Novel Turtle Creek Legally Right But Dings Spirit of Zoning

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After the March 10 Oak Lawn Committee meeting, I wrote a pair of fiery columns about Crescent Communities’ coming Novel Turtle Creek apartment building now under construction near Oak Lawn and Irving Avenues (behind the Fedex and across from Holy Trinity). You can read them here, and here.

Their presentation to the OLC was informational-only, as the project was touted as being by-right – i.e. not needing any zoning changes. When I first saw an image of this building months ago, it never set right. It seems just too big. A note to Crescent back in January yielded no details on the plan.

The week I published those columns, I had a daily back-and-forth between Kris Sweckard, director of Sustainable Development and Construction for the City of Dallas (that copied several City Hall big wigs). I was told by others behind the scenes at City Hall that I’d hit a nerve.

So what happened?

Combined replatted lots outlined in purple

On January 17, 2019, Plan Commission approved the replatting of the AT&T and Novel sites into a single lot that would be owned by the two entities. Typically, these arrangements are partnerships where, for example, one party owns a 60 percent interest while the other owns 40 percent. But in this case, the combined parcel’s owners would retain deeded ownership interest in their original physical portion of the overall lot – a legal exploitation to access development rights.

Sweckard said this ownership structure was allowed in the code but couldn’t give any examples. I called Ken Nolan, the chief appraiser for DCAD. He told me that yes, multiple parties could own a single parcel and their ownership could be reflective of physical boundaries versus a percentage partnership. He said it wasn’t too common and that such an ownership structure had to be called out on the parcel’s deeds. Think of it as being like a condo situation, but with land – there’s the common parcel but each “owner” is assigned part of the whole.

Because of what you’re about to read, until the replat is filed, there’s no deed language to inspect.

Replat Was Approved, Not Filed

I was also correct that the replat, while approved, had not been filed 14 months later. Sweckard quoted code that says it “… allows for projects in the platting process to obtain an early release of a building permit once building permit review is complete and engineering plans have been completed.  This is common.  No final Certificate of Occupancy can be issued until the plat has been filed.”

This is where I continue to have a problem. Why would the city not require a replat to be filed until the building is essentially complete? Why would they issue building permits on an approval but not the filing?  For the developer, why would they want to wait so long to file?

I cannot explain the city’s rationale. I spoke with a developer who builds nationwide who said this was highly unusual, another one of those “Dallas things.” He said once they get a replat approved, their banks want to see it’s been filed. Similarly, I can’t explain (nor could this developer) why a delay in filing would be advantageous to Crescent. I assume it’s financial, because it typically is.

4:1 or 4.5:1 FAR?

The way to get to 4.5:1 FAR is to have a mixed commercial and residential use on the parcel. As a stand-alone residential building, I assumed it was 4:1 FAR. But because of the ownership structure of the single parcel, the existing AT&T central office operation becomes the commercial piece. This is part of the overall sharing this project relies on to squeeze out every square foot of building.

The reason this deal was struck in this way was so that Crescent could harness the development rights of the AT&T site without having to buy it (and AT&T not having to sell). In this case it wasn’t height being shuffled, it was FAR and lot coverage. Because they’re able to claim a single parcel, the 60 percent lot coverage comprises the combined lot (even though physical portions are separately owned), not just where Crescent is building. This enables that sub-parcel to exceed 60 percent coverage.

It’s the same for FAR. The 4.5:1 rights are being piled on the Novel sub-parcel while the AT&T facility continues as is. For example, if you had an acre parcel at 4:1, you’d be able to build four-stories assuming 100 percent lot coverage. If you had three acres but wanted to build on that one acre, you could build 12-stories if the remaining two acres were never built on.

Together or Separate?

But can the lot be separated back into two lots at some point? That’s been a fear of mine. What’s to stop this combined lot from being re-divided and a second high-rise built on AT&T’s existing 1.7 acres? This would result in a double-dip of rights.

Sweckard’s response was that were a de-platting filed, the city would check if the resulting parcels would create “any zoning non-conformities (such as FAR or setback encroachments)” and if so, “the issue must be addressed before a plat can be filed.” But while some variances can be fixed, “FAR is not a regulation that can be varied by the board of adjustment, so a replat that creates noncompliance with FAR cannot be approved.”

This seems to say that AT&T can’t double-dip FAR for a project using their 1.7 acres of non-Crescent land. What this also seems to say is that this building will almost certainly never convert to condos. The current replatted land ownership would make residential mortgages problematic – a residential unit would essentially be a condo within a condo. Ditto if they’re somehow able to separate the plat – banks and insurance companies don’t like non-conforming uses because there’s no guarantee they could be rebuilt if disaster struck.

Loophole or Just Messy?

It’s a messy way of accomplishing “transferrable development rights” where one lot is able to simply buy rights from another (and that Dallas is too lazy to utilize). Using that method, a zoning case would be filed that would extinguish the seller’ rights in perpetuity – oh, and there’d be community notification. In this case, I’m sure AT&T was compensated for their rights in some fashion (AT&T doesn’t strike me as a benevolent organization).

In Oak Lawn and Uptown, three recent/current projects have in some fashion used this ability to pile development rights within a parcel. We saw it with Streetlights on Oak Lawn and Lemmon – who filed a full zoning case. We’re getting wind of it for the high-rise planned for the rear parking lot of Maple Terrace – that I’m hearing is also claiming to be by-right. But in both these cases, the entire parcel is owned by one entity. In my limited experience, this is the first time I’ve seen a replatting used to accomplish a rights transfer between two owners of a parcel combined solely to take advantage of rights. And that’s a problem.

When a replat goes before City Plan Commission, unless there’s some informed opposition, typically, they’re quickly voted to approve in bulk with little or no discussion. Petitioners for a replat do not have to show plans of any proposed construction. In this case, the “staff recommendations” included a requirement for a full set of plans when the replat was filed – which as we’re seeing could be years later and after the building is built.

Would CPC have voted differently had they known what the plan was? It’s facile to think AT&T and Crescent didn’t know what the plan was, at least generally – after all, I doubt Crescent got AT&T to the table without their financial remuneration known. Equally facile is thinking they didn’t know the neighborhood wouldn’t support the project.

So is it a loophole – or simply exploiting the system – that a replat can be filed with no development plans within a process that pays little attention to replats in general? Is it a loophole that this specific type of replat’s intentions can so easily be obscured? Is it a loophole that this type of ownership setup can be used to essentially transfer development rights that might not have been allowed were the intentions more public?

Loophole might be the wrong word, but I’m at a loss for a better descriptor.

Next Steps

I think the horse is out of the barn on this one. But it’s time to shut the door. The city must learn from this case and start requiring stated intentions and development plans for replats at Plan Commission – can Plan Commission already ask for them? How could providing more information on the applicant’s intentions and plans not ensure better decisions?

Should there be a time limit between a replat being approved and filed?  Does it make sense for approved but unfiled replats to be issued building permits? Why is “the day you’re finished” the current standard?

How are replat applications handled within their neighborhoods?  Should residents nearby be notified of a replatting? Should they also have access to the applicant’s plans to see if they support them?  In replats taking place in PD-193 (Oak Lawn, Uptown, Knox) should the Oak Lawn Committee be apprised of them?  I realize this sounds similar to how rezoning cases are handled, but in some cases it would be warranted – while in most ignored.

I am concerned that this seemingly new playbook on how to upzone property without rezoning or city and neighborhood engagement will gain traction within the development community. You should be too.

Finally, given COVID-19’s impact on real estate funding, the last chapter of this project may not have been written.

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Jon Anderson

Jon Anderson is CandysDirt.com's condo/HOA and developer columnist, but also covers second home trends on SecondShelters.com. An award-winning columnist, Jon has earned silver and bronze awards for his columns from the National Association of Real Estate Editors in both 2016, 2017 and 2018. When he isn't in Hawaii, Jon enjoys life in the sky in Dallas.

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Comments

    • mmJon Anderson says

      AT&T gets paid for rights it will never use while paying taxes they’d pay anyway – although it remains to be seen how the shared parcel is effected by the Crescent “improvement” (unless that’s the deal, Crescent pays all taxes on the parcel forever?). The AT&T building in question houses central office switching equipment. It will be there forever. Even in a “kill the copper” wireless world, all that chatter and selfies hit a terrestrial network at some point (and there’s a ton of wired internet/TV services to support too).

  1. William A. Morgan says

    So, if Crescent pulls a building permit, but never records the replat, the resulting structure will be illegal and prohibited from obtaining a certificate of occupancy, correct?

    I assume that Sustainable Construction and Development is requiring the developer to post a bond to cover the cost of demolition in the event something happens and the replat is never recorded, correct? To do otherwise seems incredibly reckless and irresponsible, as it would leave the community saddled with an illegal, uninhabitable structure towering over the neighborhood.

    Has Crescent explained why they haven’t recorded the replat?

    Finally, how are real estate taxes to be allocated between AT&T and Crescent, since this will be one tax parcel once the replat is filed?

    This seems perilous from a financing standpoint. Curious as to how they are able to obtain bank financing with such an unconventional ownership structure.

  2. Jouno says

    Thanks Jon for your work on this issue. One has to wonder if Crescent who pulled a fast one on the neighborhood and the city also did so with AT&T. It would be nice to hear AT&Ts side of the story.

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