Energy Corridor Pioneer David Wolff is Still Swinging Deals

 

By DANNY KING

HOUSTON – Lest anyone believe praise for longtime Houston real estate developer David Wolff is universal, former Houston Mayor Bill White offers a dissenting, though instructive view.

Serving as chairman of the Metropolitan Transit Authority of Harris County from 2004 to 2010, Wolff – philanthropist, family man, civil servant and visionary of what would become Houston’s Energy Corridor – may be “impeccably polite,” as White puts it, but it doesn’t mean he’s a soft touch.

“My one attribute of people who I appointed is that I wanted people to squeeze the most out of every dollar that was expended,” said White, now chairman of Lazard Houston. “I can tell you from some of the complaints I got that he was pretty aggressive.”

Since moving to Houston in 1966 to work for developer Brookhollow, the Philadelphia native and Harvard Business School graduate, who founded his development firm in 1970 and has been its sole shareholder since 1985, has cut a wide swath, impacting Houston’s public-transportation system and health care infrastructure while making his mark in Northern California as a former vineyard owner and current minority shareholder of baseball’s San Francisco Giants.

But it’s his in his role as Wolff Cos.’ chairman and president where the 78-year-old has likely made his most substantial mark in a metropolitan area whose population has more than tripled to about 7 million since his company’s founding almost 50 years ago.

Energy Corridor Groundwork

Foreseeing both residential and commercial growth west of the Addicks and Barker reservoirs about 20 miles west of downtown Houston, Wolff and then-partner Neil Morgan began buying property along the Katy Freeway between Highway 6 and Barker Cypress Road in the early 1970s for what would become the Park 10 Regional Business Center. The bet would pay off, as companies such as ConocoPhilips, Exxon Mobil, Arco and Amoco (now BP) would subsequently make their homes in the area. Morgan had tepped away from the business in 1985.

Since then, Wolff, whose company includes his daughters Carolyn Wolff Dorros, the firm’s executive vice president, and Elizabeth Wolff Rogers, a vice president, has by his own estimation helped develop “thousands of acres,” master planning and laying down infrastructure and landscaping before reselling the property to builders of offices, warehouses and hotels.

While much of the company’s early work set the stage for office and industrial development, the focus has shifted more towards retail districts and health care facilities, Wolff said. Among its current holdings are Central Park, located in the Energy Corridor; Ten Oaks, adjacent to Texas Medical Center’s West Campus; and the 1,500-acre Gates Ranch residential project outside of Brenham about 75 northwest of Houston.

Wolff himself is as plainspoken about his track record as others are complimentary.

“If you focus on one market, you’re going to know more than other people do. You don’t earn any money at the Hertz counter,” he says. “There’s more than enough money to be made in Houston to satisfy anyone.”

“All great leaders have that ability not just to look down the street, but to see around the corners and see possibilities,” added Mark Wallace, president and CEO of Texas Children’s Hospital. “David has that characteristic.”

Making it Work

Not that Wallace can be fully objective about the subject. Tasked in 2003 with finding a location in West Houston for a community hospital that would complement the work of its central Houston facility, Wallace, who oversees the country’s largest children’s hospital, targeted a 55-acre site owned by Wolff. But when he estimated the land’s value, he worried the asking price would make the project cost-prohibitive and expressed that to Wolff during a face-to-face meeting.

“There was a pause of about five seconds. Then he said, ‘You can afford it.’ I said, ‘How?’ He said, ‘Mary (Wolff’s wife) and I will donate 10 acres, and Texas Children’s can pay for 45,” Wallace recalled. “I knew David was going to be fair with us, but I did not expect this.”

Breaking ground in 2008 and fully opening in 2011, Texas Children’s Hospital West Campus generated $547 million in gross patient revenue for the year ended Oct. 1, 2018, while almost 7,000 surgeries were performed 533,000-square-foot facility, whose emergency room is named in honor of David and Mary Wolff.

“We estimated the fair market value of the donation back then at $4.4 million when property was going for $6 to $7 a foot. Now, it’s going for closer to $30, so it could be over $25 million in today’s dollars,” said Wallace. “That was in incredible gift.”

Meanwhile, White, who’d known Wolff socially since the early 1980s and who served as Deputy Secretary of Energy in the Clinton Administration, said Wolff was an early proponent of White’s run for local office.

“He was one of the first people who talked to me about running for mayor,” White said. “He was concerned about issues such as the need for advocacy for clean air and other quality of life amenities such as park space and a strong mass-transit system, and he did not want Houston’s progress to fall behind.”

Light Rail Proponent

Among other things, White credits Wolff for helping acquire the right-of-way for MetroRail’s University Line that was key in expanding the system into what’s today a 23-mile light-rail network. White also cited Wolff’s role in the acquisition of the land where Houston Dynamo home BBVA Stadium would open in 2012.

Wolff, whose civic work has also included twice serving as chairman of the Houston Parks Board, was also key in expanding both the city’s inventory of high-occupancy-vehicle lanes and commuter-bus service.

“Metro is not just about rail, it’s about mobility, and David never forgot that,” White said. “He, along with George Mitchell in The Woodlands, shared the recognition that planning, green space and good, high-quality infrastructure are not inconsistent with long-term real estate value, but in fact enhances it.”

While with Metro, Wallace said Wolff was also critical in getting the Fannin Street bridge connecting the children’s hospital with Texas Children’s Pavilion for Women built over a light-rail line in 2011.

“There were some days and weekends where light rail had to be stopped, but we worked out a schedule and got it done,” Wallace said. “We could not have built the kind of structure we did without his leadership, vision and assistance.”

Branching Out

Wolff has also applied his business acumen to two of his hobbies: farming and sports. Having owned a 1,700-acre cattle ranch in Independence, Texas, since 1972 (“I love it, it’s my favorite place in the world,” he says), Wolff acquired a 10-acre plot in California’s Napa Valley in 1997 and regularly produced Cabernet grapes for winemaker Pina before selling the land earlier this year.

In another link to Northern California, Wolff in 2000 bought a minority stake in the San Francisco Giants. In addition to recalling perks such as traveling with the team during its 2014 World Series run and spending time with athletes such as Barry Bonds (“He’s a better person than people gave him credit for – a soft-spoken and intelligent guy,” Wolff said), Wolff, who declined to disclose his ownership percentage, compared sports franchises to land ownership as far as asset classes whose valuations often appreciate at faster rates than their cash flow would suggest.

“I don’t think there’s a better asset class than professional sports franchises,” Wolff said. “Drayton McLane bought the Houston Astros for $95 million and sold them for $650 million, and Jim Crane will do very well. So it’s a great investment.” (Published reports peg the 1992 acquisition and 2011 sale prices at about $117 million and $680 million, respectively.)

Granted, investing in Houston real estate can be risky, given the boom-bust nature of the business and the impact volatile oil prices can have on the economy. A recent spate of building deliveries in the area drove Houston’s second-quarter industrial vacancy rate up to 6.1 percent from 4.9 percent a year earlier, according to real estate brokerage JLL, leading some in the industry to express caution about the development sector.

Still, Wolff, who spends much of each summer at his Nantucket, Mass., home, continues to expand his company’s presence throughout the region. Last year, it acquired 521 acres near U.S. 290 northwest of central Houston. It subsequently sold about half the land to Long Lake Ltd. for a 1,000-home residential community and will build the other half as Beacon Hill Business Park.

“When there was a downturn in the local economy beginning in the mid-1980s, he had the patience to basically sit out of the market on new development until the demographics and economic fundamentals improved,” White said. “One reason he’s been successful and avoided some of the boom-and-bust pitfalls is that he does have a multi-decade vision.”

In fact, Wolff, who declined to disclose his company’s annual revenue, says he’s largely immune to economic swings because of Wolff Cos.’ financial structure.

“We have no debt and no partners, so we’re not leveraged at all,” Wolff said. “One has to be concerned about (overbuilding), but that’s typical Houston.”

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