OG&E Energy Center

[warreng88]

Problem with "for sale" properties in OKC is how hard it is to get loans for condos here.

what is the issue with condos in OKC? I was surprised they weren't condos when this was announced.

Why is that?

When you are buying a house for yourself or family, it is going to be 100% percent occupied by you and they can rely on you and your income to make the payments.

When you are buying one condo in a building of 20 condos, the bank is relying on you to make the payments on your condo, but the developers only have so much money for basic upkeep.

So, if there are only five out of 20 condos sold, there is less money to the developer for basic maintenance in the common areas, not to mention their P&I payment plus taxes, insurance, etc.

This, could decrease the value of the condo since the quality of the common areas have gone down.

Also, it is more likely that the developer will drop the price of remaining condos if not sold in a reasonable amount of time, which would decrease values of the condos already sold as they become comparables.

All that being said, banks are willing to finance condos, but not at 95% LTV like regular homes. Probably more like 80% or less. So, if these condos were $500k, a normal home loan would be $475,000 with $25,000 down. These condos would be $400,000 with $100,000 down. Not everyone has $100,000 lying around.

[Rover]

But, once it is built as apartments and filled, it can be converted to for sale units as rent contracts expire.

[soonerguru]

When you are buying a house for yourself or family, it is going to be 100% percent occupied by you and they can rely on you and your income to make the payments.

When you are buying one condo in a building of 20 condos, the bank is relying on you to make the payments on your condo, but the developers only have so much money for basic upkeep.

So, if there are only five out of 20 condos sold, there is less money to the developer for basic maintenance in the common areas, not to mention their P&I payment plus taxes, insurance, etc.

This, could decrease the value of the condo since the quality of the common areas have gone down.

Also, it is more likely that the developer will drop the price of remaining condos if not sold in a reasonable amount of time, which would decrease values of the condos already sold as they become comparables.

All that being said, banks are willing to finance condos, but not at 95% LTV like regular homes. Probably more like 80% or less. So, if these condos were $500k, a normal home loan would be $475,000 with $25,000 down. These condos would be $400,000 with $100,000 down. Not everyone has $100,000 lying around.

80/20 is pretty common for home loans now.

[Spartan]

That's why townhomes are easier than true condos.

[LakeEffect]

OCURA doesn't do clawback. Look at Deep Deuce and Lower Bricktown.

I think it would be more accurate to say "in the past, OCURA didn't do clawback."

[warreng88]

80/20 is pretty common for home loans now.

There are a lot of 80/20, I know a lot of people who have them but they are 80% first and 20% seconds so they don't have to pay PMI. One of my good friends runs a mortgage brokerage and he said people that fall in the normal section of borrowers can borrow 95% LTV plus closing costs. The 80% figure might be low for the condos, I am not sure exactly what that figure is. The bank that I work at doesn't do them.

[Pete]

I was thinking about this project some more and the thing that bothers me most about this huge ask is the office space.

What special circumstances exist where a developer can't build a new office building downtown without massive assistance?

Vacancy rates are at historical lows, they have an anchor tenant in OG&E who was ready to pay market rents... Why is this such a difficult project to make work?

Remember that in the 80's there were four large completely speculative office buildings constructed: Oklahoma Tower, Corporate Tower, Mid-America Tower (now Continental) and Leadership Square. The office market at the time was tight but not as tight as now and I know all received some incentives it was no where near what is being asked by Clayco.

Also, we've had tons of new office construction for Devon, Continental and SandRidge plus lots of expensive renovation projects that involved spec office space.

So why exactly can't Clayco build office space and find market-rent paying tenants without a huge taxpayer subsidy? They are not dumping a massive amount of space on the market. Just the south tower which isn't that big.


The high-rise housing is a different discussion.

[Chadanth]

I was thinking about this project some more and the thing that bothers me most about this huge ask is the office space.

What special circumstances exist where a developer can't build a new office building downtown without massive assistance?

Vacancy rates are at historical lows, they have an anchor tenant in OG&E who was ready to pay market rents... Why is this such a difficult project to make work?

Remember that in the 80's there were four large completely speculative office buildings constructed: Oklahoma Tower, Corporate Tower, Mid-America Tower (now Continental) and Leadership Square. The office market at the time was tight but not as tight as now and I know all received some incentives it was no where near what is being asked by Clayco.

Also, we've had tons of new office construction for Devon, Continental and SandRidge plus lots of expensive renovation projects that involved spec office space.

So why exactly can't Clayco build office space and find market-rent paying tenants without a huge taxpayer subsidy? They are not dumping a massive amount of space on the market. Just the south tower which isn't that big.


The high-rise housing is a different discussion.

I know. I'm starting to sour on this for the same reason. I'm only in favor of taxpayer subsidies for very specific cases, and never to make it cheaper for relatively wealthy people to buy condos or for class A office space. If it's not economically viable without buckets of free money, there are problems with the business's model.

Perhaps more will come to justify it, or maybe they just threw out an artificially high number to see what they can get.

[Pete]

And has been pointed out, both these towers already front a park that was funded by millions and millions of tax payer dollars.

If they can't get enough rent for office space in these circumstances (fronting the park, big anchor tenant, easy plot to develop, record low office vacancy, only 25 stories each) why have other projects worked and how would future projects ever work?

[bchris02]

Perhaps more will come to justify it, or maybe they just threw out an artificially high number to see what they can get.

Perhaps.

I also think national developers still underestimate the OKC market for whatever reason. They think developing something fit for the big leagues here is riskier than it really is.

[Motley]

There is a definite perception about OKC, even from people in Tulsa and clearly from people unfamiliar with OKC. I just read a ranking of the cities with the most beautiful people, and it was noted that OKC was the most underserved city for high end retail. For whatever reason, this blog site consistently demostrates that OKC lacks great shopping, great supermarkets, great buildings, and, unfortunately, a diverse economic base.

Whatever happens with Clayco, it would be great to have a real autopsy from Clayco and from the city as to why TIF was necessary and why OKC cannot attract the same level of almost anything compared to other cities.

[bchris02]

Whatever happens with Clayco, it would be great to have a real autopsy from Clayco and from the city as to why TIF was necessary and why OKC cannot attract the same level of almost anything compared to other cities.

This is a great question. Does it all go back to an outdated stereotype/image issue or is there really something in the numbers that scares national developers about OKC?

[Pete]

Something else has been lost in all of this..

The RFP for the south parcel absolutely did not yield the maximum number of proposals because of the way it transpired.

Remember, Clayco approached the City about buying that land and only then was an RFP issued, with a 60 day response deadline.

I talked to two different developers who were very interested in making a run, but both said there was absolutely not enough time to make a meaningful application.

So, we are left with the Clayco proposal which had the massive advantage of pretty much being done before the RFP was even issued, and Milhaus who clearly did a rush job and was one of only a couple of non-local developers to know the market somewhat because they already have a project in OKC.


All of this was rushed out of courtesy to Clayco and at the very end they drop this huge incentive bomb having never mentioned assistance for the north parcel prior?

[Motley]

If the Clayco development collapses, it is unfortunate that the uncertainty in the oil market will make the likelihood of a better proposal unlikely. I even wonder if the Preftakes and FNC projects are more unlikely now or at least pushed back a year or so if the price of oil plateaus at 50.

[bchris02]

If the Clayco development collapses, it is unfortunate that the uncertainty in the oil market will make the likelihood of a better proposal unlikely. I even wonder if the Preftakes and FNC projects are more unlikely now or at least pushed back a year or so if the price of oil plateaus at 50.

This is definitely something to consider. If the Clayco deal falls apart and oil stays low for the long haul, there could be an empty lot at the Stage Center site for the foreseeable future. That would be extremely disappointing.

[Paseofreak]

While I'm sure everything about how this entire set of deals will pass procedural muster, things don't seem to be getting carried out with crystal clear transparency. If I were a developer presented with the RFP and it's short fuse for a proposal of this magnitude, I'd turn and run, especially with the head start Clayco had. The outcome certainly has to send ripples throughout the development world leaving the impression that competition isn't exactly fair and open in OKC. Not good for the city's image.

Moreover, Rainey was awarded the SC site at an arguably cheap price with no public mention of a big TIF. Now the whole thing seems to be linked together with a huge TIF request that will result in either rent subsidies to commercial interests (at least one of which will relocate from within the city) in a tight office space market and residential rent subsidies for a select few hundred that are at the high end of the socio-economic spectrum; or will generate a handsome profit for the developer. That all assumes the economy doesn't suddenly tank, of course.

What really is bothering me aside from all of the specifics to these projects I've mentioned is that this stuff is evolving apparently under civic knowlege/complicity to the surprise of the public, some of whom are very astute. Just look at all the questions being asked here spawned by the selection of Clayco with little more explanation than a brief project description, some renderings and a per building cost and TIF request. This whole process seems linked from the get go, yet the last opportunity for public comment was when the only question was demolition of the SC. I know there's a lot of conjecture in this last paragraph, but really, the process is not very out in the open.

[Paseofreak]

Duplicate post... Sorry

[Motley]

I try to avoid conspiracy theories and do not believe in jumping to negative ulterior motives. At the same time, Clayco is in it for their self-interest, as they should be, but until shown otherwise, I trust the city and OCURA to have the best intentions for the city and its future. The deal is not done and that is why we have the ongoing negotiations to resolve the TIF and other design issues.

I do like transparency, so there should be a system to ask OCURA questions, and we all (at least citizens of OKC) have the ability to discuss it with our representatives, who should have insight in the deal (and not just a politically motivated position).

I was discouraged when the committee approved the Chase building without a full explanation of their decision. I hope this doesn't happen here, no matter the conclusion.

Trust but verify.

[Pete]

^

Just to be clear, OCURA had nothing to do with Chase. That was completely on the Downtown Design Review Committee.

The Downtown Design Review Committee was also the body that gave final approval for the the demolition of Stage Center, and they would have to approve any final designs for this project, but that should be a technicality.

[Motley]

I forget the names of the various committees, but any government or quasi-governmental agency should be willing to explain decisions with patience and in detail. From the conversations on this site, it seems that the transportation group that planned the boulevard and the design review committee that approved Chase felt that explaining and justifying their decisions too bothersome

[Paseofreak]

I try to avoid conspiracy theories and do not believe in jumping to negative ulterior motives. At the same time, Clayco is in it for their self-interest, as they should be, but until shown otherwise, I trust the city and OCURA to have the best intentions for the city and its future. The deal is not done and that is why we have the ongoing negotiations to resolve the TIF and other design issues.

I do like transparency, so there should be a system to ask OCURA questions, and we all (at least citizens of OKC) have the ability to discuss it with our representatives, who should have insight in the deal (and not just a politically motivated position).

I was discouraged when the committee approved the Chase building without a full explanation of their decision. I hope this doesn't happen here, no matter the conclusion.

Trust but verify.

To be certain, conspiracy theory is not what I feel or intend to convey. Instead, my impression is "Hey, this is complicated and we're the professionals. We got this. You really wouldn't understand anyway." Informing the public just doesn't seem to be a priority.

I would have liked to understand early on from OCURA that this specific set of properties have these qualities, and we are targeting this type of development, which we expect to have these benefits. We think taking these steps now is important because________. Agree? Here's how we're gonna approach it. We're gonna take the site spec's and a list of benefits and amenities and shop it to every developer in the country that could meet our expectations. We'll take about six months to do that and then issue an RFP that gives every developer with an interest six months to determine the best way that they can invest about a half billion dollars and get OKC the type of interest and devlopment that we've been aiming for for the last 20 years.

[kevinpate]

All those folk who belly ache on and on on how able bodied people are gaming disability by the thousands, or peeps who could get off govt/assistance but hide funds so they appear to need the assistance?

Is this maybe a wee bit like that .... albeit with more zeros staged prior to the decimal point?

[Paseofreak]

All those folk who belly ache on and on on how able bodied people are gaming disability by the thousands, or peeps who could get off govt/assistance but hide funds so they appear to need the assistance?

Is this maybe a wee bit like that .... albeit with more zeros staged prior to the decimal point?

Sure looks that way to me. Be terribly glad to have someone dissuade me.

[Motley]

I fully agree with the idea of them laying out the process, the goals they want to promote and the rationale they will use in forming a decision. At this time, I would say we have to trust they are doing this and then expect a thoughtful and detailed review afterwards. I say this because they are already in negotiations and I doubt they can be transparent until negotiations close. People should demand transparency and require agencies to open up their decision making processes. I only hope the agencies want to create a process wherein these questions are addressed in advance on future projects.

I only bring up the Design committee from a few months back because their answer as to why they approved the design struck me as conclusory and flippant. I hope OCURA does better, far better since there is so much sincere concern in this development.

[Pete]

To be certain, conspiracy theory is not what I feel or intend to convey. Instead, my impression is "Hey, this is complicated and we're the professionals. We got this. You really wouldn't understand anyway." Informing the public just doesn't seem to be a priority.

Or, even doing a good job of presenting objective reports and various alternative scenarios to the City Council, who have to vote on all this.

I absolutely don't believe in conspiracy theory but came to the conclusion some time ago too much power is concentrated in too few hands, and those people all have their own biases and vision for how they want things to go. Many examples of this happening of late with virtually no watchdog component.

Makes me very uncomfortable, especially when you are dealing with hundreds of millions of public funds.

And if these are all great decisions then the naked, full truth should only help to underscore that.