Saturday, September 18, 2021

Gelbman: Overbuilding in Flower Mound

Itamar Gelbman, Place 5, Flower Mound Town Council.

For the last few months I have been warning that we are overbuilding the commercial properties in Flower Mound, and as always, I have been personally attacked by the Council members and their supporters, many of whom are personal friends with the developers or the land owners. But is it true? Are we overbuilding the commercial properties and senior care properties?

One way to see who is right is to look at the physical occupancy of the properties. Here is where you will see a game of musical chairs.  As brand new retail centers go “live,” developers aggressively look for tenants – mostly because brand new construction has a much higher cost basis than older properties and usually a much larger loan that needs to be paid. Commercial developers need to quickly lease their properties to begin to recover their costs, and are willing to discount the rent in order to attract tenants.  Another factor in the desire to rent quickly is the repayment of net, net, net, or NNN charges. NNN charges are a way for the landlord to pass-through expenses (such as property tax, insurance, maintenance, etc…) to the tenants. It is an additional charge on top of the rent and each tenant in a commercial property pays his share (according to the % the tenant occupied space) to the landlord. So if the property is at 60% occupancy, the landlord pays from his own pocket the rest of the 40% operation cost, while if the property is at 100% occupancy, the landlord pays nothing out of pocket.

By having so much available square footage to lease, the landlords with the highest basis and costs are more aggressively interested in leasing their properties. This creates a major problem, as in some cases the brand new developments are leasing their spaces cheaper than the older developments. This is like a musical chair game which might makes you believe that there are more commercial tenants in town, but in fact it is the same amount of square footage leased. For example, the Starbucks that was on 2499 and 3040 next to Tom Thumb relocated to Lakeside, then Trio Coffee that was on 2499 next to Wells Fargo relocated to the old Starbucks location, and Wells Fargo relocated to a brand new standalone building. Here is a perfect example of 3 commercial tenants that relocated, creating the feeling that we are growing.

Another way to know we are hurting ourselves on the commercial development component of our town is to look at the property taxes. While your residential property is being assessed based on recent sales and comparisons, commercial property owners can appeal their assessments and they then get reassess based on their net operating income, which may result in a lower tax. This brings us to a very interesting fact; when the council voted for adopting the Town Tax Rate, I was the only member who fought for a lower property tax rate, and was once again personally attacked by the same council members.

So let me ask you these two questions:

First, for the current tax year, was your property assessed lower than the year before? My bet is that your answer is “no.”

Second, if my fellow council members are convinced that allowing more commercial and senior care properties to build in Flower Mound actually reduces residential property taxes, how come a big portion of these commercial properties were assessed LOWER than the previous year and in some cases, are now assessed lower than they were assessed in 2008, in the heart of the recession?

According to Denton Central Appraisal District ( the following properties were assessed lower in 2016 than in previous years:

  • Calloway’s on 2499 was assessed in 2015 for $3,077,772 and for $2,326,951 in 2016, a $750,821 decrease.
  • The commercial property on 1900 Long Prairie was assessed in 2014 for $7,019,571 and for $6,250,000 in 2016, a $769,571 decrease!
  • The commercial property on 3301 Long Prairie Rd was assessed in 2015 for $3,397,388 and for $3,289,050 in 2016, a $108,338 decrease!

As I mentioned earlier, some commercial properties are now assessed lower than they did in 2008 and 2009, the heart of the worst recession of modern times.  Some examples are:

  • The Tom Thumb property on 2499 & 3040 was assessed in 2008 for $11,260,360 and in 2016 for $8,444,000. That is whopping decrease of almost three million dollars!
  • The Gas Station at 3300 Long Prairie Rd was assessed in 2008 for $955,800 and for $675,000 in 2016, a $280,800 decrease!
  • CVS on Morriss & 3040 was assessed for $3,313,982 in 2008 and for $2,780,568 in 2016, a $533,414 decrease!
  • Target on 2499 was assessed for $14,192,048 in 2008 and for $11,911,560 in 2016, a $2,280,488 decrease!

And there are many more.  In the senior care facilities we see similar trends:

  • Rosewood Assistant living was assessed for $8,982,740 in 2014 and for $8,000,000 in 2016, almost a $1,000,000 decrease.
  • Autumn Leaves was assessed for $3,330,000 in 2014, and for $2,825,000 in 2016, a $505,000 decrease.
  • Flower Mound assistant living was assessed for $2,389,085 in 2014 and for $1,771,665 in 2016, a $617,420 decrease.

Flower Mound has always been a successful town, even during the last recession. Flower Mound didn’t get hurt as much as other towns and cities across the country, and I believe that one reason for this is the pride of ownership. When residents have their hard earned money invested in their own properties, they tend to take care of it.  Flower Mound is an upper class community with many smart and well educated individuals who know how to secure themselves financially and to save for a rainy day, like a recession. This type of ownership doesn’t exist in Multi-Family properties and even at some older commercial properties.

A major purpose for having commercial properties is to lower the tax burden on the residential, personal property owner, and as you can see, we are doing the exact opposite.

I am the lone council member who is fighting for higher construction standards, as I want to make sure we attract the right kind of businesses; those that will be successful long term.  By lowering the standards and giving exemptions and waivers to commercial developers in order to attract any business we can, we are hurting ourselves in the long run, as a big portion of these retail businesses are vulnerable to recessions.

My opponent is a commercial real estate developer who refuses to answer even simple questions concerning how he would of vote on new developments, and in some cases even joked that we are “a development district.”

Once again, I am asking for your vote so we can assure a sustainable Flower Mound for our future generations.

CTG Staff
The Cross Timbers Gazette News Department

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