Austin Ordered to Pay South Terminal Operator $90 Million in Eminent Domain Fight at ABIA

By Nathan Bernier

The City of Austin should pay $90 million to evict the company running the South Terminal at Austin-Bergstrom International Airport, a panel of special commissioners ordered in Travis County Probate Court.

The amount awarded by the special commissioners — three landowners with no stake in the deal who were appointed by a judge — is 46 times what the city had originally offered Lonestar Airport Holdings.

“It’s a pretty extraordinary result,” said David Todd, an eminent domain attorney in Austin.

The South Terminal — where discount airlines Allegiant and Frontier operate — is a much smaller facility than the main Barbara Jordan Terminal at ABIA. The South Terminal has three gates, food trucks, and indoor and outdoor waiting areas.

Lonestar Airport Holdings was granted a minimum 30-year lease of the South Terminal in 2016. The deal allows for two optional five-year extensions. Lonestar claims to have invested almost $20 million since taking over the terminal.

Austin airport officials, with the blessing of the City Council, want to demolish the South Terminal to create space for a new concourse with at least 10 gates. The concourse would be connected to the Barbara Jordan Terminal by an underground pedestrian tunnel.

In a statement, the city didn’t say whether it would pay the $90 million or object to the valuation. Either side can dispute the award in civil court.

The $90 million decision “furthers the airport’s mission to deliver critical improvements and modernization projects needed to support increased passenger and airline activity,” the airport said in a statement. ABIA said it would not make anyone available for an interview or answer further questions.

Lonestar Airport Holdings CEO Jeff Pearse said in a statement that he’s pleased with the $90 million award and wants to reach an “amicable” deal with the city to “avoid ongoing, costly and unnecessary litigation.”

Eminent domain attorney Luke Ellis, who also teaches at the University of Texas Law School, said the use of eminent domain by a government authority to terminate a contract is “very unusual.”

“It’s essentially akin to the city trying to condemn its way out of obligations and agreements. I think that’s terrible,” Ellis said. “If the city were to prevail here, I think it would discourage and dissuade future private businesses from partnering with the city.”

The city is already moving to bulldoze every building around the South Terminal. Demolition companies were invited in December to bid on an estimated $6.5 million contract to destroy 39 buildings. Six companies have bid.

Meanwhile, a separate case is playing out in federal court.

Lonestar Airport Holdings sued the city, alleging a provision of its lease allows the company the exclusive first right to be involved in any airport expansion.

In federal court filings, Lonestar says it was willing to make a “significant up-front investment” in the South Terminal only because the length of the lease would give the company a chance to recoup its investment.

Attorneys for the city countered in federal court filings that Lonestar’s lease allowed the company to be involved in the airport expansion only if the city agreed.

U.S. District Judge Robert Pitman last month denied Lonestar’s request for a temporary halt to the airport expansion while the lawsuit proceeds.

Pitman ruled Lonestar would not suffer irreparable harm, because “monetary damages could remedy Lonestar’s alleged injury.”

Lonestar claimed in court filings it would prove the city directly cost the company hundreds of millions of dollars.

Correction: A previous version of this story incorrectly stated Lonestar claims to have invested almost $50 million in the South Terminal. The figure is nearly $20 million.

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Photo: Gabriel C. Pérez, KUT


Deal Sikes provided real property valuation, counseling and expert testimony on behalf of the property owner in this matter.

Ruling Could Set Hefty Price Toward Properties Flooded Above Barker, Addicks Reservoirs During Harvey

By John Wayne Ferguson

More than five years after their homes and businesses were flooded, residents above the Addicks and Barker dams are learning how much money the federal government owes them for damage from Houston’s overflowing reservoirs.

A federal judge last week ruled that the owners of six upstream properties flooded during Hurricane Harvey should collectively receive nearly $550,000. The six were chosen — jointly by Justice Department lawyers and attorneys for hundreds of property owners  — as test cases in a massive case initiated just moths after the historic deluge.

The decision could open the door to thousands more judgments for property owners and could result in the government paying out tens of millions more dollars, attorneys for the flooded residents said Wednesday.

The case falls under a special jurisdiction that oversees so called “takings” cases, involving allegations the government temporarily took control of private land for a legitimate purpose. If the court’s ruling survives anticipated appeals by the Justice Department, it could become the largest government takings case in U.S. history, according to attorneys representing property owners.

A ruling is still pending for separate group of residents and business owners whose properties flooded when the U.S. Army Corps of Engineers opened the Addicks and Barker floodgates. The downstream property owners saw their claims dismissed in 2020, but in June a federal appeals court reversed the dismissal and remanded it to the lower court for further proceedings.

Starting Aug. 28, 2017, and lasting four days, Hurricane Harvey unleashed historic amounts of rain over the Houston area. The decades-old flood reservoirs  on either side of Interstate 10 became dangerously full. The floodwater they retained caused widespread flooding of homes and businesses on the far-west outreaches of the Houston region.

After the storm, more than 1,600 businesses and homeowners sued the Army Corps in the specialized U.S. Court of Federal Claims in Washington, D.C., contending the government intentionally planned for the reservoirs to flood their land. In 2019, U.S. Judge Charles F. Lettow ruled government officials had knowingly and intentionally used private property to store rising floodwaters.

Then, in separate hearings, Lettow set about assessing how much money these property owners were owed. On Oct. 28, Lettow ruled on damages, laying out explicitly how much some property owners were owed for decreases in their property values, the damage or destruction of their personal property and the costs of being displaced by the floods.

“The plaintiffs are entitled to just compensation for the permanent flowage easement the government took through its construction, maintenance, and operation of the Addicks and Barker Dams,” Lettow wrote.

The six property owners included homeowners and owners of rental properties. The decision in these test cases will trigger a process for Lettow to assess how much compensation property owners might be owed in thousands of other complaints. If Lettow’s standard is applied to all the upstream homes and businesses believed to be flooded, the total compensation would top $1 billion, according to Daniel Charest, a lead attorney for the upstream plaintiffs.

Charest said he expected the Department of Justice to file an appeal within the next 60 days and will likely challenge property owners’ rights to damages.

For the six test properties in Katy and Houston, Lettow gave out vastly differing sums: one family, he said, should be awarded $195,000 because of the damage to their home. Another plaintiff was awarded $1,401, according to court records.

The property owners who received the largest award saw their home on Kelliwood Manor Lane in Katy flooded by more than a foot of water for four days. The person with the smallest award experienced no flooding in her Katy home, but she had damage to her garage, according to court documents.

Vuk Vujasinovic, an attorney with the law firm VB Attorneys and a lead counsel in the lawsuit, said attorneys and their clients were still working to process what Lettow’s decision would mean in their individual situations. Vujasinovic said there was a “wide variance” in the awards for the plaintiffs in the test case, and that Lettow had “split the baby” in his decision.

“Every case is going to be individual, based on what happened in their house, but as a general matter, we’re going to study the methods by which the judge awarded these monies and apply it to all our our clients across the board,” Vujasinovic said.

The difference in the damages was largely based on structural flooding, attorneys said. Properties that had significant flooding got more money and places with less damage got less, he said. Renters also appear to be in line to receive less compensation for their losses.

“By and large, a majority of the claimants should be happy with the result,” said Charest, one of the lead counsels.

On average, the six plaintiffs received compensation of about $130 per square foot of flooded interior, according to a press release from his law firm, Burns Charest LLP.

“I am grateful that we have achieved this result after so much effort,” said Charest. “These awards will be a huge help for our clients. I hope this result can help achieve as good or better results for the other upstream flood victims going forward.”

Lawyers for flood victims have estimated that between 10,000 and 12,000 properties upstream of the reservoirs were damaged during Harvey.

Being on the witness stand in a case was an emotional experience for the test case plaintiffs.

“I felt like I represented thousands, and I could feel the weight of that as I testified,” said Elizabeth Burnham, a test case plaintiff who was flooded in Bear Creek. “I wanted to do well for myself, but it was definitely nerve-wracking, because I knew there were many more people that depended on me doing a good job.”

Burnham sold her home to an investor after the storm and moved, but she said she still feels scared of flooding because of what happened during Harvey.

“I can’t sleep at night in a heavy rainstorm, because I have to check the road to make sure it’s not going to flood our new house,” Burnham said.

Burnham declined to comment about the size of the judgment because of possible future appeals.

Attorneys representing the federal government didn’t respond to requests for comment.

Charest and other law firms are encouraging property owners upstream of the dams to file claims before the statute of limitations passes next year on the sixth anniversary of Hurricane Harvey.

“The six-year anniversary of Harvey is August 2023,” Charest said. “I’m telling everyone that will listen to me to please get the word out that they need to get a claim on file. They can do it themselves, they can hire a lawyer, I don’t care. What I don’t want to see is the government take this property interest and do this harm and not be held accountable.”

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Photo: Mark Mulligan, Houston Chronicle

Texas Supreme Court Rejects State of Texas Bid to Overturn $28.8M Harris County Jury Verdict for CC Telge Road, LP

By Vinson & Elkins Law

In a unanimous opinion issued on May 28, 2020, the Houston First Court of Appeals affirmed in all aspects a February 2018 jury verdict in favor of CC Telge. As referenced in the opinion, at trial, the State argued it owed compensation of $1.3 million and CC Telge requested $28.8 million from the jury. The Texas Lawbook reported this to be the highest jury verdict ever for a property owner in a Texas condemnation case (The Texas Lawbook, February 7, 2018).

The State filed a Petition for Review with the Texas Supreme Court in November 2020 and on March 5, 2021, the Texas Supreme Court denied the Petition for Review.

There is a team of V&E lawyers and staff who participated in this case during pre-trial discovery, trial and on appeal. The trial lawyers were Donny Griffin and Billy Dyer with assistance from Cathy Smith on appellate issues.

Read more about the Texas Supreme Court’s decision in Law360.

For more information, please speak with our media contacts.

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Suburban Housing Demand Picks Up Around Texas Cities

By Paul Bubny with Connect Media

Increased demand for suburban housing will support property values in the outlying sectors around Greater Houston and other Texas cities, said Houston-based valuation firm Deal Sikes.

“Corporate workplace trends, such as working-from-home, have energized the suburban housing markets,” said Mark Sikes, principal with Deal Sikes. Even employees who will work-from-home only one or two days a week in the future are more open to suburban and exurban living.”

Over times, Sikes said, “attitudes about long commutes will change and homebuyers will respond by moving farther out.”

Community developers and home building firms show increased appetite for lots and developable land in counties surrounding Houston, said Sikes.

“Suburban housing growth is establishing a future market for retail development in the long-term,” he said. “Current market conditions have placed pressure on retail, but as population growth continues in outlying areas, the retail market will regain momentum for new suburban development.”

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Deal Sikes
Houston Property Values In 2020 To Rise On Job Growth


Commercial property values in Houston should trend upward in 2020, as the region’s positive job growth will increase demand for development opportunities, according to Houston-based valuation firm Deal Sikes.

“Houston’s commercial real estate values will be on a solid upswing in 2019,” Deal Sikes principal Matthew Deal said. “With Houston expected to gain population significantly in the next decade, the long-term forecast must include rising property prices that will be very impressive over the long haul.” The firm said rising land prices have pushed industrial development farther away from the center of the city, and outer suburban land prices have increased accordingly. But that hasn’t stopped development: More than 15M SF of warehouse and industrial space is under construction in the greater Houston area, the firm said. Meanwhile, property values in the urban core remain strong, as developers and builders locate buildings for redevelopment, or seek sites that are appropriate for new construction. “Multifamily construction is strong in Houston and researchers report more than 25,000 units are now under construction, although the pace is expected to be slightly more moderate in 2020 as the new inventory is absorbed,” principal Mark Sikes said.  “Investor demand is good and multifamily valuations have not yet peaked in most submarkets.” Though newer office buildings and Class-A towers under construction are leasing briskly, Houston’s office market is its most sluggish sector, according to the firm. The energy industry — a juggernaut in Houston’s leasing arena — is in the midst of a downturn, which is hurting growth. The healthcare sector is faring better. The firm identified the Texas Medical Center as a source of growth for Houston, pointing to the expansion of several hospitals and research facilities. “Although there are a few exceptions, the real estate market in Houston is headed for another good year,” Sikes said. “The region’s economy is healthy and although the energy industry is in a lackluster period, the overall economic outlook is outstanding.”

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Houston-Based Valuation Firm Reports Opportunity Zone Designation Driving Property Values

By The DI Wire

The creation of the new federal opportunity zone program is enhancing investor interest and placing upward pressure on property valuations in downtown Houston, according to the Deal Sikes property valuation firm.

“Investors are gaining an understanding of the benefits and potential value of property owned in one of the new opportunity zones,” said Mark Sikes, principal at Deal Sikes. “This is particularly true in downtown Houston where the investment potential is significant. Over the last year, valuations appear to be up 5 or 10 percent for specific properties in downtown because of the opportunity zone designation. As additional transactions are closed, price gains may prove to be even stronger.”

Opportunity zones were approved by Congress as part of the Tax Cut and Jobs Act to promote investment in distressed communities nationwide. There are more than 8,000 census tracts around the country designated as qualified opportunity zones.

Sikes said that opportunity zones allow investors to defer capital gains tax if the properties are substantially improved and held for a number of years. If a property is held for 10 years, the capital gains may be permanently excluded from federal taxation.

“The requirement for substantial improvements to the property will likely exclude Class A office towers from the opportunity zone benefit,” Sikes added. “However, downtown’s older commercial buildings, parking lots and obsolete office properties appear to offer investors significant incentive for development and growth to enjoy these tax incentives.”

A joint venture between international real estate giant Hines and Cresset-Diversified QOZ Fund, an opportunity zone fund launched by Cresset Partners and Diversified Real Estate Capital, recently started construction on The Preston, a residential high-rise tower located in a qualified opportunity zone in downtown Houston.

“Sophisticated investors are already making significant moves,” said Matthew Deal, principal of Deal Sikes. “This trend is likely to spread as the IRS clarifies its regulations and attorneys and tax consultants become more familiar with opportunity zones, which offer major federal tax incentives across the city and the nation.”

Deal Sikes is based in Houston and provides valuation and counseling services for real estate firms, governmental agencies, law firms, and investors.

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Eminent Domain Lawsuit Results in $12.2 Million Jury Award to Property Owner

By Business Wire

A jury has awarded a Houston property owner compensation of $12.2 million – almost four times the amount originally offered by the State of Texas – for the eminent domain taking of land for the construction of the Grand Parkway in north Houston, according to Deal Sikes, a Houston-based real estate valuation and eminent domain counseling firm.

Using the power of eminent domain, the Texas Department of Transportation acquired about 44 acres of land along Boudreaux Road east of State Highway 249, offering to pay $3.2 million in 2014. The remainder of the property owner’s land holdings there, about nine acres, also lost value due to the eminent domain taking, Deal Sikes determined.

At the conclusion of a trial in Houston, a jury decided the State of Texas should pay $12.25 million to the property owner. The findings of the jury closely followed the appraisal of the land by Deal Sikes, a Houston-based real estate valuation firm with deep experience in eminent domain cases.

“As required by the Texas Constitution, a land owner is entitled to receive just compensation for property acquired through eminent domain,” said Deal Sikes principal Matthew Deal. “Our firm has decades of experience providing valuation services and expert testimony concerning property impacted by eminent domain for construction of roadways, utility lines, pipelines, rail projects and other public infrastructure programs across Texas.”

The Grand Parkway, also known as State Highway 99, is a partially completed loop planned for a 184-mile route around the outskirts of Houston.

A Houston-based firm founded by Matthew Deal and Mark Sikes, Deal Sikes provides valuation and counseling services for private property owners, governmental agencies, law firms, and a variety of corporations.

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Deal Sikes Estimate of Just Compensation Upheld by Jury

By Leaders in Law

Lawyers from the Houston-based Vinson & Elkins recently won a unique eminent domain suit brought on by the State of Texas against a privately-held joint venture.

Using the power of eminent domain, the Texas Department of Transportation (TxDOT) acquired the DiMare Fresh Produce cold storage warehouse on 3.9 acres at 1415 West Loop North. The state offered to pay only $5,775,000 for the 90,000-square-foot warehouse, which was owned by Beeson Sirota Joint Venture. The offer was rejected and TxDOT subsequently filed suit against the ownership venture, which was represented by V&E partners George Murphy and David Wall.

Houston-based Deal Sikesa real estate valuation firm, estimated that the DiMare site, located in the highly popular Inner Loop location, was worth much more than TxDOT offered – $9.25 million.

“Cold storage warehouse facilities are limited in supply and in high demand in Houston and property values continue to increase in the Inner Loop district,” said Deal Sikes Principal Mark Sikes.

At the conclusion of the trial in July, the jury determined that Deal Sikes’ appraisal was accurate and the owner should be paid $9,250,000.

“This important case winds up a long series of eminent domain takings by TxDOT along Interstate 610,” said Matthew Deal, principal of Deal Sikes. “Our firm consulted with many northwest Houston property owners regarding TxDOT takings.”

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Houston Real Estate to Benefit From Better Job Growth

By Katherine Feser

Houston’s rosier than expected job growth in 2017 has positioned the local real estate market to gain strength across the board, Houston-based real estate valuation firm Deal Sikes & Associates said in a report. The Houston region added 62,900 jobs last year, the Texas Workforce Commission reported in its revised annual data. That’s a 37 percent jump over initial estimates of 46,000 jobs.

“The improvements in the Houston economy provide a brisk tailwind for real estate in southeast Texas,” Deal Sikes & Associates principal Matthew Deal said in a report. Apartment construction will pick up in 2018 after both rents and occupancy rates increased last year, Deal said.

“Apartment communities that were not inundated during the hurricane flooding last year are attracting investors who are willing to pay more for properties with a high-and-dry track record,” Deal said. Houston’s revised 2017 job growth, equivalent to 2.1 percent, shows a rebound from the bottom of the downturn in October 2016 when 7,300 jobs were lost year-over-year, according to the Greater Houston Partnership.

Houston’s economic growth and jobs gains support a broad trend for stronger real estate values in the year ahead, principal Mark Sikes said. “Home sales and single-family construction are strong. We expect to see strengthening residential prices in 2018,” he said.

“Across the board, the demand for land is healthy. Builders are seeking smaller sites for Inner Loop residential and boutique retail. In suburban areas, developers are actively acquiring land for industrial, distribution, retail and residential projects.” The office market, the region’s weakest sector, has provided an opportunity for investors. Significant investments made over the past year “will deliver strong returns as the market improves and values increase,” Sikes said.

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Photo: Steve Gonzales, Houston Chronicle

Jury Awards Developer $28.8M in Grand Parkway Condemnation Dispute

By Dug Begley

Jury rules in favor of Caldwell Companies against TxDOT in condemnation case

Blazing a path through a forested watershed for the Grand Parkway will carry a heavy cost for state transportation officials, if a Harris County jury’s record award is upheld.

The jury on Feb. 2 issued a $28.9 million verdict in favor of CC Telge Road, L.P., controlled by large Houston-area developer Caldwell Companies, in a dispute with the State of Texas, primarily the Texas Department of Transportation. If approved by a judge and factoring for another roughly $2.2 million in interest tacked on to the seven-year-old case, the $31 million award would go down one of the state’s largest condemnations.

TxDOT and the Texas Attorney General’s Office, which represented the state, declined to comment on the case, including whether an appeal was planned, saying the matter remains pending.

Harris County Judge George Barnstone still must enter the judgment for it to apply.

The case was not over the taking of the land, but the value of nearby land after TxDOT was through building the Grand Parkway. Caldwell had planned a subdivision of single-family homes in the Willow Creek watershed, east of Telge Road and north of Boudreaux near Texas 249. The development relied on the creek and forested area as a centerpiece of trail and exercise amenities.
Caldwell and the state began bickering over the value of the condemnation shortly after the company purchased the 617-acre tract in 2010.

The company unsuccessfully lobbied TxDOT to shift the parkway south, though the state already had a 40-acre easement through the site. The segment of the parkway was built from 2013 to 2016, during which crews cleared hundreds of trees and flattened the ground for the elevated parkway through the watershed.

Caldwell said it could not go forward with its initial plan without the pristine watershed as a centerpiece and developed the property as private acre lots without the community assets, such as trails, parks, sports fields and other gathering spots for residents.

“You can’t build small lots and expect people to gather around a super-freeway and say ‘Wow, what a great experience that is to be gathered up against the freeway with our kids,'” Caldwell Companies CEO Fred Caldwell said during a deposition in the case.

The question for the jury was how much that difference was worth and what the state should pay for a project planned long after the parkway was designed. In filings, the state called the condemnation negligible to the development of the property, questioning an appraisal that valued each of the lots of Caldwell’s development as worth $110,000 without any construction or infrastructure whatsoever.

That assessment, by Deal Sikes & Associates, was the exact amount awarded by the jury. TxDOT estimated the value loss of the property because of the parkway at $1.3 million.

The parkway is hugely popular with drivers, bringing in $55.6 million in tolls for the last four months of 2017, about $22.8 million more than officials expected. Use has far exceeded expectations since the lanes opened two years ago.

Still, the project has been dogged by some residents and green space promoters for cutting a wide gash in forested portions of northwest Harris County.

The parkway also remains a work in progress. Completed from Fort Bend County around the western side of the Houston, the next phases of the parkway are set to start construction in the summer.

The work, expected to take about four years, will extend the parkway south and east from Interstate 69 north of Kingwood to interstate 10 northeast of Baytown. The 37.5 mile section set to start is expected to cost $1.28 billion.

Grand Parkway Infrastructure, a joint venture of construction titans Ferrovial Agroman US Corp., Webber LLC and Granite Construction Inc., won the $855 million construction job in March 2017.

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Photo: Brett Coomer, Houston Chronicle