Death of Texas tycoon James Cotter leads to estate issues

Real estate tycoon and cowboy extraordinaire James Cotter died as he lived, sowing confusion among the people he loved.

Since his death from cardiac arrest Jan. 25, 2017, his estate has been the subject of much dispute and legal maneuvering among his surviving widow, five children, his lenders, creditors and the IRS.

The San Antonio Express-News reports James Cotter died at 83 without a valid will. The bulk of his estate, valued at about $288 million 13 months before his death, comprises a vast real estate empire of 66 properties in six states. In San Antonio, it includes the twin Alamo Towers along Northeast Loop 410 and the two Petroleum Towers just around the corner on Tesoro Drive.

After James Cotter’s death, Bexar County Probate Judge Tom Rickhoff appointed San Antonio attorney Marcus Rogers as the independent administrator to oversee the estate. Rogers called it “the case of a lifetime” but would not discuss it further, saying he considered it a family matter.

The probate case is further complicated by the fact that the Cotter companies’ books were left in disarray, Rogers noted in a March court filing. The balance sheets reflect “substantial intercompany-related accounts that did not balance and had not been reconciled for what appears to be many years,” he said. As a result, Rogers added, “balance sheets cannot be relied upon to represent the true book value of the assets, liabilities and equity accounts.” The loans on the real estate were personally guaranteed by Cotter, so his death “resulted in an event of default on virtually every mortgage,” one court document reads.

The companies that own Petroleum Towers, Alamo Towers and a 36-story Cotter Ranch Tower office building in Oklahoma City, considered the Cotter portfolio’s crown jewel, were put into bankruptcy after his death. The latter two bankruptcies were filed to stop lenders from foreclosing on the properties.


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‘Sharka’ plans $500m data center in Midlothian, Texas

 A company operating under the alias Sharka, LLC is planning a major data center development in Midlothian, a city 25 miles southwest of Dallas, Texas. While keeping its true identity a secret, the company has negotiated significant tax breaks for the $500 million project. The company plans to build a data center at the RailPort Business Park, on approximately 375 acres of land owned by Jet Stream, LLC, which appears to be run by the same unidentified company. The development promises around 40 full-time jobs.

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Q1 CRE Chartbook: Property Prices

Q1 CRE Chartbook: Property Prices Growing Fastest Outside the Gateway Markets


The U.S. economy grew faster than expected in the first quarter, with real GDP rising at a 2.2 percent annual rate. Moreover, the quarter ended on a strong note and growth appears to have
ramped up considerably in Q2. Nonfarm employment has risen by an average of 207,000 jobs per month so far this year, up from an average of 184,000 jobs per month last year, while the
unemployment rate has fallen to 3.8 percent. Wages and salaries are still rising only modestly compared with other periods when labor market measures were this tight. Inflation has also moved
back to the Fed’s 2 percent target range and may actually run a little above that range. We expect the Fed to continue to gradually nudge short-term interest rates higher.

A common concern among real estate investors is the potential adverse impact rising interest rates may have on property values. Cap rates have risen for two consecutive quarters and appear to be
moving up alongside the 10-year Treasury yield. According to Real Capital Analytics, cap rates rose 25 basis points in Q1, the largest quarterly increase since 2009. Despite the increase, cap rates
remain below their prior cycle lows. Rising interest rates also come amidst an increasingly solid economic backdrop that is driving demand for commercial real estate. We anticipate the rise in cap
rates should be minimal and largely offset by rising occupancy and higher rents.

Property prices are currently at all-time highs. The Commercial Property Price Index has risen 8.5 percent over the past year and is 23 percent higher than its pre-recession peak. Prices increased
across all property types, but especially for apartments and industrial buildings. Since the end of 2017, price appreciation in major gateway markets has moderated somewhat, while secondary
markets have seen prices rise more rapidly. This comes as no surprise, as many secondary markets are attracting a great deal of investor interest given their stronger population and employment
growth, particularly relative to major gateway markets.

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Texas job growth beat goes on

Texas employers boosted their payrolls by another 35,000 positions in May. By continuing a streak of job gains that began nearly two years ago. The Texas Worforce Commission reported Friday.

The state added more than – 350,000 jobs over the past year:

  • with employment growing at a robust rate of nearly 3 percent, almost double the national rate of about 1.6 percent.
  • The State unemployment rate held steady at 4.1 percent. Even as the labor force absorbed nearly 40,000 new workers.
  • In Houston – the region’s employers added 10,000 jobs in May the eighth consecutive month of job growth, the Workforce Commission reported. The local economy has generated more than 85,000 jobs over the past year, matching the state’s job growth rate of about 3 percent.


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Outlook for the Texas Economy

April 2018 Summary1

Increased activity in the energy and manufacturing industries advanced the Texas economy. Improved employment opportunities expanded the workforce, translating into accelerated economic activity. Texas led the nation in job creation this month with 39,600 new jobs, and initial unemployment insurance claims relative to the size of the workforce reached a record low. Real earnings, however, remain suppressed and present a growing challenge to Texas as well as the nation. Upward momentum in goods-producing and technology-based industries should eventually stimulate wages. Threats of retaliatory trade barriers on U.S. goods, however, pose a serious threat to Texas’ current rate of growth.

Spurred by widespread employment gains, the Dallas Fed’s Business-Cycle Index jumped above 5.5 percent on a quarterly seasonally adjusted annualized rate (SAAR). The largest increase since 2014. Growth in the energy industry pushed the Houston economy up 7.6 percent SAAR despite fading hurricane-related reconstruction stimuli. Austin’s booming technology industry supported 7 percent growth through the first four months of the year. North Texas’ expansion was more modest at 5.4 and 3.9 percent growth in Dallas and Fort Worth.  While the San Antonio economy grew just 2.6 percent amid weak hiring activity.

The economic expansion should continue as the Texas Leading Economic Index (a measure of future directional changes in the business cycle) rose 5.7 percent year over year (YOY) to a new cycle high. Higher oil prices, low unemployment, and growth in the national economy signal favorable economic conditions as the year progresses. Despite favorable economic data, the Texas Consumer Confidence Index dipped for the second straight month amid rising trade tensions and NAFTA uncertainty. International commerce is a critical component to the Texas economy, supporting over 900,000 jobs in primarily higher-wage manufacturing subsectors.

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U.S. retail sales post biggest gain in six months

U.S. retail sales increased more than expected in May as consumers bought motor vehicle and a range of other goods even as they paid more for gasoline. The latest indication of an acceleration in economic growth in the second quarter.

The Commerce Department said on Thursday sales jumped 0.8 percent last month, the biggest advance since November 2017. 

Economists polled by Reuters had forecast sales rising 0.4 percent in May. Sales in May increased 5.9 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.5 percent last month after an upwardly revised 0.6 percent increase in April. These so-called core sales correspond most closely with the consumer spending component of gross domestic product. 

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