As Texas legislators look to navigate some of the most pressing issues in real estate, they have a fourth-generation industry insider leading the way.
Texas Speaker of the House Dade Phelan of Beaumont, who is serving his fifth term in the Texas House of Representatives and second term at its helm, has climbed to the heights of power in the legislature in a relatively short time. But when he isn’t swinging the gavel, he’s signing leases as a broker and partner at Phelan Investments, his family’s real estate development and investment firm.
With several real estate-focused proposals on the table, such as cutting property taxes and red tape around development, banning certain foreign buyers, and increasing transparency around commercial sales, the legislature could fundamentally change bottom lines across the business.
It is not strange for state legislators to operate businesses outside of session — the Texas Legislature is one of the lowest paid in the nation and almost all members have other jobs — but Phelan is a developer at a time when real estate across the state stands at a crossroads. What will his understanding of and financial interests in the business mean for Texas real estate?
Buying up the boomtown
The Texas oil boom was born just south of Beaumont, and it forever reshaped the city. In January 1901, the first gusher of the Spindletop oil field blew an inky black column hundreds of feet in the air, setting off a wave of drilling all across the town. By March of that year, Beaumont’s population had swelled from 9,000 to 30,000.
Phelan grew up in Beaumont and attended Monsignor Kelly Catholic High School, where he was voted best looking and won the senior leadership and service award, telltale signs he had a future in politics.
After graduating from University of Texas at Austin with a degree in government and business, Phelan spent a year in Washington, D.C., in 1998 and 1999 working for Rep. Richard Armey of Texas, then the House Majority Leader. Then he spent five years as a legislative aide in the Texas Senate before moving back to Phelan Investments, where he has worked since 2006.
Just a 15 minute drive north of Spindletop, Phelan Investments is headquartered in a tidy, two-story brick building at 1277 Calder Avenue. Traveling west along Calder Avenue just past Interstate 10, the road changes names to Phelan Boulevard, which leads to Phelan Plaza, a shopping center owned by Phelan Investments.
Phelan’s holdings
There is no complete list of the company’s real estate holdings, but a sampling of its properties shows a wide range of asset types and locations. The firm is listing space in at least 21 shopping centers spread out across San Antonio, Houston, Austin, Texarkana, Beaumont and Arkansas. Those properties were built between 1979 and 2006 and are generally single-story strip malls unlikely to stun an architecture critic but to do just fine with customers.
Their retail tenants include Walmart, CVS, Kroger, Starbucks and Chipotle, making the House Speaker the landlord for some of the biggest takers of retail space in the country.
The firm also has a robust portfolio of office and industrial buildings, with many from the same late-20th-century vintage. Phelan lists available space in 16 such buildings in Beaumont alone, including the old Sysco Foods Warehouse. The firm’s website says it also deals in agricultural land, timber fields, mineral reserves and oil and gas properties.
The website says it is developing Willow Creek, a master-planned community on 2,700 acres in southwest Beaumont. Few traces of the project exist elsewhere, though, and the company did not respond to a request for more information.
The Willow tree looms large in Beaumont: At least 14 parcels owned by Phelan Investments sit amid the intersections of Willow Bend Drive, Willow Place and Willow Way. Back in 1978, the firm paved the very road now known as Willow Bend.
Making ends meet
Working in the Texas legislature is a low-paid, part-time gig, at least on paper. The salary is $7,200 a year, not even enough to pay five months of the median rent in Austin. Legislators also receive $220 per diem for the 140-day session, which brings the annual pay to $38,000 when the legislature is in session.
So if you want to be a member of the Texas legislature, you either need to be independently wealthy or work a job that allows you to take five months off and live in Austin when the legislature is in session, from January to May in odd-numbered years, not counting special sessions. A bill introduced in the current session, which would pin lawmakers’ salaries to those of teachers, faces long odds.
Inside the red granite Capitol Building swirls an eddy of business interests, most of which get quietly brushed aside.
“This is not a conversation any of them really want to have,” said James Henson, the director of the Texas Politics Project at the University of Texas at Austin. “There are norms that call for members to recuse themselves in matters of direct conflict, but they’re pretty toothless.”
Each of Phelan’s predecessors as speaker in recent history were also economically comfortable businessmen, according to Henson. Tom Craddick was a fixture in oil and gas, Joe Straus came from a wealthy San Antonio family and Dennis Bonnen worked in banking.
Phelan did not respond to a request for comment on how he balances his business and political workloads, but there are plenty of other Phelans — Michael, Patrick, Mark and Lan — who also work for the family firm. Dade is listed as a broker on several of the company’s active properties, both industrial and retail.
Following the money
The Texas Sands PAC, the group supporting Las Vegas Sands’ push to legalize casinos and sports betting in the state, contributed $300,000 to Phelan’s campaign, making it the top contributor, according to Transparency USA, an organization tracking money in state politics. Phelan also received $150,000 from Robert Rowling, the billionaire founder of TRT Holdings, who in 1996 parlayed his family’s $500 million worth of oil fields to purchase Omni Hotels. Harlan Crow, chairman of Crow Holdings, donated $90,000 to the campaign. The Texas Realtors’ PAC gave him $125,000, and the Texas Association of Builders gave $100,000.
Donations do not necessarily equal favors, and many of Phelan’s top donors gave just as handily to his colleagues in the legislature.
So far in this session, Phelan has focused mainly on issues unrelated to real estate, like Medicaid expansion and data privacy. But with housing and affordability central to the Texan and national conversations, he will have to work on matters related to the industry, and this week, he has amped up his focus on bills affecting real estate.
A proposal filed on Monday, which Phelan has included on his list of “priority bills,” aims to streamline the property development and building review approval processes. Cities and counties that fail to process those projects quickly enough would be required to allow third-party reviewers for things like city inspections.
“The Texas Legislature must continue to support our state’s rapidly-increasing demand for internet, water and housing,” Phelan said in a media release.
He also recently proposed cutting school district property taxes by 28 percent.
While the fact that Phelan works in real estate could create ethical dilemmas, it also means he has personal experience with the market forces and attitudes of the people those bills will affect.
So the next time Phelan addresses the chamber in a well-tailored suit, it’s fair to assume that isn’t coming out of his $7,200 a year. But neither are the suits of his colleagues.
“It is expected,” Henson said, “that the vast majority of people that come to the legislature are not making a living being elected officials.”
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