Bright outlook
Satya founder Sunny Bathija basks in Houston’s ‘land of opportunity’
Sunny Bathija, founder of real estate development firm Satya, oversees a diverse group of holdings ranging from suburban strip shopping centers to hotels, warehouses to upscale condominiums in some of Houston’s finest neighborhoods.
Born in Chennai, India, he is now involved in half a billion dollars worth of real estate developments across the Houston region, including a 500-acre land development on the former Moran family ranch across from The Woodlands Hills in Montgomery County. Satya’s business includes project development, land development, consulting and property management services.
Bathija visited with the Chronicle to talk about Houston’s development and his role in it.
Q: How did you get your start in commercial real estate?
A: I used to work for a gas station developer back in 1997’98, and then I got an opportunity to build my own gas station in ’99. I used to develop and sell gas stations. One day, I had some excess land. Some told me, “Why don’t you build a retail center?” So, I got into that.
I liked that business because it did not have any of the operations that you had with the gas stations with the employees not showing up. There used to be break-ins in the night. You always worried about the safety of your employees. There were always operational problems. I saw retail being less intensive. There were more opportunities in retail. I started buying more land and building more retail centers. So far, I think we have done more than 80 retail centers in Houston.
Q: What’s the retail focus? A: We do street retail, 20,000 square feet of street retail. We saw there was a growing demand for it, especially with growing neighborhoods. We started looking around and we found there was void in the market. Every neighborhood needed the support of a nail salon or a dry cleaners or a day care. We went looking for those opportunities in the growing markets of the suburbs.
Q: And that led to land development?
A: We started doing land development, ground leases with McDonald’s, Jack in the Box and Wendy’s. We buy big parcels of
land, subdividing them, connecting utilities and selling pads to other retailers. We did 75 acres in Longmeadow Farms, around 20 acres in Gleannloch Farms, 20 to 25 acres in Coles Crossing. I must have done around 40 acres in Fulshear.
I’m still developing another 35 acres in Rosenberg. Land development is a big part of our portfolio. We sell land to other developers who don’t want to buy big pieces of land. They don’t want to worry about how to get utilities and how to go about platting it.
Q: What’s your largest project?
A: Recently we bought Moran Ranch. It’s 500 acres. It took us over a year to put together. There were 26 sellers. They had to appoint a trustee through the court who coordinated the sale. Now we’re working with TxDOT on building a frontage road. We have two miles of frontage on I-45. We just started last year. Right now, we’re working on utilities, engineering, getting detention, the roadways, driveways, getting it pad-ready.
Q: Do you sell your developments?
A: Yes, we sell. We retain a few. We have a fund. Right now we own and operate 16 shopping centers in Houston. We have one office building. We have two hotels, which we are running.
Q: How is the leasing going? A: Right now, the challenges are two things: to help the tenants without hurting yourself and to retain tenants. Finding a replacement tenant for the tenants who are going out of business, that’s a huge uphill task.
As far as the new retail centers are concerned, the last two months have been very dull. But it’s definitely coming back. We are getting interest from people who want to lease space. People who have been laid off from their jobs want to start their own business.
Q: What types of tenants do you focus on in your retail centers?
A: We have a mixture of 50-50, national tenants and 50 percent maybe franchise nail salons, gyms, day cares, liquor stores. All your neighborhood retail is in our retail centers. We don’t concentrate on the big boxes: the grocery stores and the clothing stores. Our typical tenant;s size is from 1,000 to 5,000 square feet.
Q: Have people had trouble paying their rent?
A: In the last few months, yes. We worked with them to give them relief, a couple of months rent. Taking two months rent and dividing it out on the remaining 36 months, so it’s a few more dollars a month. Most have appreciated that and have availed of that. The national tenants – Sherwin Williams and McDonald’s – they kept paying us. They didn’t need any relief. Our lenders have given an abatement of our note payments, because of that we were in a position to help our tenants.
Q: How have you changed the focus over the years?
A: When I started in ’99, we started with a 200-square-foot rental office space. We grew from there. I started alone. In four months time, I needed some help. My assistant Cindy is now my property manager. I came to this country in 1996. I had brought $2,900 with me. Here I am 25 years later. We are managing half a billion dollars of real estate in Houston.
Q: Why did you leave India to come to Houston?
A: I was longing for opportunities. There was an uncle of mine, he told me the opportunities are great here. I had a 6-month-old baby and I said I need to do something with my life. So I came here to the land of opportunity, and it turned out to be the land of opportunity for me.
In 2003, I went out and bought property: 40 acres on Eldridge and Briar Forest in the Energy Corridor. Starbucks, Jack in the Box, all those tenants. I had some extra property. I built a freestanding office property, which was only 3,500 square feet. It was like a luxury going from 200 square feet to 3,500 square feet. We grew out of it, and bought this office building, which is 50,000 square feet. We occupy maybe 7,000 square feet and lease the rest out.
Q: What did you do with that $2,900?
A: I paid my rent deposit. I bought a car for $700. I paid an electricity deposit. My cable deposit. The best part is I’ve got the passbook telling me where I spent that $2,900. There were times when I only had $50 in the account.
Q: What fundamental changes will we see in real estate as a result of COVID-19?
A: It is still a changing world. Everyone has relief right now. The tenants are getting relief from the landlords. Everyone is getting paycheck protection loans, disaster loans. Once all these loans were off in the next six months, that’s when the reality will come up.
We pushed everyone’s payment out three or four months. We’ll know reality of what’s going to go down, what’s going to stay afloat in the next four months.
A lot of offices are allowing people to work remotely, which means they are going to occupy less office space. They will be downsizing. On the retail, I’ve been getting requests from gyms. Because of social distancing, they need a bigger space to keep more space between their machines. Everyone is adapting right now. We do not know the full scenario of that adaptation. Tenants will need more room. Can they afford that rent? These are big question marks. The changes are still very much evolving. There is no real answer to that question yet.
Q: Who are your partners in your developments?
A: My partner in Satya is Ameen Ali, a CPA. It’s just two of us. We have investors in our projects. He is a CPA and takes care of the back office, the accounting. I’m on the front of the development side. I take care of the development and leasing and brokerage. On the financials, we have more than 50 partnerships going at any one time. We have investors who have been with us the last 20 years now.
Q: Who are your investors? A: They are individuals who have now become more like family and friends. We don’t take any corporate investors. We have repeat investors who have been with us the last 15 or 20 years. These people we have met in the real estate community through friends and family.
Q: What kinds of returns do the investors see?
A: It all depends on the project. There have been returns of 200 percent and there have been returns of around 10 percent. Back in 2009 and ’10 when we had the slowdown, the returns were pretty light. The best years were around 2004 and ’05 and ’06 when the returns were very high. The returns are calculated on how long you hold onto a project, so it fluctuates. On average, you tell me a safe return on real estate may be 15 percent. But there are always risks. You could also be losing.