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Every week, attorney Sean Bukowski reviews what is going in Austin, San Antonio, Dallas, and throughout Texas. Past topics have included: This is a really quick and easy way to stay on top of commercial real estate trends and topics. Subscribe to our YouTube channel today.

Adapting Commercial Real Estate in the Post-COVID Era: With Christian Catron from Redeem Investments

After sustaining injuries that led to a medical discharge from the military, Christian embarked on a nearly two-decade-long career in healthcare, starting from pharmaceutical sales to eventually pursuing an MBA ...at the University of Texas at McCombs School of Business on a full scholarship. A transition from healthcare to real estate investment, termed as "wealth care," was motivated by a desire to serve in a different capacity and the challenges of mounting tax liabilities. Starting with residential real estate in 2017 and quickly moving to commercial spaces, Christian showed a keen interest in leveraging commercial properties for forced appreciation, particularly in a time when COVID-19 has transformed workplace norms.

Takeaways

- Christian Catron's journey from humble beginnings to leading in real estate investment highlights resilience and adaptability.
- Christian leveraged commercial properties for forced appreciation amidst the changing workplace norms due to COVID-19.
- His adaptation of commercial properties to meet evolving demands illustrates a strategic response to market trends post-COVID-19.
- Through Redeem Investments, he emphasizes on rejuvenating buildings to cater to local community needs like medical offices, hotels, and apartment buildings.
- Redeem Investments exemplifies a forward-thinking approach to real estate investment, championing the adaptive reuse of commercial spaces.[+] Show More

Adapting Commercial Real Estate in the Post-COVID Era: With Christian Catron from Redeem Investments

After sustaining injuries that led to a medical discharge from the military, Christian embarked on a nearly two-decade-long career in ...

Save Our Springs Alliance vs. Endeavor: What's Next for the Statesman Site?

Austin's Statesman Redevelopment Hit With Legal Setback: Here's What Happened The future of a major redevelopment project on the south ...

Austin's Statesman Redevelopment Hit With Legal Setback: Here's What Happened
The future of a major redevelopment project on the south shore of Lady Bird Lake in Austin, Texas is uncertain after ...a recent court ruling.

What was the plan?
In late 2022, the City of Austin approved a plan to revitalize the former Austin American-Statesman site. The project envisioned a vibrant, mixed-use area with high-rise buildings, shops, restaurants, and improved public spaces. To help fund this ambitious project, the city designated the area as a Tax Increment Reinvestment Zone (TIRZ). This meant capturing a portion of the rising property taxes generated by the development to pay for infrastructure and amenities.

So, what went wrong?
A local neighborhood group, Save Our Springs Alliance (SOS), challenged the TIRZ designation in court. They argued that the city didn't have sufficient evidence to classify the area as "blighted," a key justification for the tax break.

Judge sides with SOS
Last week, Judge Jessica Mangrum of the Travis County District Court agreed with SOS and blocked the city from using the TIRZ for the project. This throws the entire development into question, as the funding mechanism is now uncertain.

What are the options now?

The City of Austin has a few choices:
Appeal the decision: This could lead to a lengthy legal battle and further delays.
Revisit the TIRZ designation: The city could try to re-evaluate the blighted area status or provide stronger evidence to support it. This might require revising the project and getting community approval.

Explore alternative funding: Public-private partnerships, federal grants, or other creative solutions could be on the table.

Scale back the project: If funding becomes a major hurdle, the overall scope and density of the development might need to be reduced.
The future is uncertain

The future of the Statesman redevelopment project remains unclear. This case highlights the complex challenges of balancing economic growth and large-scale development with neighborhood concerns.

Stay tuned for further updates on how the City of Austin and Endeavor, the developer, will proceed with this project.[+] Show More

T.C. Broadnax: A Fresh Perspective for Austin's City Management

Hey everyone, Sean Bukowski here! I hope you're all enjoying your week, perhaps catching some of the exciting action at the Masters. As ...

Hey everyone, Sean Bukowski here! I hope you're all enjoying your week, perhaps catching some of the exciting action at the Masters. As I'm recording this a day early, I'm ...crossing my fingers for an epic finale on Sunday. But today, I want to delve into some significant news that's been buzzing around Austin recently.

Introducing Our New City Manager: T.C. Broadnax
In case you missed it, Austin made a big hire a couple of weeks back, bringing in T.C. Broadnax as our new city manager. Hailing from Dallas, where he previously held the same position, T.C. Broadnax's appointment has sparked both interest and some raised eyebrows.

A Controversial Past: Lessons from Dallas
Now, here's where things get interesting. T.C. Broadnax' tenure in Dallas wasn't without its controversies. He faced criticism and ultimately resigned from his post earlier this year. One major bone of contention was the sluggish pace of the permitting office, causing frustration among businesses and city officials alike. Additionally, a shortage of 9-1-1 operators further strained relations.

But perhaps the most alarming issue was the revelation that a Dallas city employee had deleted police department files worth a staggering $9 million. T.C. Broadnax knew about this incident months prior but failed to promptly inform the city council and mayor, leading to accusations of negligence and a breakdown in trust.

Challenges Ahead for Austin
So, what does this mean for Austin? Well, we've got our fair share of challenges too, particularly in the realm of permitting and bureaucracy. Anyone involved in real estate here knows the headaches of navigating the site plan review process. It's time-consuming and often feels like wading through molasses.

Hope for Improvement
Despite the rocky start, I'm cautiously optimistic about T.C. Broadnax's appointment. There's no denying that Austin needs a capable leader to steer us through our growth and development challenges. However, success will hinge on his ability to foster transparency, rebuild trust, and learn from past missteps.

Looking Forward
As we welcome T.C. Broadnax to Austin, let's keep a watchful eye on how he tackles our city's pressing issues. We're rooting for him to succeed, but it won't be an easy road. Here's hoping for a brighter, more efficient future for our beloved city.

What are your thoughts on Austin's new city manager? Share your opinions and insights in the comments below! And don't forget to hit subscribe for more updates on Austin's evolving landscape. Until next time, this is Sean Bukowski signing off.[+] Show More

Austin's office buildings, what are mechanics liens and how do they impact owners and investors?

As we all know, the office market is struggling and will likely to continue to struggle in the near future. There are likely to be more ...

As we all know, the office market is struggling and will likely to continue to struggle in the near future.

There are likely to be more office buildings that have mechanics ...liens put on them by contractors who are not getting paid.

This could present an opportunity for a savvy investor to capitalize on a distressed asset.

Texas has always been a land of great opportunity, and commercial real estate has been a cornerstone of that growth – especially in the last 25 years. But lately, the office sector has hit a rough patch. We have talked about that a lot in this blog. And, of course, everyone in the industry is having those discussions around town.

The pandemic’s remote work revolution has left many buildings partially vacant, with vacancy rates in some major metros eclipsing 20%. This certainly leads to a buyer’s market, with landlords struggling to fill space and lenders getting nervous.

And its left a lot of office owners struggling to pay some vendors. Indeed, the tallest tower in Fort Worth has mechanics liens totaling $1.6 million recorded against it. So what does that mean for the industry? And does it present an opportunity for savvy investors? That’s what we talk about this week.

Mechanics Liens: A Contractor’s Weapon
Imagine a scenario: a developer bites off more than he or she can chew, hires a contractor to build a fancy new office complex, then can’t pay the bill. In Texas, that contractor has a powerful tool at their disposal – the mechanics lien.

A mechanics lien is a legal claim against a property that secures payment for labor or materials furnished for its improvement. It essentially says, “If you don’t pay me, I get a stake in your building.” This can be a real headache for a property owner, as it clouds the title and makes refinancing or selling the building difficult.

Notice Requirements for Mechanics Liens
Here in Texas, things get a little more complex. Unlike some states, filing a mechanics lien isn’t a slam dunk. Contractors (and subcontractors and suppliers) have to comply with strict notice requirements depending on their role in the project. Original contractors (those with a direct contract with the owner) generally don’t need prior notice. But everyone else – subcontractors, material suppliers – needs to send out pre-lien notices to preserve their lien rights.

It’s a bit of a bureaucratic dance, but get it right, and a mechanics lien can be a powerful tool to force payment.

Foreclosure and Judgment: Taking it to Court
Once a contractor places a mechanics lien on a property, the contractor can sue to foreclose on the lien. This means going to court and asking the judge to order the sale of the property to satisfy the debt. It’s a lengthy process, but if successful, the contractor gets paid from the proceeds of the sale. It is also, of course, a very powerful bargaining tool to use against the property owner.

This is where things get interesting for outside investors who could see this as an opportunity. Let’s say the office building is half-empty, struggling financially, and gets slapped with a hefty mechanics lien. The owner might be desperate to avoid foreclosure. This creates a prime opportunity for an investor to swoop in.

Distressed Deals and Deep Discounts
There are two main ways an investor can potentially capitalize on this situation:

Buying the Lien: Investors can buy the mechanics lien itself from the contractor at a discount. This essentially means they step into the contractor’s shoes and pursue foreclosure themselves. This can be a risky proposition, as the foreclosure process can be expensive and time-consuming. But if successful, the investor could end up owning the entire office building for a fraction of its original value.
Buying the Foreclosed Property: If the foreclosure goes through, the investor can bid on the property at auction. With a distressed market and a cloud hanging over the title, there’s a good chance of getting a deep discount. Now, the investor owns a potentially valuable asset at a fire-sale price.

Proceed with Caution
There are, of course, potential pitfalls with either of these two strategies that an investor should be leery of –
Don’t go it alone, hire a lawyer experienced in Texas mechanics liens to navigate the process and ensure everything is done by the book.
Due Diligence is Mandatory: Do your research on the property, the lien itself, and the overall market conditions. Is the building structurally sound? Are there other liens? Is there potential for future vacancy?
Be Patient: Mechanics lien enforcement and foreclosure can take months, even years. Don’t expect a quick payday.
The Bottom Line: A High-Risk, High-Reward Proposition

Mechanics liens can be a powerful tool for contractors to secure payment, but they also present a potential windfall for those willing to take a calculated risk. Do your homework, get good legal advice, and you may have a great investment opportunity.[+] Show More

The impact of the NAR lawsuit on real estate commissions.

The National Association of Realtors settled its lawsuit that it had previous lost as a result of its alleged collusion. After this ...

The National Association of Realtors settled its lawsuit that it had previous lost as a result of its alleged collusion.

After this settlement, it is likely that buyers and sellers ...will be much more likely to negotiate broker’s rates going forward.

And while this has a huge effect in residential real estate, it should also impact commercial.

A while back, I wrote a blog article about some big news in the real estate world – specifically that some plaintiffs had secured a massive judgment against the National Association of Realtors and some brokerages for collusion on brokerage fees. If you recall, according to the judgment, the Court found that real estate brokers colluded to make it standard that they charge a 6% fee that is paid by the sellers. And at the time, we knew the defendants would appeal the verdict. But we did not know how it would be resolved.

Well now we do – the parties have settled the lawsuit. And with that settlement will come some pretty significant changes in the real estate industry.

Collusion and Commission Concerns
To recap, last fall, a jury in Burnett v. National Association of Realtors et al. found that the NAR and some major brokerages guilty of collusion. Basically they were all working together to keep fees high. The jury initially slapped the NAR with a whopping $1.78 billion fine. It was at that point, of course, that the Defendants filed an appeal of the verdict. And that likely set the settlement discussions in motion.

Parties Settle the Lawsuit
Two weeks ago, then, it was announced that the parties had reached an agreement and settled the lawsuit for $418 million. But even though the amount has been reduced, the lawsuit is very likely to change the landscape of the real estate industry – especially the residential real estate industry.

The big change? Say goodbye to the good ol’ days of the “standard” 6% commission. Under the settlement, those rates become a thing of the past. Instead, buckle up for a new era of negotiation. Sellers and buyers will have the freedom to wrangle with their agents over fees. And not only what that fee will be – but who should pay them. I reckon it won’t just be automatically assumed that the seller is going to pay for both the seller’s and buyer’s commission. This could lead to lower commissions for some, but remember, negotiation is a two-way street.

Impact on Real Estate Prices: A Cloudy Crystal Ball
So what will all of this do to real estate prices going forward? I have heard some folks try to argue that lower commissions could lead to higher home prices. Their logic? With potentially less income, agents might pressure sellers to inflate asking prices. Now, that’s a possibility, but I do not think that is what will happen. Here’s why: Competition is a powerful force. With agents needing to hustle for business, they will likely lower commission rates to attract clients. This could, in turn, lead to more buyers in the market, potentially driving down prices. And if buyers are paying for their own broker fees, then they are more likely to offer a lower purchase price to make up for that amount. Plus, if you have read Freakonomics, you know that an increase in the sale price of real estate often makes a negligible difference in a broker’s commission. Its more important for them, therefore, that the deal closes.

What This Means for Real Estate Investors
So, what does this settlement mean for you, my Texas real estate partners?
Sellers: Get ready to negotiate. Educate yourself on commission rates in your area and be prepared to discuss your expectations with potential agents. Don’t be afraid to shop around for the best deal.
Buyers: This might be your chance to snag a lower commission rate. Having said that, it is likely that buyers will have to pay for their own brokers going forward. Which, again, could affect sale prices.
Having said all of this, remember, a good agent with a proven track record can be worth their weight in gold. It may not be worth prioritizing saving a few bucks over getting the best representation. Ultimately what you will likely see is a lot of brokers exiting the industry. With lower commission rates, it may not make sense for them to continue.

Conclusion
The NAR settlement is a big change for Texas real estate. It’s a chance for a more open broker market. But it also comes with new challenges – and likely fewer brokers.[+] Show More

When to Hire a Commercial Real Estate Lawyer for CRE Drafted Agreements to Protect Your commercial r

In this commercial real estate environment, its natural for disputes to frequently arise. The best way to avoid these disputes is to ...

In this commercial real estate environment, its natural for disputes to frequently arise.

The best way to avoid these disputes is to have good documents to rely on.
And when ...you are in a dispute, bringing on an experienced litigator who can help you strategize is a must.

In the last few months, because of the current commercial real estate environment, I have written a few times about litigation. Things are a little dicey out there. I know I don’t have to tell you that. Well today we are going to dive in some more. And while we are already seeing a lot of disputes – much more than we did a few years ago – I reckon those numbers are going to continue to increase.

The bottom line is that, while deals are getting signed up, a lot of them are not closing. Much more than just a couple of years ago. And, sadly, with the increased interest rates and flat rents, investments are starting to fail. And will likely continue to do so.

As a result, there is no doubt that litigation has increased and will continue to do so. What to do, therefore, when faced with that unfortunate situation? Lets talk about it.

Ounce of Prevention is Worth a Pound of Cure
First, a good litigation defense starts with hiring a good lawyer early in the deal process – before litigation is even contemplated.

I know folks often will try to save money by using form purchase agreements with no review or drafting operating agreements themselves. This is a bad idea. Doing so sets you up to having a messy divorce when things go wrong.

To be clear, I’m not saying that the TAR or TREC forms are bad. They aren’t. But they are a lot better when your lawyer reviews them, makes sure the right boxes are checked, and adds some additional clauses to the agreement for your protection.

And I know this sounds self-serving. I am a lawyer telling you to hire a lawyer early in the process. But the reality is its good advice. And it will protect you in the long run. Because when things go sour, you want – you need – to have good documents to fall back on. Ones that will be clear in dictating the rights and responsibilities of all the parties. So please take my advice and hire a good lawyer when setting up your partnerships or purchasing a property.

Also Need a Lawyer When Things Go Wrong
Despite the best intentions and having good documents, sometimes things just break bad. Especially in the current commercial real estate environment. So what should you do then?

Once again, get a lawyer involved. There are many reasons that you want to get a good litigator involved early in the process. First, we have expertise in litigation. We have been through it a lot. We are not intimidated by the process. And we know what steps you should take to put yourself in the best position.

Also, a good litigator understands how expensive litigation is. And we will do all we can to avoid it. So sometimes bringing in a lawyer who can look at things differently can help the parties resolve their issues prior to litigation. We can do this through demand letters, discussions with the parties, potentially pre-litigation mediation. All of these are possibilities for keeping costs down and yet coming to a resolution.

But if we cannot resolve the issues without resorting to filing suit, its important to get started quickly. The first step is to make sure you document everything. The more you have written down in any form – the better your records are – the better off your position will be in the litigation. A good litigator will also review your entire dispute and – with your input – form a litigation strategy that will put you in the best position for a recovery. Again, the sooner you do that and have a plan going forward, the better off you will be.

These are tough times in real estate. And tough times usually means there are going to be disputes between parties. When you are facing a dispute like this, please do not hesitate to reach out to a commercial litigator. Because we can help guide you through this difficult process to finding the best potential outcome.[+] Show More

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Adapting Commercial Real Estate in the Post-COVID Era: With Christian Catron from Redeem Investments

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