distributor Lanes Plans to add collector-distributor (CD) lanes to Interstate 10 in West El Paso have been in the works for years, but the project recently got a shot in the arm in the form of funding support from the County of El Paso. Now, the $150 freeway project could be set for construction to begin by the end of 2014. The CD lanes will create a buffer for the main lanes by “collecting” and “distributing” traffic to and from on- and offramps between Executive Center Boulevard and Mesa Street. The number of lanes will vary along the five mile stretch of I-10. Initial renderings of the planned project included toll lanes when first unveiled years back, but now only include regular main lanes in the middle of the freeway. No word on whether or not toll lanes will be included after all. The future, toll-only Border Highway West will have an interchange with I-10 within the boundaries of this project. Montecillo Town Center West El Paso should see a good amount of progress on the highly anticipated Montecillo Town Center project which will include the Alamo Drafthouse theater location as an anchor. The SmartCode development’s “Entertainment District” will include street retail, a big box retail space, commercial office space, and 99 residential units, according to initial site plan details. No concrete timeline has been disclosed by the project’s developer, though the Alamo Drafthouse’s announcement in March of 2013 indicated it would be soon, and has indicated plans to open in Fall of 2014. Crews finally broke ground in November 2013 and have been working to clear the site for construction ever since. The project is located on Mesa Street across from the Venue at Montecillo apartment complex. Another retail and restaurant project at the development, TI:ME at Montecillo, should be completed this year. Triple-A Ballpark The project with the tightest timeline is undoubtedly the baseball stadium currently under construction in Downtown El Paso. With an opening date set for April, construction continues at breakneck speed at the site. Only nine months have passed since the former City Hall was demolished in ten seconds to make room for the ballpark that will house the El Paso Chihuahuas Triple-A team. Now, steel beams continue to outline the skeletons of the main and outer buildings. The $62 million project was designed by the Populous architectural firm of Missouri which specializes in sports facilities. San Jacinto Plaza Downtown El Paso’s main park, San Jacinto Plaza, has been undergoing renovation work for several months, and
now the project is moving into its next phase. The plaza’s boundaries have been expanded by taking over the parking lane formerly adjacent to the park on all sides. The City recently awarded the contract for the next phase to Basic IDIQ, Inc., and includes installation of all the new features and fixtures that residents will experience once San Jacinto Plaza opens. Initial completion estimates had the plaza reopening by the end of 2014, though that could be pushed back if Basic IDIQ uses the entire 360 days in the contract’s language to finish. Gayle Greve Hunt School of Nursing / Cardwell Collaborative Steel beams are now going up on the campus of the Medical Center of the Americas (MCA) in Central El Paso for what will become the Gayle Greve Hunt School of Nursing. The 34,000 square foot structure will be part of the Texas Tech University Health Sciences Center, which also includes the Paul L. Foster School of Medicine. Construction began last year and will become the new home for the nursing school, which is currently housed in temporary quarters near Downtown El Paso. A donation from the Hunt Family Foundation helped form the school in El Paso in 2010. The new building is scheduled to be completed in 2015. Nearby on the northern edge of the MCA campus, work should begin this spring on the Cardwell Collaborative, an 83,000 square foot building to be used for biomedical technology research by public and private entities. The building will be located along Gateway Boulevard East, near Raynolds Street, and may also be completed next year. Airport Hotel/Retail Complex One of the largest construction projects set to begin in 2014 will take shape on El Paso International Airport land. A $64 million project will bring a high-rise hotel and a retail center to 10-acres at the corner of Airway Boulevard and Boeing Drive. The developer, EP Vida, LLC, received an incentives contract from the City in which it promises to create 300 jobs at the hotel/retail complex. According to preliminary site plans, the retail center will create an urban main street which ends at the hotel tower. The City of El Paso’s 2013 Annual Report indicates the project should break ground in May of 2014, with completion slated for June 2016. Few details have been disclosed by the developer, but a rendering indicates the hotel may carry the Westin brand. Eastside Crossings Already underway in Far East El Paso is the project to bring a “mixed income” community to the city. Eastside Crossings will create 188 apartments that will have a mix of market rate, public, and affordable housing units. The $22 million project is a partnership between the Housing Authority of the City of El Paso, Hunt Companies, and Investment Builders, Inc. Units at the complex, which is near the intersection of Joe Battle Boulevard and Zaragoza Road, may be ready for occupancy by fall of 2014. Sierra Providence East Expansion The Sierra Providence East Medical Center opened in Far East El Paso in
The Topping Ceremony was recently held for the Hunt School of Nursing in Central El Paso, one of 2014’s major projects in the city. (UMC of El Paso)
Projects slated for El Paso this year include (counterclockwise from top left) I-10 Collector-Distributor Lanes, the Montecillo Town Center, the Triple-A Ballpark, San Jacinto Plaza’s renovation, the Gayle Greve Hunt School of Nursing building, the Airport Hotel/Retail Complex, Eastside Crossings, the Sierra Providence East Medical Center expansion, the William Beaumont Army Medical Center replacement hospital, and the Northgate Transit-Oriented Development. (El Paso Development News)
2008 in the fastest growing part of the city. Now, construction is ongoing on a new 145,000 square foot expansion that will add a four story tower to the site. Room will be added for 30 additional surgical beds, 30 medical beds, a 12-bed cardiovascular intensive care unit, and 10 more beds for the emergency department. Ground broke on the project one year ago and is expected to be completed by the end of 2014. The hospital is located at the corner of Joe Battle Boulevard and Edgemere Boulevard. William Beaumont Army Medical Center Replacement Hospital Quite possibly the largest and most expensive construction project in the reason is the William Beaumont Army Medical Center (WBAMC) replacement hospital in East Fort Bliss. The huge, $648 million contract was awarded last year to Clark McCarthy Healthcare Partners II. The 1.13 million square foot facility will have a myriad of clinics in addition to its 135 hospital beds and 10 operating rooms. Some of the 30 specialty clinics include ones dedicated to behavioral health and oncology. The hospital campus will also include
over 4,000 parking spaces, a “two way approach” helipad, therapeutic gardens, and recreation trails. The contractor, Clark McCarthy Healthcare Partners II, received its notice to proceed in June of 2013 and expects to complete construction in 2016. Northgate Transit-Oriented Development The now-vacant site of the former Northpark Mall in Northeast El Paso may finally see activity this year, according to media reports from last year along with a recent grant awarded to the City to construct a transit terminal. The development is envisioned as a mixed-use project with housing, shops, restaurants, and office space intermingling along tree-lined streets. Matthew McElroy, the director of the City Development Department, indicated in September that the project may break ground in 2014. City officials received a $10.3 million federal grant to construct a transit terminal at the Northgate development. Three developers submitted proposals for the 30-acre site last year, but the City has yet to disclose any more details about the plans.
Builders Outlook Issue 2.2014
Content provided by El Paso Development News visit: elpasodevnews.com
More Housing Downtown Multi-Story Apartment Building Seeks City Approval in the coming years, if the project receives City approval. The “Campbell Apartments” would span a half-acre made up of adjacent properties at the corner of South Campbell Street and 3rd Avenue, one block south of Paisano Drive. According to the Master Zoning Plan, there will be 82 apartment units made up of 16 three-bedroom, 49 two-bedroom, and 17 one-bedroom units spread out over four levels. The apartments will surround a central, landscaped courtyard. In addition, four spaces at street-level will be dedicated to commercial use, with a total of nearly 4,000 square feet available for this purpose. The shop fronts will line South Campbell Street, with residential apartments on the floors above the retail space. Access points to the courtyard will be located between the shops, with an additional two access points leading out to the alley behind the building.
Office Park Expands in West El Paso A budding office park is ready to begin its second phase of construction in West El Paso. Ventanas Corporate Center, located off Sunland Park Drive west of Interstate 10, is adding two more buildings to the site, an L-shaped property tucked behind the Holiday Inn Sunland Park. The two new structures will add a total of 19,600 square feet of space and
Airport Hotel Developer Moves Forward Jordan Foster Construction Chosen as Contractor for Hotel/Retail Complex
The front and side elevations of the planned structure show a four-story, mixed-use apartment building. (City of El Paso)
There is no parking included in the project, and the developer is seeking a 100% reduction to the parking requirement. The Master Zoning Plan states the project will be built in one phase. The new project will replace several older structures, including existing multifamily apartments. The site sits just outside of the Downtown core in a city block on the northern edge of Segundo Barrio. No information is yet available on rental rates or individual apartment size. There has been an uptick in new residential projects for the Downtown area in recent years. The Magoffin Park Villas brought 91 units to the Magoffin historic neighborhood in 2011, and The Mix at Union Plaza added 14 units last year. Next up are the Martin Building apartments in the middle of Downtown which will contribute about 40 units. Other developments in the pipeline include a Franklin Avenue project with 40 units, the Artspace artist lofts with 50 units, and the Savoy apartment project with 27 units. A rezoning application is scheduled to be considered at the February 13, 2014, City Plan Commission meeting. City Representatives may consider the item for final approval at the February 18, 2014, City Council meeting. No timeline for construction of the project has been disclosed.
Construction of a 4-Star hotel and retail complex near the El Paso International Airport is set to begin this summer, and now the developer has announced the contractor chosen for the project. EP Vida, LLC, a development company with an office in El Paso, announced in a press release that Jordan Foster Construction will perform “predevelopment services” for the project. The complex will include a 220-room, full service hotel with an attached 80,000 square foot retail center. Renderings of the hotel indicate it will rise more than 10
Transportation Update: Border Highway West Commission Approves $600M Minute Order for Loop 375 Extension A minute order was recently signed by the Texas Transportation Commission approving a $600 million grant for the Border Highway West project in El Paso, with funds coming from Texas Mobility Fund bonds. The new tollway will extend Loop 375 from south of Downtown to the northwest for seven additional miles. The funds have been authorized for the Camino Real Regional Mobility Authority (CRRMA), who originally sought to make the project a reality. However, the Texas Department of Transportation (TXDOT) requested last year that the CRRMA waive its option to develop the project so that TXDOT could bring it to fruition.
be constructed just south of the existing Phase One buildings. According to a press release, the idea behind the design of the office park was to “provide an attractive corporate park environment that offers an abundance of parking, energy efficiency, contemporary southwest design, corporate signage, fiber optic internet services, and amenities that include an outdoor gazebo area.” The size of the office park will eventually expand to a total of 89,113 square feet when built out. Phase One opened
with 25,000 square feet in 2013 and has an 82% occupancy rate. According to the developer, EP Riverbend Development, LLC, the project is the “largest professional office complex” to undergo construction outside of El Paso’s Central Business District in more than 15 years. Ventanas Corporate Center is located at 3821 Constitution Avenue.
stories and may carry the Westin brand name. The site plan shows that the hotel will have a triangular footprint at the end of a street lined with shops. There has been no indication if any retail or restaurant tenants have been signed. The press release also indicates that it will include both indoor and outdoor entertainment venues. El Paso City Council approved an incentives package last year for the hotel/retail complex on airport land, which is expected to cost $64 million to construct. The contract, approved in late May of 2013, stipulated that EP Vida must begin construction within one year. The City’s list of “Four Star” amenities include availability of presidential and executive suites, concierge service, a full service restaurant and bar, meetings rooms, and “upscale” interior finishes. The City desires a “modern, refreshing, welcoming, comfortable and exceptional
Now, the two parties will partner up on the project, with TXDOT responsible for most of the development and construction and the CRRMA overseeing the design and installation of toll facilities and infrastructure. In addition to the $600 million secured for the project, TXDOT will kick in another estimated $200 million needed to complete the tollway. Four development teams were shortlisted for the project last October, including two that recently held meetings for subcontractors interested in performing work on the tollway. Rio Bravo Developers, consisting of Fluor Enterprises of Irving, Texas, Ames Construction, Inc., of Minnesota, and Austin Bridge & Road, L.P., also of Irving, held a meeting on January 15, 2014. And Border Highway Mobility Partners, consisting of Walsh Construction of Chicago, Sundt Construction of Arizona, Infrastructure Corporation of America of Tennessee, and Parsons Corporation of California, held a meeting on February 5, 2014. The other two teams consist of Camino
guest experience” for the hotel. The hotel project will be constructed on a nine-acre vacant property at the corner of Airway Boulevard and Boeing Drive. It may open as soon as fall of 2015, according to the press release.
Frontera Constructors (Zachry Construction Corporation of San Antonio and Skanska USA Civil West of Colorado) and Abrams-Kiewit (J.D. Abrams, L.P. of Austin and Kiewit Infrastructure South Co. of Omaha). The nine mile project will create a seven mile tolled expressway from Downtown El Paso, where Loop 375 currently ends, to the north and west to a point just south of the Interstate 10 at Paisano Drive intersection near Sunland Park. Southeast of downtown, a new multi-ramp interchange will connect the existing Border Highway with Paisano Drive and Delta Street, providing east and westbound access to the city’s center. TXDOT is expected to choose the development team this spring with a Notice to Proceed possibly issued by the end of 2014. The project may take about three years to complete.
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Builders Outlook
The Economy
Interest Rate Movements: What Are They Telling Us? By Elliot Eisenberg, Ph.D., GraphsandLaughs, LLC
Over the last eight months interest rates have gyrated more dramatically than in years. This process has not only whipsawed investors but seriously called into question the nascent housing recovery. After all, how can housing starts rise from their near historic lows if rates are one percent higher than they were in late spring and with interest rates expected to rise somewhat higher over the course of 2014? Is not the housing sector highly interest rate sensitive? And isn’t the Federal Reserve deliberately buying tens of billions a month in mortgage backed securities to keep 30-year mortgage rates low to help the housing market? Relax. While new residential construction is indeed interest rate sensitive, it is also heavily dependent on other macroeconomic factors and they will more than compensate for the recent rate rise. To use an analogy, interest rate movements are like a thermometer. A rise in body temperature may or may not be a good thing; it all depends on the initial level. A rise in body temperature of two degrees from 94 degrees to 96 degrees is excellent news and suggests a patient recovering from hypothermia. By contrast, a rise in body temperature of an adult from 102 to 104 is serious, and suggests a very ill patient in need of prompt medical attention. Changes in interest rates should be similarly viewed. Interest rates are the cost of borrowing money. When times are good and economic growth is robust, interest rates rise because investors borrow funds for investment purposes while households borrow to finance purchases of cars, houses and other big ticket items. This increase in demand raises rates and this rise is healthy. Returning to our thermometer analogy, this would be like a rise from 96 to 98 degrees. Sometimes, however, the economy grows so fast that shortages of workers and supplies start to materialize, resulting in inflation. If allowed to fester, inflation can spin out of control. That is why interest rates continually rose during the 1960s and 1970s. Eventually, things got so bad the Federal Reserve raised rates to 20% to weaken the economy and squeeze inflation out of the system. This would be equivalent to a rise in body temperature from 103
2014 issue 2
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to 105 degrees. This rise was necessary but was a sign of a profoundly sick economy. Until recently, despite amazingly low interest rates, no one borrowed; witness the ridiculously low levels of new home construction and investment in plant and equipment by firms, because everyone was pessimistic about the future. This would be akin to fall in temperature from 95 to 93, a bad sign. However as the economy improves, and trust me it is, albeit way too slowly, and as we become increasingly optimistic about the future, interest rates will rise and this is what is finally starting to happen. The thermometer is now in the process of going from 94 to 95. In this early phase of the recovery, firms hire workers, begin buying equipment and start building plant. As a result, unemployment rates decline, wages start rising and household spending increases. And this boosts GDP growth, which results in yet more
corporate spending and more household consumption on, among other things, housing. Given the immense slack in our economy this process could last several years, accompanied by slowly rising interest rates akin to the thermometer rising from 96 to 98.6! Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net. His daily 70 word economics and policy blog can be seen at www.econ70.com.
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Reserve your advertising space in the 2014 edition of Economist Elliot Eisenberg is a regular contributor to the Builders Outlook. His wealth of experience on housing has been the model for HBA’s across the country over the past decade. Now in private practice, Dr. Eisenberg brings his insight every month to our members.
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2014 issue 2
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Builders Outlook
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Builders Outlook
2014 issue 2
Innovation and the new normal for housing, a particular view By Walter Lujan, Dawco Home Builders, El Paso
The following paragraphs are intended to share lessons learned from a specific strategy followed by Dawco in response to the economic downturn. The Great Recession affected everyone, the housing industry was particularly affected, and it forced builders to change the way they build and operate in order to survive. Many housing certifications such as Energy Star or Green Certified homes became too costly or became a lower priority due to the cost to get them certified rose. My company, Dawco Home Builders, is constructing a model home that is the result of lessons learned since the start of the Great Recession. The model home is one that has a projected HERS rating of 52 or is about 48% more energy efficient than a similar home under the present building code. The addition of a solar system should lower the HERS rating to 16-34 or 66%-84% more energy efficient. It will have several green features as well as a number of Universal design features, what is called “Aging in Place” features, along with some other features but of course due to cost constraints not every desirable “upgrade” can be built into it. Dawco’s response to the economic
crisis was to follow a highly technical multi-disciplinary approach to housing, to take a holistic view of housing in its multitude of facets not only in familiar areas such as energy efficiency, renewables, green features and others but also digging deeply into the social aspects of housing: the economic burden, wealth creation, policies, cost location, transportation costs, social mobility, age, multi-generational, affordability aspects. In order to better understand the designated areas we acquired multiple certifications from the NAHB Green certification, the Building Performance Institute (energy audits), became partner in DOE/EPE programs, decreasing our building activity to become engaged in programs to acquire the appropriate experience such as weatherizing close to 60 homes for the City of El Paso, or acquiring, rehabilitating and selling foreclosed homes along with some partners under a HUD program. We also performed energy audits, built green certified homes, building investment properties in in-fill lots to put to practice a number of innovative methodologies and technologies proposed by a range of companies, organizations or government institutions. For example “Housing and
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Transportation Affordability Index”, “Energy affordability Gap”, “Aging in Place”, “Universal Design”, while also acquiring and learning energy modeling software, going into depths of difference in algorithms used to simulate energy usage, investment metrics. I literally read hundreds of scientific articles(as opposed to marketing articles or commercial “experts”) regarding “HOUSING” in a very holistic view, and studies from DOE, EPA, HUD, universities, etc. I then analyzed the technologies or products and their performance under a given set of conditions, their benefits, limitations and unknowns. In a nutshell, what works for El Paso, what is hype, what is cost effective. During this same time the U.S. government implemented an unprecedented level of cooperation between government agencies, enlisting the help of elite institutions such as the Center for Housing Studies at Harvard (which many consider the pre-eminent housing studies organization in USA) to develop and implement policies that will guide the new housing norm. The new norm is basically all inclusive with financial, technical, development components. New standards were and are developed and implemented in a multitude of areas that have or will have a direct impact on housing. Many are technical standards that are becoming national standards that states and cities do or will follow. The results are sobering. In general and in particular the El Paso home builders face increased materials costs, tougher building codes, proposed increases in fees, fierce competition, and higher selling costs. Now former house upgrades have become standard items, along with tighter lending requirements, competition from resale’s, and increased real estate commissions or bonuses. Requesting cost reduction from subcontractors and suppliers has become the norm. Many builders have gone bankrupt during this recession while others are surviving and a very few others thrived as they perfected the right formula. From Dawco’s perspective the answer lies in finding, developing and implementing a delicate balance, finding a way to provide value to the customer not as much to the hedonic but in the utilitarian benefits. We
must provide quality affordable housing for the markets served, which provides the “right” amount of energy efficiency, durability, design and upgrades that can be appreciated by the customer. Of course the challenge continues. What is the “right” balance? How do you balance technologies or do you spend money in more expensive cabinets or do you improve the insulation? Still many in the development community believe a house must be built in such a way as to facilitate wealth creation which can take the form of energy efficiency, higher and quicker appreciation, improved durability, etc. It is not rocket science to use formulas to ensure families do not go into foreclosure based on extreme economic burdens by not finding the right balance. Affordable housing whether owned or rental remains at the forefront of the challenges. “Affordable” is not only the house payment, as there are many other factors that could be an economic burden to homeowners. “Affordable” does not mean low income, as it is also defined by market segments. A house foreclosure means a damaged credit that may take years to be repaired and for that person to become a home buyer again. In another words any new housing should be a vehicle for wealth creation for the homeowner and not an economic burden of such magnitude that will lead to foreclosure. Of course builders do not control all the variables, but we can help. If in fact we are in a new era where old formulas will fade away. You need a more systematic, realistic, focused effort to learn the new realities in home building. It’s time to learn, adapt, and try. Motivation alone is not good enough. Walter Lujan was educated as an engineer but his passion is building. He has earned the prestigious National Association of Home Builders Certified Green Professional Builder. His work includes finding technical methodology to home construction including minimizing waste on a building site. Mr. Lujan serves on the El Paso Association of Builders board of directors.
2014 Issue 2
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Builders Outlook
www.elpasobuilders.com www.epbuilders.org
Membership News UPCOMING EVENTS | FEBRUARY 28, MARCH 1 &2 HOME AND GARDEN SHOW CIVIC CENTER
MARCH 12 BOARD MEETING EPAB OFFICE
APRIL 9 BOARD & GENERAL MEETING EL PASO CLUB
APRIL 16 GOLF TOURNAMENT HORIZON GOLF COURSE
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EC PLUMBING CONTACT: ENRIQUE CASTRO 8621 NORTH LOOP EL PASO, TEXAS 79907 915-791-0111
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Builders Outlook
2014 issue 2
Associates Council
Sam Shallenberger Western Wholesale Supply
ome Your New H eva
Su Casa Nu e best tim NOW is th new to buy your so! Pa home in El
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I want to thank all of the members who stepped up once again and helped sell out the upcoming Spring Golf Pachanga tournament. The event is April 16 at Horizon Golf Course and it appears it should be a really fun event. I’d like to thank HUNT who will sponsor the dinner; Joe Bernal doing the Hole in One challenge; Stewart Title and AT&T who both are doing some major support advertising. We have 26 teams filled and ready to go. To some it would appear that it’s not a big deal, but let
me tell you this every day we hear of groups that have difficulty finding players and advertisers. We are truly blessed. You know Charlie Tellez at JOBE came and delivered a bunch of goodie bag stuff and I want to thank him also. Meanwhile by the time you read this we are either doing or have just completed another successful Home and Garden Show. My hats off to Don and Cheryl Rassette with Rassette Homes who stepped up and got a
house inside the show. To the associate members who supplied the house our many thanks. With your support our association couldn’t be represented any better. I hope for much success. Finally a reminder we will be doing some more exciting events through the spring and summer. Keep your ears to the ground and help participate when you can.
Reach thousands of potential home buyers Reserve your advertising space in the next edition of Your New Home/Su Casa Nueva The most complete home buying guide in both English & Spanish • Unmatched distribution and circulation • Unique dual language layout • Great advertising opportunity Call 778-5387 Today
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www.elpasobuilders.com www.epbuilders.org 6046 Surety Dr. El Paso, TX 79905 915-778-5387 • Fax: 915-772-3038 ■ execuTive oFFicerS Frank Torres – President GMF Custom Homes edgar montiel – vice President Palo Verde Homes carlos villalobos – Secretary Treasurer Palo Verde Homes Sam Shallenberger – Associates chair Western Wholesale edmundo Dena - immediate Past President Accent Homes ray Adauto – executive vice President El Paso Association of Builders Jay Kerr -Attorney of record
■ couNciL/commiTTee cHAirS Associates council Sam Shallenberger Build PAc Randy Bowling Desert Green Building council Javier Ruiz Land use council Sal Masoud Young Designer Award John Chaney remodelers council Rudy Guel membership retention Mike Santamaria, Greg Bowling Finance committee Carlos Villalobos Women’s council Lorraine Huit ■ ADviSorY To THe BoArD J. Crawford Kerr, Attorney, Firth, Johnston & Martinez ■ BoArD oF DirecTorS Beverly Clevenger, Automated Division 6 Builders, Inc. Leti Navarette, Custom Dream Homes Kathy Parry, Hunt Communities Edgar Garcia, Bella Vista Custom Homes, Inc.. Bud Foster, Southwest Land Development Services Juanita Garcia, ICON Custom Home Builder, LLC Walter Lujan, DAWCO Home Builders Joey Najera, Joseph Custom Homes Rigo Mendez, Mission Homes Nick Bombach, Casas de Leon, LLC Lydia Mhouli, Crown Heritage Homes JJ Vasquez, Pacifica Homes Dan Ruth, Millenium Homes Ken Wade, El Paso Building Materials Ruben Orquiz, MTI Ready Mix Kathy Carrillo, Pioneer Bank El Paso Henry Tinajero, WestStar Bank Chuck Gabriel, Carpets West Ted Escobedo, Snappy Publishing John Chaney, Passage Supply Joe Bernal, Employee Benefits of El Paso Linda Troncoso, TRE & Associates Margaret Livingston, Lawyers Title of El Paso Orlando Rodriguez, Mass Media Advertising, Inc. Bret Thompson, Foxworth Galbraith Lumber Chris Worm, City Bank Texas Sal Masoud, Del Rio Engineering
■ TAB STATe DirecTorS Randy Bowling Greg Bowling
■ NATioNAL DirecTorS Bobby Bowling IV. Demetrio Jimenez NATioNAL ASSociATioN oF Home BuiLDerS (800) 368-5242
TexAS ASSociATioN oF BuiLDerS (800)252-3625
2013 Builder member of The Year Edmundo Dena Accent Homes 2013 Pat cox Award Sam Shallenberger Western Wholesale Supply 2013 Associate of The Year WestStar Bank Larry Patton, Burt Blacksher and Henry Tinajero
Honorary Life members Wayne Grinnell Don Henderson Chester Lovelady Cliff C. Anthes Anna Gill Brad Roe Rudy Guel E H Baeza Past Presidents committed to Serve Greg Bowling Kelly Sorenson Mark Dyer Mike Santamaria John Cullers Randy Bowling Doug Schwartz Robert Baeza
Bobby Bowling, IV Rudy Guel Anna Gil Bradley Roe Bob Bowling, III E. H. Baeza Hershel Stringfield Pat Woods
ePAB mission Statement: The El Paso Association of Builders is a federated professional organization representing the home building industry, committed to enhancing the quality of life in our community by providing affordable homes of excellence and value. The El Paso Association of Builders is a 501C(6) trade organization. © 2014 Builder’s Outlook is published and distributed for the El Paso Association of Builders by Ted Escobedo, Snappy Publishing ted@snappypublishing.com El Paso • Texas • 79912 915-820-2800