Thursday August 21, 2008 - The Taos News
Tourism marketing funding comes to TaosValley
Tourism marketing funding comes to TaosValley

By Patricia Chambers

The Taos News

Taos County is the big win­ner in the annual cooperative grant program distributed by the New Mexico Tourism Department.

A cooperative effort to prepare a grant application by the Taos County Lodgers AssociationandtheTaosCounty Chamber of Commerce resulted in a $33,000 to enhance the Taos Vacation Guide Web site www. taosvacationguide.com.

The grant is the largest ever awarded by the state Tourism Department.

Mary Jane Morgan and Janet Webb ofWebb Design prepared the grant application.

“It was the highlight of my week to hear that we got the grant,” Webb said.

The redesigned Web site is expected to launch by the end of this week, Webb said. It will include features such as a trip planner, and e-postcards, she said.

The Taos Vacation Guide is sent to anyone who requests information about Taos, Webb explained. The newest guide will soon be available for download from the Web site, she said.

“We get about 2,000 visits a month to the Vacation Guide Web site,” she said.

The tourism department funds don’t come without a price, however. Local matches are necessary, but Webb is not worried about raising the 50 percent matching funds.

The 45 hotels in the Taos County Lodgers Association, the town of Taos, Taos Ski Valley and the area art galleries and museums will contribute, Webb said. The state reimburs­es the entities that receive tour­ism grants for money spent on advertising.

“We have to spend about $100,000 to get the $33,000, but it’s worth it to expand the mar­keting programs for the coun­ty,” she said.

The Lodgers Association buys the back cover of the state lodgers guide each year. “We’ve had the back cover for about 20 years. They print about 1 mil­lion copies. It’s really effective for us,” Webb said.

Expanding the market­ing programs for the county is increasingly important as the tourist market shrinks, she said. “People who used to fly or drive long distances for vaca­tions are looking for the best place to spend their vacation dollar,” Webb said. “A vacation in Taos is less expensive that more exotic locations.”

Also underway is a proj­ect creating a Taos Tourism Council, Webb said. The non­profit has been registered with the state and the final papers are being drawn up, she said.

Additional grants awarded

The town of Taos also received $10,000 from the New Mexico Tourism Department to beef up its marketing efforts. Griffin & Associates, the agency that contracts with the town to market the community, made the town’s first application for the tourist funds in con­junction with the Taos Gallery Association and Taos County Chamber of Commerce.

The Taos Valley received nearly $124,000 from the 2008­2009 tourism grants.

Other organizations receiv­ing tourism funds are:

■ The Museum Association of Taos, $5,000

■ Harwood Museum of Art Alliance, $3,000

■ Taos Ski Valley Chamber,

$9,000

■ Taos County Film Com­mission for $1,000.

■ Enchanted Circle Coop­erative, $7,000

■ Eagle Nest Chamber of Commerce, $4,000

■ Holy Cross Hospital, $8,000

■ Taos Ski Valley Chamber of Commerce, $9,000

■ Touchstone Foundation/ Taos Artists Organization, $1,000

■ Town of Red River, $19,000

■ Town of Taos, $10,000

■ Village of Angel Fire,

$13,000.

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S&R Septic modifies lagoon renewal permit

S&R Septic modifies lagoon renewal permit

By Andy Dennison

The Taos News

The owner of S&R Septic says he will not add car-wash waste to his state application for a renewal permit — thus, removing one legal angle sought by neighbors who want to shut down his sewage lagoon disposal site off U.S. 64 west.

In addition, Taos County Attorney Sammy Pacheco has informed the Stagecoach Neighborhood Association that without any change in the permit conditions, “there is no action that Taos County can take” because S&R’s lagoon predated the county land use code of 2005 and enactment of the association’s zoning ordinance in 2006.

S&R owner Steve Rael, who has been in the septic and restaurant waste dis­posal business for more than 15 years, told The Taos News

Wednesday (Aug. 13) that while he doesn’t believe add­ing a type of waste constitutes “expansion” of his operation on Tune Drive, he has written New Mexico Department of Environment (NMED) with­drawing the request.

NMED spokesperson Mar­issa Stone confirmed that Rael had verbally informed the agency’s Groundwater Bureau the same information.

“(Processing as a renewal) means that the waste types, volumes of waste accepted, and location of the discharge will be the same as they were during the last permit term,” Stone said in an e-mail.

The only permit required for Rael’s operation is issued by the groundwater bureau.

For the neighborhood association, which has object­ed to the odor and potential health hazards of the 15-acre evaporative disposal site, the emphasis may shift to lobby­ing state environmental offi­cials rather than the county.

“It gets a bit lawyer-ish now,” said Peter Fortunato, a Tune Drive resident. “While we still contend that the land­use ordinance prohibits his use, now I guess we will have to make a big stink with the state.”

Fortunato said that the association wants NMED to expand it regulatory range beyond groundwater con­tamination to air quality issues.

“It’s common knowledge that sludge open to the air and blowing around is a health hazard,” he said.

Rael’s latest permit expired in May, and his application has been deemed acceptable by NMED.

Now, Rael must make pub­lic notice that he is seeking renewal, and state inspec­tors will conduct a “technical review” to see if groundwater under and near the 16-cell site is protected. Rael is allowed to dump 10,000 gallons a day, under his current permit.

If successful during the technical review period, Rael will face 30 days of pub­lic comment before a final determination.

Planning commission approves variance for limited parking in front of Walgreen’s

Planning commission approves variance for limited parking in front of Walgreen’s

By Patricia Chambers

The Taos News

The Planning and Zone Commission granted the devel­opers of Walgreen’s a variance Wednesday (Aug. 6) after a lengthy discussion of whether to include 10 parking spaces in front of the building pro­posed on a property on Paseo del Pueblo Sur, south of Cruz Alta Road.

The debate continued for about an hour and half circling around a 2006 requirement in the Town of Taos Land Use Development Code (LUDC) prohibiting parking in front of a commercial building.

Plaza de Colores on Paseo del Pueblo Sur was the first devel­opment required to meet the standard intended to improve the aesthetic of an ocean of parking spaces viewed from the street.

Commissioner Jim Pollard argued that the commission did not have the authority to grant a variance on the parking rule because the zoning code uses the phrase “shall not” allow parking in front of the build­ing, but Alex Abeyta, engineer­ing consultant on the project, argued that the developer is entitled to seek relief from the code when the economic value of the property is threatened by code requirements.

“That’s what a variance is for,” said Commissioner Charles Montgomery, who said the presentation was beginning to convince him to support the variance.

Ben Horton of Bencor, developer of the project, said he has brought the town’s zon­ing rule prohibition against parking in front of the store to the board of directors and a vice president of Walgreen’s and they have said front door parking is key to the company’s policy of convenient access for customers.

Horton, whose business has developed building sites for Walgreen’s for the past 20 years, said the company feels so strongly that customer con­venience is key to Walgreen’s success that it would likely abandon the project without the requested variance.

Commissioner Zeke Tapia, however, said that “it’s unfair to hold the town hostage” by say­ing it would not continue with the project without the parking spaces in front of the store.

Horton said his statement was presented only to empha­size the importance of the issue to Walgreen’s.

“This is up to you. You need to decide what is best for your community and Walgreen’s will have to decide whether the business is viable,” he said.

Tapia and Pollard voted to deny the variance, but the other commissioners voted to approve.

Site restrictions

The pharmacy and sundries store is expected to provide 30 permanent jobs, Abeyta said.

Abeyta said the site includes a Tri-State Generation electrical line easement, a New Mexico Department of Transportation easement and two storm water

‘This is up to you. You need to decide what is best for your community and Walgreen’s will have to decide whether the business is viable.’

Ben Horton

retention ponds. If the 10 park­ing spaces (of the 65 required) were to be moved, one of the retention ponds would have to installed underground to accommodate them, he said.

The parking spaces in ques­tion consist of about 15 percent of the total parking and three of the spaces would be Americans with Disabilities Act (ADA) requirements, Abeyta said.

The front of the store will be paved to accommodate a drive-through window and will be about 50 feet from the road­way, he added.

Although he, too, was reluc­tant to grant the variance, Commissioner Mark Gonzales said, “This is not a bar or a res­taurant. Walking from the back of the building would be incon­venient for the elderly and for the public in general.”

In an odd twist, two plan­ning department employees expressed their objection to the variance.

Long Range Planner Matt Foster said he had “clocked out” in order to present his objection as a resident of Taos. He insisted that the proposal does not meet the burden of proof necessary for a variance. “They could do something else,” he said.

Senior Planner Rudy Perea was asked by the commis­sioners for his opinion of the parking space variance. He deferred to his boss, Planning Director Allen Vigil, who said he does not believe the staff should present opinions. The commissioners need to assess the information presented at a public hearing and formulate their decision based on that presentation, Vigil said.

When Perea continued his comments saying Walgreen’s would be going against a policy statement on its Web site by asking for the variance, Town Manager Daniel Miera stepped in and asked that Perea’s opinion be stricken from the record.

The planning staff is directed to present information about the town planning and zon­ing regulations and should not direct the commission’s ruling, Miera said.

A section of the prop­erty on Cruz Alta Road will not be directly owned by Walgreen’s, Horton said. Focus Development will maintain the commercial business there and Walgreen’s will be built south of the existing office buildings. The property extends from Cruz Alta to Herdner Road.

‘Glitch’ puts crimp in county complex planning

‘Glitch’ puts crimp in county complex planning

$45M project likely to be rebid

By Andy Dennison

The Taos News

Taos County’s plan to fast-track a new administrative-judicial center screeched to a halt Tuesday (Aug. 12), as the county’s attorney found a dis­turbing legal loophole in state law.

While County Attorney Sammy Pacheco is still researching the issue, he told The Taos News Wednesday (Aug. 13) that it “looks like we won’t be able to go with the construction manager at-risk idea.”

State statutes only mention edu­cation facilities when detailing pur­chasing codes for this innovative contractual arrangement for public projects, Pacheco said.

Without statutory backup, Pacheco fears that any construction contract could be open to legal challenge.

“While I was researching for the contract (with winning bidder Bradbury Stamm Construction), it came to my attention that CM at Risk procurement method was not autho­rized in the statute,” Pacheco said. “It’s a technical glitch in the procure­ment code. Since Taos County is not a home-rule county, we have to follow state procurement codes.”

Through a voter-approved charter, home-rule governments can write their own codes and procedures — such as buying goods and services — as long as they don’t violate exist­ing state statutes. No New Mexico counties have home-rule charters, save the combined city-county of Los Alamos.

Re-bidding likely

For Taos County, the so-called “CM at Risk” would have permitted work on the $45 million complex to begin in October — when architectural plans were 70 percent completed and before a final project cost was negoti­ated.

In addition, the deal would have given a contractor a head start on purchasing materials — a cost-saving potential in these days of escalating construction costs.

If Pacheco’s suspicions bear out, the county will have to rebid the 125,000­square-foot project in a standard

Feds Seize Control of Private Equity Real Estate Firm

1,200 Investors Entrusted Nearly $255 Million to WexTrust Capital Now Under Federal Court Control

WexTrust Capital, a Chicago-based private equity firm with interests in up to 2.5 million square feet of U.S. office and industrial properties, hundreds of apartment units and hotel rooms, millions of dollars in mortgage debt, not to mention South African diamond mines, was taken over by the federal government.

After filing a formal complaint in U.S. District Court, the U.S. Securities & Exchange Commission was granted emergency relief to freeze WexTrust’s assets and place the Wextrust entities under the control of a receiver to safeguard hundreds of million of dollars in assets. The freeze also affects WexTrust’s ongoing offerings to raise money to acquire additional properties.

In addition to the emergency relief, the SEC is seeking “disgorgement of the defendants’ ill-gotten gains, civil penalties, and permanent injunctions barring future violations of the antifraud and other provisions of the federal securities laws.” If granted, such a move could affect firms that may have acquired assets WexTrust has recently sold.

The court appointed Timothy J. Coleman, a partner the Washington, DC, law firm of Dewey & LeBeouf as receiver over a wide ranging list of assets, that also includes personal residences, aircraft and bank accounts. (A listing of some of the commercial real estate assets accompanies this story.)

The SEC hit Wextrust Capital LLC, its principals Steven Byers and Joseph Shereshevsky, and its affiliated entities Wextrust Equity Partners LLC (WEP), Wextrust Development Group LLC, Wextrust Securities LLC and Axela Hospitality LLC with civil court complaints in connection with an alleged massive Ponzi-type scheme.

Concurrently, the U.S. Attorney for the Southern District of New York has filed criminal charges against the principals of the company alleging securities fraud.

The case has been assigned to the Honorable Denny Chin, U.S. District Court, Southern District of New York. There is a preliminary hearing scheduled before Judge Chin on Sept. 4.

According to the SEC complaint, from at least 2005, the defendants raised approximately $255 million from about 1,200 investors, targeting members of the Orthodox Jewish community of which Shereshevsky is a member, purportedly to fund the acquisition of specified assets, the majority of which were commercial real estate ventures.

Contrary to representations in the offering memoranda that proceeds would be used for specific projects, the SEC alleged that the defendants diverted funds to pay returns to investors in prior offerings and for personal expenses.

In one offering, conducted in 2005, the SEC complaint alleges that defendants falsely represented to investors that the more than $9 million raised would be used to purchase seven specifically identified real estate properties that were leased by federal government agencies, such as the General Services Administration.

In fact, according to the complaint, the defendants never purchased the seven properties. Moreover, at the time the offering occurred, they knew or were reckless in not knowing that the seven properties would not be acquired.

Significantly, while the offering was ongoing Wextrust entities “borrowed” more than $6 million from the funds raised in the GSA offering and used these funds for purposes unrelated to the GSA offering.

Overall, the complaint alleges, defendants diverted at least $100 million dollars to unauthorized purposes. The complaint alleges that the defendants are conducting at least four ongoing offering frauds intended to raise money to pay back investors from prior offerings.

It’s unclear at this point whether any of WexTrust Capital assets are retrievable. Coleman is telling investors that there is not enough information at this time to determine whether any assets will be liquidated.

The complaint names the following defendants.

Byers, age 46, is a resident of Oakbrook, IL, and owns 60% of Wextrust. He is the chairman of Wextrust and president and COO of WEP, the arm of Wextrust focusing on income-producing properties, and is also an owner or controlling person of Wextrust Securities. Together with Shereshevsky and others not named in the complaint, Byers controls the Wextrust affiliated entities.

Shereshevsky, age 51, is a resident of Norfolk, VA, and owns 20% of Wextrust through a partnership interest held in the name of his wife. Shereshevsk, until recently, Wextrust’s COO, was instrumental in founding Wextrust Securities, and was responsible for Wextrust’s expansion into purported diamond mining investments in Africa. Shershevsky pled guilty to one felony count of bank fraud in June 2003, U.S. v. Shereshevsky, 94 Cr. 248 (CSH).

WexTrust, an Illinois limited liability company, was formed by Byers in 2003. The company’s web site has been taken down by the receiver and replaced with links to information concerning the case.

WEP is an Illinois limited liability company headquartered in Chicago, engaged in the business of buying real estate assets, generally though its partially-owned subsidiaries. According to WEP documents, WEP is the beneficial owner of approximately 120 entities formed for the purpose of owning equity interests in commercial and multi-family real estate assets.

The Frozen Assets
Following is a partial list of the commercial real estate associated with assets frozen by the U.S. District Court and identified as assets in which WexTrust Capital has control or purported to have a direct or indirect interest.

CoStar Group Inc. shows WexTrust entities also own the following property: Oak Lawn Train Station Retail, at 5102-5116 W. Museum Drive in Oak Lawn, IL, with 11,111-square feet of retail space.

Array of Niche REITs Survive, Even Thrive in Unforgiving Real Estate Market

REITs Dealing in Life Science, Data Center, Student Housing and Medical Office Assets Mostly Fare Better Than Market Generalists

The outlook among publicly traded commercial real estate REITs following the second-quarter results was decidedly subdued. However, there were several notable bright spots among those focused on a handful of the tightest office markets, and REITs specializing in property niches like life science flex buildings and medical offices, self-storage, data centers and student housing, many of which appear to outperforming the market.

The strength of the niches reflects a potpourri of varying economic and demographic factors, including an aging Baby Boomer population, an undersupply of on- and off-campus housing for college students based on projections of the number of teenagers turning age 18, growing investment in biotechnology and medical research, growth and consolidation among Internet and telecommunications companies, and dislocation of former homeowners in the troubled single-family housing market.

The more mainstream property sectors continue to experience turbulence despite continued strong leasing and vacancy fundamentals in many areas. Most real estate investment trusts downsized their growth estimates for the second half of 2008 and ’09 in the face of the credit crunch and general economic malaise.

REIT executives are falling back on basic strategies that have steered them through previous real estate downturns. Many singled out their financial and leasing teams for praise during second-quarter conference calls as they focused on keeping debt under control and holding down vacancies by negotiating long-term leases in 2007 — while working to renew expiring leases early in a period of generally flat rent growth.

“There are four constants that are essential for a company during a difficult period, and they all start with the letter L: low leverage, low payout ratios, lots of liquidity, and finally, level-headed talent,” said Milt Cooper, CEO of retail REIT Kimco Realty Corp. (NYSE: KIM).

“Typically in a slowing economy we have a number of tenants usually on the office side approach us about terminating their leases early to downsize their space and reduce overhead costs. So far this year we have not seen that happen,” said Dennis Oklak, chairman and CEO of office and industrial REIT Duke Realty Corp. (NYSE: DRE) “We believe this is a positive sign because when the economy turns around — which it eventually will — the need for space should accelerate quickly.”

Over the last three weeks,CoStar Advisor listened in on most of the conference calls for more than four dozen REITs in the office, industrial, multifamily, mixed and specialty spaces. Executives with players specializing in the niches, along with some of the high barrier-to-entry office markets on the coasts, were among the most bullish on prospects for the next 18 months.

Self Storage

The self-storage sector was the strongest REIT segment in the first half, with returns up more than 12%, according the National Association of Real Estate Investment Trusts (NAREIT). Supply-and-demand fundamentals are driven by a simple fact: people who are the victims of foreclosure need a place to put their stuff, making the sector one of the most defensive investor plays among REITs.

However, the surge in the popularity of self-storage also means that the stocks are no longer as cheap as they used to be relative to their asset value. Some of the bigger players, including Public Storage Inc. (NYSE: PSA) and U-Store-It (NYSE: YSI), have been dragged down by the general economic malaise in Florida.

Hurricanes Katrina, Rita and others “filled everything up” in 2005 — virtually all of the Florida storage space was full with rent hikes of up to 25%, said Dean Jernigan, president/CEO of U-Store-It.

“It lulled us into a sense of false security, I think. When those people started moving out, it uncovered what was underneath and that is perhaps management teams that had grown to accept something less than perfect, they weren’t as energized as before. I think another term is bad, dumb and happy.”

However, the third quarter has started off in promising fashion, with a newly-formed joint venture of Sovran Self Storage (NYSE: SSS) and Chicago-based real estate management firm Heitman pulling off one of the largest self-storage property transactions ever last week, acquiring a $144 million portfolio from San Antonio-based Hendry Investments. The 1.62 million-square-foot portfolio consists of 21 Lock-N-Key Mini-Storage locations in five states. The properties are 84% occupied and are in the Houston, Dallas, San Antonio, Tampa, Columbus, Denver, and Louisville markets.

Life Science

Alexandria Real Estate Equities (NYSE: ARE), the first REIT to exclusively focus on space for pharmaceutical, biotechnology and life science product/service companies, is benefiting from the perception among investors that the asset class carries a higher risk. The result: an effective barrier to entry that helps specialized players, like ARE, armed with the industry knowledge and track record to effectively underwrite credit tenants, be able to acquire and develop properties at attractive initial yields, unlike many other development-centered REITs. Analysts expect Alexandria will continue to reap above-average earnings by tapping income from its extensive development pipeline.

“We concentrate on the highest quality and most flexible world-class lab space. We’ve stuck to our knitting with highly flexible and generic space and we’ve generally try to avoid highly specific tenant facilities and those that are verey costly manufacturing facilities,” said CEO Joel Marcus. “Recently, other landlords have stumbled when they sought these kinds of facilities or transactions.”

Marcus said ARE is “in great shape for the remainder of the year,” reporting strong first-half leasing in the San Diego market and other life science clusters around the country. Rental rates are up more than 19% for renewed and released space and two-thirds of its expected lease rollovers for the year are either completed or committed. The REIT’s average occupancy is at 95% — even higher in the especially tight San Francisco, Massachusetts and Seattle markets.

“The life science industry has a positive long-term factor that supports the continuing need for research , which drives the need for our property, not just today but also in the future, said Alan Gold, chairman, president and CEO of BioMed Realty Trust, Inc. (NYSE: BMR). “Our long-term, triple-net leased structures provide us with relatively stable, steady and predictable cash flow stream.

On the development front, “we are hitting major milestones across our entire program,”including the completion of core-and-skeleton at Towne Center Drive in San Diego, where Illumina will expand their presence on its San Diego campus to 193,000 square feet, he said.

BioMed leased more than 327,000 square feet in the quarter, highlight by its 144,000-square-foot lease with DayStar Technologies at the Pacific Research Center in San Diego. BioMed was also able to deliver more than 241,000 square feet during the second quarter to four tenants at the Center for Life Science in Boston, a 703,000-square-foot research facility.

Data Centers

Since the bursting of the Internet bubble early in the decade, technology-related real estate has been an underserved asset class. REITs like Digital Realty Trust (NYSE: DLR) and DuPont Fabros Technology, Inc. (NYSE: DFT) have been among the first focused exclusively on the data center space, where there are few competitors due to the expensive development costs.

For example, extensively improved space owned by Digital Realty can cost between $700 and $1,000 per square foot to build out. DLR has 2 million square feet in its redevelopment pipeline at very favorable yields that are roughly twice those of traditional office space, resulting in above-average earning growth project for the next three years, according to Citi’s REIT research group.

Hossein Fateh, president and CEO of DuPont Fabros Technology, Inc. (NYSE: DFT), said the data center specialist’s portfolio was just under 94% occupied in the second quarter, up 600 basis points from the previous quarter. While tenants are taking longer to sign leases, “we have several letters of intent executed and remain bullish on the existing traffic and prospective customer interest in all our facilities,” Fatah said.

“The supply and demand parameters are still in our favor that remains significant barriers to entry in the wholesale data center business,” said Hossein Fateh, president and CEO of DuPont Fabros Technology, Inc. (NYSE: DFT). “We are working very hard to execute leases and remain confident in our ability to do so. We have a conservative capital structure with low leverage and we are in the process of obtaining financing to fund our additional development projects.”

Construction of the first phase of DuPont Fabros’ ACC5 center in Ashburn, VA continues on schedule for completion at the end of first quarter of 2009, and the company broke ground in the first quarter on the first phase of a center in Piscataway, NJ, a project set for completion in third-quarter 2009. DFR started demolition at a development site in Santa Clara, CA, earlier this month and plans to begin construction of a facility scheduled for delivery in the fourth quarter of 2009.

Student Housing

Housing on or near college campuses is enjoying strong demographics that provide more protection from economic cycles than traditional apartment companies, industry analysts say. Driving the demand is the more than 4 million Americans in each of the next 12 years and 400,000 Canadians each year that will turn age 18 until 2019, according to a recent report published by Urban Land Institute.

Investors have taken note, and companies like American Campus Communities Inc. (NYSE: ACC) have built a strong platform based on the development and acquisition of those assets.

“We are very pleased with the continued success in all areas of our business,” said ACC CEO Bill Bayless. “We believe that our core performance this quarter coupled with our lease-up progress and rental rate growth for the upcoming academic year demonstrate the quality of our portfolio and our ability to execute on our business plan.”

“The other companies that have student housing expertise are not well capitalized and have to bring someone else’s money to the table,” Bayless said. “It is a segment that does have good barriers to entry, and that is one of the reasons we are most excited about it.”

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