For many firms in the design and construction industry, a project begins when the site has been acquired, the contract is in place, and the owner/developer says go. But by that point, Matt Deal’s job is already done. That’s because Matt and his firm, Deal Sikes & Associates, are involved in the very early stages of a project, helping entities acquire the land they need to bring projects to fruition.
RVi has been very lucky to work with Deal Sikes on a number of these early-stage projects, providing highest and best use analysis, impact studies, and expert witness testimony that often lay the groundwork for future development. Leading RVi’s efforts is Peter Boecher, a licensed Landscape Architect, Certified Planner, and Counselor of Real Estate who has decades of experience in this specialized market.
We sat down with Matt Deal to learn more about his firm’s major areas of practice and how land planning fits into the complex world of real estate appraisals, acquisitions, and counseling.
1. Real property valuation and consulting is a very niche market in the real estate industry. Tell us a little about what Deal Sikes does, and how your services come into play during real estate development.
I’d categorize the majority of our work into three different areas. The first area is real estate that’s in litigation, and there are different types of real property valuation that fall into this category. Condemnation is one of those – the government’s right to acquire property upon the payment of just compensation. We also do a lot of bankruptcy work, a lot of environmental contamination work, title disputes, construction defect cases, etc. There are just a whole lot of different reasons why people get into lawsuits over real property values. So we are experienced in those areas and are accustomed to providing expert testimony in those cases.
Another area that we do a lot of work in is estate planning, or estate tax issues. When someone with significant real estate holdings passes away, Uncle Sam is ready to take his share. There are ways to pre-plan that process, to minimize the impact of passing along property to heirs – through trusts, family limited partnerships, and things of that nature. It is not technically litigation, but it is subject to scrutiny by the IRS.
The third area is more general real estate counseling. This has to do with the government’s acquisition of private property under the threat of eminent domain. It is different from the work I described previously where we’re actually doing the appraisals and testifying to the value. As an example, we managed the appraisal process for the Metropolitan Transit Authority of Harris County (METRO), which is Houston’s version of Dallas’ DART and Austin’s CapMetro. They recently went through a process where they extended the light rail network from 13 miles to 28 miles throughout urban Houston. That necessitated the acquisition of about 450 properties – mostly sliver acquisitions – under the power of eminent domain. We managed the appraisal process for METRO.
2. How do you typically utilize the services of a land planner like RVi in the course of your work?
We work with land planners a lot in the first area of work that I described. The land planner assesses impacts to remainder properties and also layouts of the property before the taking. Or, if there is a tract of land that is undeveloped, the question becomes what is its highest and best use? We often work with RVi to assess and consider the likely uses of the property – from a legal perspective and from a physical perspective in terms of layout and access. Then, Deal Sikes handles the financial feasibility and we collaborate on the maximum productivity part. After the taking of that property, oftentimes there is a damage to the remainder. RVi also provides excellent service as it relates to considering all the potential impacts to a property caused by a taking.
In the third type of work I described, the counseling piece, we’re working for entities like METRO. Our team assesses what needs to be done to make these property owners “whole” once the taking occurs. So if you own property, it’s worth a certain amount. The government has a right to take a portion of it to do things like widen a road, build a school, put in power lines, etc. But the second part of that is – they’ve got to pay you for it. So that’s where we come in – figuring out what they have to pay you to make you whole. We work with Peter at RVi to properly assess what is happening to the stakeholders’ properties.
One counseling project that we’re actively working on now is the Uptown Houston project. The Uptown Houston district is a very high-end mixed-use area of town. It is an equal mix of office, retail, and residential – a high density urban activity center. Right now, Uptown is in the process of creating a mass transit system through its core, which is Post Oak Boulevard. Deal Sikes is in the process of managing the acquisition process for Uptown’s bus rapid transit, and we’re working with Peter and RVi on that project.
3. What have been some of your most challenging project assignments?
I’d say certainly the METRO project was challenging. It was 450 parcels, 2 appraisals per parcel – that’s 900…plus many updates of those appraisals. It was well in excess of 1000 appraisals that we oversaw and reviewed. Working with a large government agency is always a challenge. In addition, this government agency was in turn having to work with another big agency – the University of Houston. So you had Metro with the power of eminent domain acquiring the property of the University of Houston, which also has the power of eminent domain. That was certainly challenging.
More recently, we did an appraisal assignment of 30 properties on Galveston Island. It is challenging to appraise property when there is limited market data. Our work is based on comparative analysis – comparing properties financially, geographically, in terms of rental prices, sale prices, etc. So we require data upon which to compare. When you don’t have that data, it is very challenging.
Generally there are two kinds of appraisers: residential and commercial. Residential brokers are required to report sales prices in MLS. Commercial brokers are not.
Texas is a non-disclosure state. In most other states, you can go down to the courthouse and see the price that is printed on the deed. Texas is a bit more of an independent-thinking place – so sales price is not required to be disclosed. My firm needs that sales data, so we actually spend a lot of time calling around, talking to people and gathering sales data that is not part of the public record. Frankly, you just have to roll up your sleeves and get after it.
4. You have worked extensively on eminent domain and condemnation matters. What are some of the key nuances that set this area of practice apart from others areas of your practice?
The main nuance is knowing compensable elements of market value loss. There are certain elements that can’t be considered, even if they affect the value. For example, if a road widening occurs, let’s say that before the taking your business was right after the exit ramp of a freeway. So before, traffic could go down a ways and enter your property easily. So if they widen the road and move the exit down a quarter of a mile, now traffic is exiting past your property. That certainly has a negative impact on your business, but you can’t get compensated for it. Other things that generally aren’t compensable include noise and loss of business. You must understand all of the nuances going in, because if you make a mistake and load non-compensable items into your damage analysis, you will have a problem with the court.
I’m sure it’s the same for RVi – you all have to understand the key nuances of your land planning and landscape architecture practice. The bottom line is that it’s important to have experienced people when you’re dealing with these complex matters.
5. Tell us a little about your own personal background and how you got into the profession of real estate valuation and counseling.
I grew up in Houston and graduated from The University of Texas at Austin with a Bachelor of Arts degree in 1988. This was in the depths of the Texas depression.
Real estate always interested me. I went to work for a small valuation firm, Lewis Realty Advisors, and I was there for 20 years. My partner and I struck out on our own and started Deal Sikes & Associates in 2009.
6. How do you relax and unwind?
My wife, Kimberly, and I have been married for 24 years and I have 3 kids – two in college. We have a place in Galveston that we really enjoy with family and friends.
7. What does RVi bring to the table for Deal Sikes?
Frankly, a lot. The ultimate benefit for us is in presenting something that is easy to understand. That’s not to say that what Peter does is a simple analysis – because it’s very complex – but the conveyance of the information is simple and easy for people to understand. The recipients of that information could be anyone from a special commissioner in a condemnation case, to a judge, to a juror. All of those people have varying levels of knowledge about this type of work, but all of them must be able to look at the drawing and understand it easily. We appreciate the depth of Peter’s experience in this eminent domain arena. So many times I get drawings from engineers or other land planners that just simply doesn’t convey the information as well as RVi does. As soon as a juror doesn’t understand what you’re saying, the case is in jeopardy.
Any time you’re hiring someone for a professional service – be it a lawyer, an accountant, and appraiser, or a land planner – you’re hiring experience. As a client, I can go to sleep at night knowing that whatever the issue is, it’s in good hands with Peter and RVi.
8. You’ve lived and worked in the Houston area for many years. What have been some of the biggest changes in the marketplace that you’ve seen over the past 3-5 years?
Let’s go back a little further than that – 2006 through early 2008. We had a market that was very strong during that time. Then in 2008, Bear Stearns went down in early summer, Lehman Brothers went down in September, and at the same time Hurricane Ike hit. Houston was out of commission for at least a week, but probably more like a month. After that, things started to go south in the real estate market. It’s not really that it went down, it’s just that nothing happened. There were very few sales, very few transactions. It was like a dead zone. Then sometime at the end of 2009, things started to get better. After 2010, it has just been an explosion. It was like the elevator went up through 2008, then it kind-of stopped for a year or two, and then it just picked up at light speed. Right now we’re dealing with the fact that we didn’t build any apartments in that 2008-2009 time period. So now we’re putting a ton of apartments on the market. And it’s not just garden apartments – but high rise, multi-family, high-density apartments. We’re really seeing it in the urban corridor; there are cranes everywhere. People are building high-rise residential and high-rise office buildings. We’re seeing a lot of product constructed and coming on line soon. That’s the biggest change I’ve seen.
The thing I’m really wondering about is how are all these people going to get around? The thing with transit is that as you’re building, you are not meeting the immediate need. If we need it now, it’s already too late. In order to be on top of things, you have to look out 20+ years in the future. I think Uptown has recognized that fact, and is doing something about it. Otherwise, transit can be a big problem. That can hurt a city badly in the long-term, to have that reputation of traffic congestion.
9. Related to trends in the Houston market, where do you see the focus of your work going in the next 3-5 years?
I think it will be more of the same. I mean, we don’t seek out litigation, but when the phone rings, we pick it up. There is always litigation involving real estate. Regarding our trust and estate work – I think as more wealth is being created, there will be a greater need for that service. There has been a significant amount of wealth created in Houston and really all over Texas, so the need for trust and estate planning will increase. In terms of counseling for the bigger projects – we see more of that coming in the future too, and we are definitely capable and ready to take on those big projects.