Real Estate Deal – #1 – 139 North Street, San Antonio 78201
Ed Garza and real estate partner Sam Wayne purchased – via their real estate joint venture known as Urban One 30 Group LLC – a property at 139 North Street, a 3 Bed 2 Bath 1,976 square foot stone construction house built in 1930. The property is in the neighborhood of Monticello Park, adjacent to and just North of Garza’s own neighborhood. Monticello Park features attractive single-story and 1.5 story houses built in the 1920s and 1930s.
Garza and Wayne paid $157,250 in March 2008 for the property, which then had a Bexar County tax-assessed value of $131,910, and a Zillow online real estate ‘Zestimate’ of $131,000.
Urban One 30 LLC obtained a Deed of Trust[1] through Sterling Bank for $125,800, interest only, that matured nine months later, in December 2008. They probably intended to ‘flip’ the property quickly, hence the nine-month loan and interest-only provision.
Here’s how the property looked at acquisition:
Unfortunately, March 2008 was a tough time to acquire real estate for flipping – as a nation we’d be in full-on financial crisis mode by the Summer of 2008 – so Garza and Wayne refinanced the loan when it matured in December 2008.
They refinanced and extended the loan – then for $125,785 – for an additional five years to December 2013, interest-only for the first 6 months, followed by a 4.5-year amortization schedule.
Here’s where it gets weird
And then the first suspicious thing happened.
Two years after they extended the loan, and around the time they unsuccessfully listed it for sale for $145,000 in 2011, first with realty company Vflyer and next with Keller Williams, a massive fire gutted the property.
The Express-News reported that Garza claimed a contractor accidentally sparked the blaze, without going into details of how. Garza further said that he was suing the contractor.
Hmm. Ok. Was the contractor using explosives? Because this isn’t the work of a casual cigarette butt tossed next to an open aerosol can. I looked at the property up close last month, and it’s a catastrophe. Here it is inside:
And here it is from the front, in which you can see the burned roof.
then there’s the side angle:
Another side angle:
And an interior shot:
Now, in the real estate world, let’s just say there’s a weird correlation between unsold buildings with mortgages and insurance that tend to catch fire in economic downturns.[2]
I know that property had insurance because there was a mortgage from Sterling Bank, and all mortgage lenders insist on insurance, including for fires.
Why do properties in economic downturns mysteriously catch fire, and inevitably the fire is large and catastrophic rather than contained? A fire insurance payout for the whole property can be a way for a financially distressed developer to collect insurance proceeds. That money then allows the developer to stay current on the mortgage, or to rehab the building. I’ve even seen situations in which the insurance proceeds can be offered to a new buyer, as an incentive to purchase a burned property, lowering the cost of acquisition.
Among the curious aspects of the 139 North Street situation is that, following the fire, the property never got rebuilt.
Does that mean the insurance company refused to pay because the fire appeared too suspicious? That in itself would be very interesting information, and would explain why the property lay burned and unimproved for so long.
I don’t know what caused the fire 139 North Street, but I’d really love to read the fire inspector’s report, or the insurance company’s investigation. I’d also be curious about the result of litigation Garza said he pursued against the contractor.
So then what happened?
Ok, let’s jump to the Spring of 2013. The Express-News’ Brian Chasnoff features this Monticello Park eyesore in a column. Chasnoff interviewed Neighborhood Association President Rob Sipes, who admits his Association is afraid to complain to the City about Garza’s burned out hulk because it may compromise ongoing neighborhood discussions about lighting and fencing at Jefferson High School.[3]
It seems reasonable from Chasnoff’s article to assume that the City and neighborhood treatment of Garza and his eyesore reflect his political clout.
Meanwhile, the Bexar County tax assessed value dropped from $131,900 to $57,660 in 2013, as makes sense for an empty, burned-out husk of a house.[4]
Another odd detail of Ed Garza’s real estate businesses
Two of Garza’s seemingly primary real estate businesses were ‘involuntarily terminated’ by the Texas Secretary of State in August 2011.
Ed Garza and partner Sam Wayne formed Urban One 30 LLC in November 2007, and they later formed Zane Garway Consulting LLC in October 2009. A few years later, In March 2011, the ‘Registered Agent’ for both LLCs[5] filed a notification of ‘resignation,’ essentially firing Garza’s 2 companies as clients, and sending them a certified letter to let them know. The certified letter was to ensure Garza and Wayne couldn’t claim later to have not been notified, because of a letter lost in the mail, for example, or an incorrect address.
As you can see from the document, no reason is given in the resignation, although the most obvious reason would be for non-payment, most likely of just a few hundred dollars.
What happens next is that in August 2011, the Texas Secretary of State ‘involuntarily terminates’ Urban One 30 Group LLC and Zane Garway Consulting LLC – essentially making it improper for them to do any business in the State of Texas. The termination is for not keeping a registered agent. The effect is that nether entity then maintains required state filings, such as an annual ownership registration, an affiliated-entity registrations, or annual franchise tax registration. From my perspective, this may either a result of neglect, or it may be a strategic choice.
There’s nothing necessarily shocking about the registered agent resignation and the subsequent termination. It does not mean necessarily they found something improper. It does mean, however, that Garza and Wayne a) Through neglect or for strategic reasons, failed to pay for a basic requirement of doing business and b) Through neglect or for strategic reasons, allowed their businesses to go ‘dark’ in the state of Texas from the perspective of reporting contact information, ownership information, or filing franchise tax information.
I do think there’s something strange about a real estate investor and self-designated professional urban planner who lets his businesses, in this case two active legal entities, Urban One 30 LLC and Zane Garway Consulting LLC – both of which he shares with Sam Wayne – get ‘involuntarily terminated.’
But interestingly, On April 5, 2013, the Secretary of State received and approved a ‘Certificate of Reinstatement’ for Urban One 30 LLC. That filing, signed by Ed Garza, clearly was a precondition for the sale of 139 North Street, which is the weirdest thing of all.
The Sale!
Um, What?
Imagine my surprise to learn that Urban One 30 Group LLC sold 139 North last month for $156,250. That’s exactly $1,000 less than Garza and Wayne paid in 2008, before the house was a burned-out shell.
That got me thinking – and curious about – who would buy such a house, at such a price?
The Buyer
The buyer of 139 North is Nuvista LLC, a newly formed LLC, which first registered with a San Antonio PO Box in November 2012. Nuvista also acquired two other distressed properties in the nearby neighborhood, in December 2012 and March 2013, and a fourth distressed property last month.
Nuvista LLC is an unusual buyer, and the financing is odd as well.
The lender to Nuvista on the property at 139 North is called “Steadfast Funding LLC,” but that group does not appear to exist in Texas. Two private individuals in Allen TX are also listed as the principal backers of the construction loan to Nuvista, which matures in 6 months.
The owner and founder of Nuvista LLC and his wife declared bankruptcy a year ago in Arizona, in April 2012.
The owner of the LLC is listed as the founder of 20 different LLCs over the years.
The owner of the LLC has Arizona bank judgments against him for $538,497 and $42,729 from two different banks, a California State Tax Lien against him for $2,348, and a California judgment for $1,518.
I know it’s just a coincidence, but do you know who else had California State Tax Liens, and Arizona bank judgments?
Manuel Isquierdo did! Isquierdo is the Superintendent finalist that Ed Garza’s SAISD board nominated last month. In my article about Isquierdo’s nomination, I implied that board members might find a financially distressed Superintendent an advantage, rather than a disadvantage, and stated that I don’t believe in coincidences.
Let me clarify: I have no reason to think that Isquierdo and the owner of Nuvista LLC are actually linked.
But a recently bankrupt, financially desperate real estate investor paying 3 times too much for Garza’s burned-out property seems funny to me. How does the financially insolvent purchaser get a private mortgage anyway? Lenders aren’t stupid, in my experience.
It’s not illegal to pay too much for a property, but it strikes me as unlikely without a particular reason.
How did Urban One 30 find a buyer like Nuvista? Why would Nuvista pay the same amount for the property in its present, burnt-out, condition, when the tax assessed value is nearly 1/3 of its earlier value?
The fire at the location two years ago. The de-listed LLCs. The sale this past month. It’s incredible.
Please see other related posts:
A review of SAISD President Garza’s real estate deals
Real Estate Deal #2 – 2006 W. Magnolia Ave, San Antonio TX 78201
Real Estate Deal #3 – 1919 W. Magnolia, SA TX 78201
and upcoming posts:
Further information on Ed Garza’s LLCs
Is there something odd about Zane Garway Consulting Group LLC’s business dealings?
[1] Also known as a Mortgage.
[2] If you’re a fan of Michael Lewis’ books you may recall the chapter in Boomerangabout mysterious explosions all around Iceland when their financial crisis started. That was the sound of SUVs exploding like fireworks throughout the capital, all the better to collect insurance and relieve the owners of paying their suddenly unaffordable car loans.
[3] Folks closer to Garza frequently mention his adoption of his alma mater Jefferson as his own private Superintendent-ship.
[4] In 2011, tax-assessed value was $115,250, but then it dropped post-fire in 2012 to $58,500. Which makes sense.
[5] A quick note on a ‘registered agent’ if that’s not a familiar term for readers: Every corporation, LLC, or partnership – at the time of the company’s birth – informs their home state of a designated contact person and address known as a registered agent. Most businesses choose a professional ‘registered agent’ that can receive official notices such as lawsuits or government actions. It costs a few hundred dollars a year, and you have to tell your state who it is.
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2 Replies to “Ed Garza Real Estate Deal #1 – 139 North Street, San Antonio TX 78201”
That’s some impressive sleuth work. In a former career I briefly worked at the county level and saw transactions and myriad real estate entities get extremely cozy in all sorts of deals. I once asked a judge if he was ever bothered by all of the shady LLCs that were represented in his courtroom. He told me that as long as they follow the process he was powerless to do anything.