Houston builder-Mike Demko's plan to restore aged apartments in the
Midtown area is being hailed as the first of an expected flurry of
projects in the near-downtown neighborhood.
 
Demko, with his partner/wife Janet McNerney and Bob Carey, a commercial
builder-developer transplanted from Michigan, closed a deal during the
last week of May to purchase five buildings on Caroline Street one block
east of San Jacinto Street. A separate transaction to purchase a vacant
lot on Caroline adjacent to the buildings will close at the end of June.
 
 
Operating as Caroline McDemko Property Inc., the partners say they will
spend $500,000 restoring the circa 1930s and '40s red brick apartment
houses and building one new six-unit structure.
 
In addition, a sixth apartment house already owned by Demko in the same
block also will receive attention.
 
"I bought a four-plex on this block a few years ago. We liked the area
and saw the housing market improving, so we decided to try and put this
together," Demko says. "somebody had to start the redevelopment, so why
not us? I've always wanted to do a (restoration) project downtown."
 
The partners had to negotiate deals with five different property owners
in order to block up the property, contacting absentee landlords from as
far away as Arizona, the Bahamas and Washington D.C.
 
"We're going to do more than renovate the apartments; we're going to
restore them back to their original character," says Carey. That will
include gutting and rebuilding the interiors, laying new roofs and
installing new windows.
 
Restoration of the mostly deteriorated buildings is expected to take six
months. Once that's done, work will begin on the new six-plex, Demko
says.
 
The couple's construction firm, Parallax Services Inc., will handle the
building work.
 
The partners plan to market the renovated apartments as convenient
housing for students at nearby Houston Community College and for
downtown workers. Rents may start at about $550 per month for one- or
two-bedroom units.
 
Although the property sits a block to the east of the recently
established Midtown Tax Increment Finance District, Demko and Midtown
officials consider the project the first major renovation effort in the
mostly blighted Midtown area.
 
The Caroline Street apartment buildings most likely will be in a swath
of property that will be brought into the TIFD through a "sweeping
annexation" expected within a year, says F. Charles LeBlanc, executive
administrator of the Midtown Redevelopment Association.
 
"Interest in redevelopment is beginning to build, but getting the first
developer in is the toughest," LeBlanc says. "We hope to see some more
new construction by the fall."
 
The Demko property is located within the general Midtown boundaries of
the Interstate 45/Pierce Elevated to the north, U.S. Highway 59 to the
east and south, and Spur 527/Bagby Street to the west. But it is among
the peripheral tracts where Midtown organizers did not have sufficient
owner consent for inclusion in the district.
 
"We're very enthusiastic about this project. A lot of people thought
that the purpose of the TIFD was to bulldoze and tear down the existing
buildings, but a lot of the buildings can be renovated to alternative
use. We think this project fits into the overall redevelopment plan real
well," LeBlanc says.
 
Creation of the TIFD was approved in December by the Houston City
Council and became operative Jan. 1. Now that the TIFD is in place, the
taxable value of property within the district has been frozen at its
current level for 5 years.
 
As the property is redeveloped and its value increases, owners will be
taxed at the new value will be deposited into a dedicated trust fund to
retire debt incurred by the district. That revenue will be used to
finance public improvements within the district.
 
Midtown officials worked with Demko for months before the builder was
ready to approach Southern National Bank for financing. Bank officials
eventually approved a loan for the purchase of the buildings, the lot
and upfront money for the restoration. Demko declined to say what the
partners paid for the buildings and lot.
 
"We think it's a good deal, a win-win situation for everyone," says
Lance Gordon, senior mortgage loan officer for Southern National. "We
think as far as university students and downtown workers are concerned,
this will provide them with good housing options. Once (other lenders)
see how successful this project is, they'll begin to lend out here."
 
LeBlanc claims that an increasing number of developers are contacting
the Midtown association for information about land availability. He
estimates more than two dozen transactions have been completed since the
beginning of the year.
 
"There have been some big-name builders showing interest. They appear to
be serious about starting some quality redevelopment programs --
townhomes and garden or patio homes," LeBlanc says.
 
Approximately 40 percent of the land in the square-mile Midtown area is
vacant, so there are plenty of parcels available for new construction.
 
A small office building is already planned on Milam Street, and the West
Lake Noodle Co., which has an office/warehouse facility on Caroline
Street, has started an expansion project, LeBlanc says.
 
In addition, a San Antonio firm has bought the former Southwestern Bell
building on Main Street for conversion into a data storage facility, and
Houston restaurateur Jim Goode reportedly plans to open a new Goode Co
eatery in the former Spec's All American Seafood on Smith Street.
 
PHOTO (COLOR): Bob Carey (left) and Mike Demko: 'Somebody had to start
the redevelopment, so why not us?
 
~~~~~~~~
By Martha Binig Drake, Houston Business Journal
 
 

 
 
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Source: Houston Business Journal, 6/2/95, Vol. 25 Issue 3, p1, 2p, 1c.
Item Number: 9506231541