Dallas Spent Five Years and $4.4 Million not Building Veterans Housing, And Dwaine Caraway's Pissed
City Hall has done its part to make Patriot's Crossing a reality. Over the past five years, it's handed developer Yigal Lelah $4.4 million and promised another $1.3 million in HUD funds. It has endorsed him in three unsuccessful attempts to win lucrative, highly competitive low-income housing tax credits from the state. Mayor Mike Rawlings made it part of his marquee GrowSouth plan. The city really, really wanted this particular project, which would provide 162 units of veterans housing directly across the street from the VA Hospital.
Lelah, meanwhile, has done ... absolutely nothing. Well, not quite nothing. He used the city's money to acquire the land for the project, and he's obviously been very busy behind the scenes marshaling political support (the City Council voted five times to increase funding for the project, which also received an official endorsement from State Senator Royce West), but he's built nothing. For an idea of what that looks like, you can hop in the car and drive down Lancaster Avenue, or you can just hop on Google Streetview. The picture's two years old, but it could have been taken yesterday.
This horse has been flogged on Unfair Park before, with stories about the price of the land and the fed's unwillingness to green-light funding. What's different this time is that city staffers have joined in the flogging.
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Theresa O'Donnell, who oversees Dallas' housing department, said on Friday that the city sent Lelah two letters notifying him that he's in default on his contract. The first, sent August 21, was because he hadn't started construction within the five years allotted under the terms of the contract. The second, sent August 27, was because there are two liens on the property, another violation. One, a mechanic's lien for $103,482.14, was filed by 5G Studio Collaborative, LLC. The second, a labor lien for $444.64, was filed by the city.
If Lelah doesn't clear the liens and start construction within a 30-day grace period, O'Donnell says the city will likely begin the process of taking the property as a way of recouping its $4.4 million investment, which was given as a forgivable loan.
City Councilman Dwaine Caraway, whose district absorbed Patriot's Crossing from Vonciel Hill's following redistricting in 2011, said the lack of progress has been shameful and has hampered efforts to revitalize the Lancaster Corridor.
"Hopefully, at some point, we will be able to have someone step up to the plate, maybe not with the same players but with the same type of development," Caraway says. And unlike Patriot's Crossing, the new development won't flounder for years as empty dirt. "I can promise you one thing: It's going to be moving. If I had had anything to do with it from the beginning, people would be living in it now."
Lo and behold, someone is stepping up to the plate. After this post was published on Monday, Scott Galbraith, vice president of Matthews Southwest's low-income housing arm, called to say the project may not be so dead after all.
"We're in the final stages of our due diligence to partner with Yigal Lelah and make sure the project gets completed on time and on budget and in a fashion [beneficial for Dallas]," Galbraith said. The window for clearing the liens and starting construction is closing fast, but Galbraith is "optimistic that we [can] address the city's concerns and get this project going."
Matthews Southwest has been familiar with the project from the beginning. Two years in a row, the firm went before the City Council seeking low-income tax credits for its Belleview Apartments project. Two years in a row, the City Council opted to endorse Patriot's Crossing instead.
The rivalry turned into a partnership when Matthews Southwest began working with development consultant Claire Palmer on a separate project with Family Gateway. Palmer was Lelah's consultant as well, and she suggested they pair up on Patriot's Crossing.
It's still possible that the 30-day grace period will come and go and the city will cancel its contract with Lelah. If that happens, O'Donnell would still like to see housing on the site, perhaps combined with a clinic or pharmacy or medical office that would complement the VA. She does not want to see it turned into a surface parking lot, a potential use for any property in the vicinity of the VA, though she says that "ideally we might be able to solve some of their parking problems in addition to what we want to see on the property."
Who ultimately develops the property O'Donnell would like to determine through a competitive bidding process, which would mark a major change in how big housing deals in Dallas (e.g. Patriot's Crossing and Bexar Street) have traditionally been done. She also thinks it would be a good idea to actually do a bit of due diligence before signing a contract.
"In the past, developers did not have the means to carry out a project as big as they were working on, which may be the case in Patriot's," she says. The city needs to start taking a close look at a developer's other jobs, its staffing levels, and its overall ability to complete a large-scale project. "One of the lessons we've learned from these deals that haven't gone forward is we need to put more rigor in the selection process. We need to be vetting these proposals."
Not that the city is quite back at square one. It will likely never recover the $200,000 in consulting fees or $300,000 in architectural expenses Lelah paid with city funds, but he did assemble more than two dozen properties into a single parcel, which should make the land more attractive to potential developers. That, O'Donnell says, was a "great exercise. I'm glad that got taken care of."
This post has been updated with comments from Matthews Southwest VP Scott Galbraith.
Send your story tips to the author, Eric Nicholson.
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