A DOWNTOWN REVIVAL

REAL ESTATE INVESTORS ARE FLOCKING TO THE URBAN CORE OF DALLAS, GROUND ZERO FOR A REDEVELOPMENT BOOM THAT’S UNDERWAY ACROSS NORTH TEXAS.



Redevelopment map.An overnight success rarely happens overnight. For years, a small group of passionate business and civic leaders has been touting the virtues of the core of downtown Dallas. Now suddenly, it seems, the world has taken notice. 

Suburbanites are driving in to catch a show or enjoy a meal at a hot new restaurant. New residents are snapping up apartments and lofts. Downtown hotels such as the NYLO Dallas and Omni Dallas are bustling.

“It’s stunning to see,” says Jack Gosnell, senior vice president with CBRE | UCR in Dallas, whose brokerage firm is involved in leasing retail space in projects such as The Olympic at 1401 Elm St., McKinney & Olive in Uptown, and the Dallas Farmers Market. “People are starting to look at Dallas differently now.”

Real estate investors have taken notice, too. Buildings that have sat vacant for decades are being acquired by buyers from around the globe, sparking an unprecedented revitalization and adaptive reuse boom.

It’s a far cry from where things stood in the late 1990s, when Ted Hamilton bought the Davis Building, a 1926 landmark on Main Street. Back then, there were fewer than 400 residential units in the central business district. When the Davis Building reopened a few years later with 183 units of loft apartments, a large parking garage, and 52,000 square feet of retail space, there were still only about 900 residential units downtown, says Hamilton, president of Dallas-based Hamilton Properties Corp.

The success of the Davis Building led Hamilton to tackle a number of other redevelopment projects, including Aloft Dallas Downtown, DPL Flats, Lone Star Gas Lofts, and Mosaic. His latest effort involves turning a 12-story building just south of City Hall into a 237-room Lorenzo Ascend Hotel.

“Redevelopment is a lot harder than new construction, so most large developers don’t want to mess with it,” Hamilton says. “It takes so much more time, energy, and effort that there’s only mostly entrepreneurial guys interested in doing it in the first place.”

redevelopment projects

SOUTH SIDE STAR

Another urban trailblazer is Jack Matthews of Matthews Southwest. His redevelopment of a former Sears warehouse into the wildly successful South Side on Lamar helped spark the creation of a new submarket just south of downtown Dallas. Matthews has gone on to develop nearly 2 million square feet of space in the neighborhood, with projects such as a 164-unit apartment community on Belleview Street, a 75-unit condominium development called The Beat, The Cedar’s Social restaurant, a 45-lot urban housing project with David Weekly Homes, a 290-unit residential complex at 1210 S. Lamar St., and the Alamo Draft house, which is set to open later this year.

“What we’ve learned is the less you do, the more people like it,” Matthews says. “They like things like exposed brick.”

Matthews’ newest target is the former Dallas High School. Built in 1907 on the eastern edge of downtown at Pearl and Bryan streets, it has been unoccupied since the 1990s. Matthews and developer Mitch Paradise initially plan to convert the property into office space. The building sits on 5.2 acres of land.

“We loved the history of the old building,” Matthews says. “We wanted to bring that back to life and improve the whole area.”

Centurion Development Group is busy with two big projects. The company is giving the 670,000-square-foot Statler Hilton Hotel on Commerce Street a $175 million transformation. It’s also converting the adjacent former Dallas Central Library at Commerce and Harwood streets into mixed-use space.

Over at 1401 Elm St., the former First National Bank tower, which takes up an entire city block, is being converted into 480 luxury residential rental apartments and 150,000 square feet of destination-style retail space. It’s slated to open in 2017. The project, a $250 million joint venture between Olympic Property Partners and BDRC Partners, revitalizes the 1.5 million-square-foot, 52-story tower, which has sat empty since 2010.

Retailers are showing strong interest in the space, says Gosnell, who has secured early commitments from a number of tenants. “It’s a large space to deliver and it’s the first project in downtown that I’ve been able to get that kind of front-end stimulation on,” he says.

 

Urban Core Redevelopment ProjectsMAIN STREET MOGUL

About 8,200 people now live in the core of downtown Dallas. (The city’s 15 downtown districts, which include Uptown, are home to a total of about 40,000 people.) Occupancy of residential space in the core is at 93 percent. That has lured multifamily developers, which have a total of 3,150 apartments and lofts under construction.

In turn, the higher residential density is attracting much-needed retailers. Capitalizing on and helping to drive the trend has been Headington Cos., which has redeveloped a number of properties along Main Street. Led by the elusive Tim Headington, who has had tremendous success in the oil and gas and entertainment industries, Headington Cos.’ transformative projects include The Joule, a 164-room luxury hotel at 1530 Main Street. The Gothic building was initially developed in 1927 as office space for Dallas National Bank. Headington is now at work on the new Forty Five Ten boutique across the street.

Gosnell calls the project a “game-changer.” The broker has been peddling downtown space for years, and for most of that time, he says few retailers were interested. Now, though, “every retailer you can imagine has been in the car trying to figure it out—big boxes, fashion, clothing, groceries—we’ve had them all touring trying to figure out where the play is,” he says.

With the swarm of redevelopment projects underway, the inventory of old Class B and C office buildings is pretty much depleted in the core. For Gosnell and other longtime urban boosters, it’s a great problem to have.

“What’s wonderful is a lot of them were terrific buildings,” Gosnell says. “They had some redeeming characteristics and because of TIF and federal money in the form of investment tax credit money those got redeveloped and saved. The historic fabric has been saved.”

more redevelopment projects

SUBURBAN PLAYS TO WATCH

Dallas is a newer U.S. city, with most of its older buildings located in the urban core. So, that’s where most of the redevelopment activity is taking place. Industry observers expect to see more projects spring up in the West End of downtown and the Design District. But a couple of big projects are percolating in the suburbs, too:

DALLAS MIDTOWN: Scott Beck has ambitious plans for a $4 billion redevelopment on a 430-acre site anchored by Valley View mall, which he acquired in 2012. The venture will ultimately add millions of square feet of retail, residential, hotel, and office space. The 430-acre Midtown district is bounded by Interstate 635, Preston Road, Alpha Road, and the Dallas North Tollway.

TEXAS STADIUM: The 78-acre site in Irving is within a triangle created by State Highways 114, 183, and Loop 12. It has sat vacant since the former home to the Dallas Cowboys was razed in 2010. San Diego-based OliverMcMillan was granted a memo of understanding concerning development of the Irving property, but that agreement has since expired.

American Airlines was bandied about as a potential headquarters tenant, but those discussions have died down, too. Irving officials are eager to secure a project similar to CityLine on the site. The massive mixed-use development in Richardson is anchored by major operations for State Farm and Raytheon.

redevelopment projects in Dallas

AS PART OF OUR PACKAGE ON REDEVELOPMENT AND RENOVATIONS, WE’RE TAKING A DEEPER LOOK AT SIX PROJECTS ACROSS NORTH TEXAS THAT STAND OUT.

400 Record Photo courtesy of Gensler400 RECORD

When it was first built 30 years ago, the 17-story former Belo Building gained quick renown, both for the media company that occupied its 253,000 square feet and for its geometric shape. The building was put up for sale last year, after Gannett Co. bought Belo. City Electric Supply, led by Thomas Hartland-Mackie, emerged with the winning bid, and is now giving the property a major overhaul.

“The building [Belo] built had fantastic bones, and it was built to a beautiful standard,” Hartland-Mackie says. “We want to respect that history, but just put a modern refresh to it.”

Designed by Gensler, the renovation includes a “sky garden” on the top floor. A new two-level lobby will be enclosed in glass and a custom- designed metal canopy will be added to the entrance. A stunning new mezzanine restaurant and bar will be covered in bronze metal panels, and have the appearance of “floating in space.”

Hartland-Mackie also plans to display pieces from his family’s private art collection in the redesigned space. City Electric Supply will occupy five floors of the building, which has been rebranded as 400 Record.

Hartland-Mackie says the improvements will open up the building to the surrounding streets and neighborhood, with transparent glass and a larger, more inviting entrance. It’s another win for the southwest area of downtown Dallas, which also is being boosted by an amenity expansion at the nearby Omni Dallas Convention Center hotel.

Matt Schendle, JJ Leonard, and Rena Chappell of Cushman & Wakefield are handling leasing for 400 Record. City Electric Supply Co. expects to begin moving in sometime this year.

 

The Crescent in UptownTHE CRESCENT

It’s hard to believe that just 30 years ago, Uptown Dallas was a sleepy neighborhood that existed in the shadow of its downtown neighbor. Today, it’s one of the most successful commercial districts in the country. Uptown is anchored by The Crescent, an iconic, three-tower complex developed in 1986.

To keep up with the shiny new towers that have sprung up around it, the iconic development and the adjacent Rosewood Crescent Hotel are getting a major overhaul—to the tune of about $65 million. The improvement will help ensure that The Crescent remains as one of the best assets in the market for the next 30 years, says Crescent Real Estate Equities LLC’s John Zogg, who oversees office leasing.

The renovation will focus on creating a “great pedestrian experience” for tenants and visitors. This includes rethinking everything from signage to landscaping throughout the 11-acre, mixed-use project. A new “front door” will be created at McKinney and Pearl. And the development’s extensive retail component, which includes upscale shops like Stanley Korshak, will be showcased. “It will be like a jewelry box; it will really pop, especially at night,” Zogg says.

The interior retail court will be reshaped to create a continuous flow, highlighted by a reflecting pool and surrounded by outdoor restaurant seating. New lighting will enhance the project’s unique features, and the current motor court will be replaced by a pedestrian-friendly piazza.

A success since its initial development, office occupancy at The Crescent stands at about 95 percent, with more than 80 financial firms calling the project home. Lease rates for the remaining space starts at $31 per square foot, triple net.

Key players involved in the renovation include Staffelbach, The Office of James Burnett (the landscape architect behind Klyde Warren Park), Gromatzky Dupree & Associates, Thornton Tomasetti, Brockette Davis Drake, Schmidt & Stacy, CBRE|UCR, and The Beck Group.

Statler HiltonSTATLER HILTON

The former Statler Hilton hotel on 1914 Commerce Street downtown is one of the largest projects to ever undergo a transformation in Dallas. Investor and developer Mehrdad Moayedi, president and CEO of Dallas-based Centurion American Development Group, is overseeing a $175 million revitalization. “It is a great opportunity to rebuild the most iconic building in downtown Dallas and do it in a public- private partnership with the City of Dallas where we can create jobs and economic development and aid in the resurgence of downtown Dallas,” he says.

The 19-story hotel first opened in 1956. Moayedi’s mission is to restore the historic property’s architecture, design, and entertainment roots. Known as one of the “most glamorous hotels in the world,” the original Statler Hilton claimed many firsts for the hotel industry, including elevator music and custom 21-inch Westinghouse TVs in every room. It also was one of the first hotels to offer conference and ballrooms on the lower levels.

The Statler Hilton changed hands in 1998, becoming the Dallas Grand Hotel. Within three years, the property fell into vacancy, a victim of the Great Recession. Moayedi bought the 670,000-square-foot hotel and the adjacent former Dallas Public Library in 2014, after securing $46.5 million in tax increment financing from the city of Dallas.

Set to open in October 2016, the new Statler Hotel & Residences will be part of Hilton’s luxury Curio collection, with 161 hotel rooms, 219 residences, four restaurants, a new music venue in a 14,500-square-foot ballroom, and boutique shopping, meeting, and office space.

“The Statler Hotel & Residence ... will create new culture and class for Dallas,” Moayedi says. “It will bring something to the city that has never been experienced.”

Merriman Associates Architects is the project architect. Lincoln Property Co. will lease and manage the residential component.

SolanaSOLANA

In 1989, Mexican architect Ricardo Legorreta came up with a design he hoped would change the way people view office space. His goal was for Solana to engage the business park’s natural surroundings, allowing tenants to feel connected to the environment. The 14-building development, built in the late 1980s, also stands out for its brightly-colored, 100-foot pylons.

Within time, though, the property fell victim to a tough economy and became trapped in a period of special servicing, where very little capital was expended. Things changed in August 2014, when Equity Office Properties, an affiliate of the Blackstone Group, paid $180 million to buy the 230-acre complex out of foreclosure. Now, the new owner is shelling out more than $50 million for renovations, with the goal of helping Solana once again become one of the premier office developments in Dallas-Fort Worth.

“Our job is to essentially come in and update the existing architecture that we have so that it appeals to modern- day corporations, and ultimately helps them attract and retain employees,” says Brian Driesse, director of asset management for Equity Office. “The bones are outstanding; it’s just the matter of spending the capital.”

Equity Office selected Dallas-based architecture firm 5G Studio to come up with a repositioning plan that still maintained the integrity of the original Solana. It even involves undoing some of the minor remodels the park has experienced over the last 30 years, to bring back the project’s “ranch cool” feel.

“I think what Legorreta did so masterfully initially with the design was to really understand the context that he was working in, and understand that the buildings are simply a functional necessity to the bigger picture, which is really the landscape, the prairie, the sky, the wildflowers—those type of things,” says Scott Lowe, partner at 5G who serves as the lead architect on the Solana project.

Amenities at the 1.8-million-square-foot development include The Plaza at Solana, a retail center with restaurants, childcare, and a Marriott hotel with a fitness center operated by Larry North. With its place along State Highway 114, the project also offers easy access to major roadways and Dallas-Fort Worth International Airport.

Chris Taylor with DTZ oversees leasing of office space at Solana. “When you have a growing employee base, you’re close to the airport, roadway access becomes that much better with a completion of a major construction project—a project like Solana is going to benefit,” he says.  Renovations at Solana are set to be complete by mid-2016.

One Dallas CenterONE DALLAS CENTER

HKS Inc., one of the world’s largest architecture firms, has helped many clients as they’ve moved into new corporate homes. The Dallas-based company got to experience things from the user side a few years ago, when its headquarters lease in Uptown was approaching expiration. An employee survey revealed that access to public transportation and walkable amenities were important considerations for new space; workers also expressed a desire to work in a “sustainable” building. The company was especially interested in HKS-designed projects, or a building it could substantially renovate, says Chairman Ralph Hawkins.

After considering 20 different buildings, HKS became very interested in a building formerly known as Patriot Tower. The 30-story tower, designed by I.M. Pei & Partners, sits at 350 St. Paul Street, adjacent to a DART light rail stop. HKS teamed up with developer Todd Interests to create a plan that would give the property a major transformation. The lower 14 floors have since been renovated into modern office space. Along with HKS, Greyhound Inc. houses its headquarters at One Dallas Center. The top 16 floors are being redeveloped into downtown apartments, a collaboration between Todd Interests and Streetlights Residential. A restaurant and bar occupy the first floor; a fitness club and community center are on floor 30.

“We’re the antithesis of a standard apartment development,” says Shawn Todd, CEO of Todd Interests. “When you buy properties that no one else wanted to own, you’re able to do that.”

One Dallas Center, a building he bought out of foreclosure for about $6 million, is now worth about $100 million, Todd says. Beyond the project’s financial success, the adaptive reuse has brought new life to a key block in the core of downtown Dallas.

 717 Harwood717 HARWOOD

World Class Capital Group knew it had a good repositioning opportunity when it acquired a tired, 1980s office building at 717 N. Harwood in Dallas. Formerly known as KPMG Centre, the 34-story building sported a dark-wood and brass interior decor that was all the rage back in the 1980s but a big turnoff to today’s office tenants. The Austin-based company brought in experts at Gensler to come up with a repositioning plan. The goal was to support the concept that “organic interactions are what lead to new ideas, new relationships,and new business,” says Sheena Paul, vice president of WCC.

Gensler Senior Designer Mark Harder and Designer Stephen Walsh worked on the project. The end result is a fresh and bright look, enhanced by LED lighting throughout the tower. A Wi-Fi lounge has been added, as have board rooms and conference rooms. The building’s lobby has been transformed, with the exception of installing artwork from emerging artists who have Texas connections. “The furniture, the reception desk, the lighting—it was really all about tying into the Dallas Arts District and helping to create street presence,” Walsh says.

The updates have helped lure two big tenants to 717 Harwood. Both Active Network and Omnitracs relocated their global headquarters from California, bringing thousands of jobs with them. The 850,000-squarefoot building has about 200,000 square feet available for lease. WCC and Gensler will be working over the next year to perfect the project’s street presence and make it an even more vibrant part of an ever-evolving downtown.


PERSPECTIVES ON REDEVELOPMENT

Phil PuckettLIVE-WORK-PLAY

“Millions of dollars are being spent to convert old and vacant office towers to multifamily residential or hotels. In the first quarter of 2015, CBRE deleted approximately 3 million square feet from its downtown office inventory due to redevelopment. For the first time in my career, downtown truly is becoming a live-work-play environment.”

— PHIL PUCKETT, Executive Vice President, CBRE


Jo Staffelbach HeinzDRIVEN BY COMPETITION

“Properties that have been successful in the past are seeing new competition, and they realize that the new developments are different. They focus on providing different types of [work] spaces, a higher level of hospitality, and more amenities. ... To compete, properties must convey a high level of energy and vitality, as well as up-to-date amenities. They must also demonstrate their sensitivity to energy efficiency and sustainability.

— JO STAFFELBACH HEINZ, president and CEO, Staffelbach


John CrawfordA STRONG CORE

“A healthy city or region is dependent on a strong core. Downtown remains the largest employment center in North Texas, and has the highest population growth rate of anywhere in the city of Dallas. As we continue to build, this will only grow stronger and reverberate success throughout the greater area.”

— JOHN CRAWFORD, president, Downtown Dallas Inc.


Jack GosnellREDISCOVERING THE PAST

“I hope [the redevelopments] raise consciousness about how we treat our heritage. The millennials are all over it. Young people want to live in a vibrant urban core, near the arts, with lots of other like-minded folks. (Hell, it sounds good to me, too!) Rediscovering and repurposing these great buildings teaches us about a past that we may have forgotten or perhaps never knew.”

— JACK GOSNELL, Senior Vice President, CBRE|UCR