Thursday, July 02, 2015

Developer Craig Hall is looking forward to getting his latest tower, KPMG Plaza at Hall Arts, completed. After all, it's going to be home to one of Hall's two corporate offices in Dallas-Fort Worth.
"We were in downtown before we came to Frisco, and now we will be in both places," Hall told the Dallas Business Journal in an exclusive interview. "We will have a number of people, myself included that will have an office in each office.
"I've always loved downtown and we're excited about the energy of the Arts District and what's going on here," he told me. "But at the same time, we're not walking away from Frisco."   
Hall's company, Hall Financial Group, which has been based in Frisco for the past 17 years, plans to operate the firm using a dual headquarters philosophy, calling Frisco and Dallas home. Hall Financial will operate on the second floor of KPMG Plaza in about 20,000 square feet of office space. The Frisco location has about 15,000 square feet.
More importantly, Hall is shaking up how he's done business for the last four decades. Instead of a large, private office, Hall is going to an open office system and will be in a cube like every other Hall Financial employee.
"I've always had this big office and private area, but that's so yesterday's news," he told me. "We will all have the same desk, the same chairs. My office is the same size as everybody else's office.   
The company's Frisco operations will stay in Frisco, as well as a number of employees that work in the northern suburb. Hall Financial will have about 45 to 50 people in its two headquarters offices, with a number of workers — including himself — having two offices, one in Frisco and one in Dallas, to work in.
But Hall said the big news is that Hall Financial will finally get a ping-pong table.
"We aren't going to be headquartered in Frisco or Dallas, but in Dallas-Fort Worth," Hall told me. "We love the energy of the Arts District and we have a commitment to the city of Dallas. I told them it was my dream to come back here and I'm looking forward to being very involved in downtown.
"And at the same time, we're not walking away from Frisco because Frisco has been great to us and we love Frisco," he said. "I think we can do justice to both."
Hall Financial plans to move into its new Arts District office at KPMG Plaza in mid-July. Hall said he's still leasing the building up, although it's been difficult showing people the building amid construction.
Dallas-based HKS is the project architect, with Gus Hinojosa leading the way. WorkspaceVision is working on the workplace design of Hall Financial's new office structure.   
Candace Carlisle/ Dallas Business Journal 
Unlike any other mile-long length of roadway in Texas, the Dallas North Tollway — bounded by Warren Parkway and Lebanon Road — has billions of new development underway.
The short stretch of highway — dubbed the "$5-billion mile" — is expected to transform about 549 acres of land in Frisco into high-end developments.
And for two decades, Dallas Cowboys owner Jerry Jones has invested in the northern outskirts of Dallas-Fort Worth, slowly buying up thousands of acres.  
Now he's migrating his Star north, where his new team headquarters will serve as the anchor of a $1 billion mixed-use development.
The 91-acre plot at the northwest corner of Warren Parkway and the Dallas North Tollway will be home to the $350 million campus.
Named The Star in Frisco, it has spurred a rush on land in close proximity to the club's headquarters and practice facility.
So far, that Frisco land rush has brought investors from as far away as Korea, China, Germany, Dubai, Peru and Honduras. And Frisco Mayor Maher Masoexpects to see more interest.
"They are all aware of the project and know about the [Cowboys] organization does things right," Maso said. "Developers know if they are near it, they will be successful."
The collection of development projects — if built as envisioned — will bring the following to Frisco:
12.1 million square feet of high-end office space
1.32 million square feet of retail, restaurant and entertainment space
490,000 square feet of medical office space
820 hotel rooms within multiple hotels
3,700 apartment homes
Two, 10-story luxury condo towers or villas
A 12,000-seat indoor multi-use facility at the Dallas Cowboys headquarters that will allow Frisco high school students to play football and host city events
This could be just the beginning. Real estate investors with land holdings further northward up the Tollway are banking on big development plans following the pathway up the roadway.  
However, before investors could make their million- and billion-dollar bets, Frisco had to create a marketable destination to support these massive projects.
Jones, through Blue Star Land, was one of the first developers of large single-family communities in Frisco, with his 550-acre Starwood custom home development in the early 1990s. Soon, Frisco began to emerge as a contender in North Texas for residents and the city's infrastructure grew.
For Jones, he knew he needed the rooftops to support the potential commercial development in Frisco and is always looking at creating opportunity, said Joe Hickman, general manager for Frisco-based Blue Star Land.
"He's been a patient land owner and he's always looked for opportunity," Hickman said. "He's spent a lot of time investing in that corridor. He knew growth was coming and it was about buying good land in the right location."
In the past decade, the city's population has grown ten-fold to more than 145,000 residents.
For the past few years, West Frisco has been one of the top submarkets in North Texas for developing single-family homes, saidTed Wilson, principal at Dallas-based Residential Strategies Inc., which tracks the region's housing market.
"The market continues to drive people northward up the Tollway," Wilson said. "The prices are up in Frisco and other markets have really mushroomed in the last few years."
And home buyers are feeling maxed out on home costs, he said, causing builders to move further up the Tollway in search of cheap, raw land to develop.
"This is the area of North Texas where a lot of relocations are happening and those who have land continue to benefit from it," Wilson said.
At one point in time, Toyota was eyeing Frisco as a potential site for its new $350 million North American campus, said Stan Thomas, president and CEO of Atlanta-based Thomas Land & Development, which is developing the $2 billion Wade Park project that sits in the $5-Billion Mile.
"We didn't know the company was Toyota at the time, and I was looking at buying another parcel of land because I felt if we put one more piece together, it would work for them," Thomas said, adding he and city officials countered a few times with the Japanese automaker.
Frisco contending with the much-larger and more developed Plano for a major relocation shows the city's growing economic strength and gives real estate investors reasons to be bullish on the future northward development up the Tollway.
As Frisco's notoriety travels, so has Jones' real estate investment interest. Blue Star Land is buying up land in north Frisco, Prosper and Celina — the go-to parcels for future single-family development, said Hickman.
"We're pretty well built out and the next logical place to go is in Prosper and jump the (U.S.) 380 corridor," he said. "This is the next northern place to develop.
Dallas trial lawyer and longtime real estate investor Don Godwin said he's come to the same conclusion.
Godwin, who owns more than 7,000 acres in the vicinity, has tied up two of the four corners at U.S. 380 and the Dallas North Tollway, a prized real estate investment that guarantees him at least an offer or two every week on the parcels.
The plethora of rooftops you can see within a mile of U.S. 380 and the Dallas North Tollway proves the investment grade of the Golden Corridor, he said.
"In my judgment, the growth you'll see from Main Street in Frisco to 380 will far outweigh — and will come along sooner — than what we've seen from State Highway 121 to Main Street," Godwin said. "The economy is going to be a major catalyst for growth and we're going to see some major changes in the next 18 months.
"You've got some major investors working on some big projects in Frisco," he added. "They aren't doing it with the idea they are gambling, this is where smart people think they can make a lot of money."
Longtime Frisco land broker Rex Glendenning — who incidentally works with Godwin and Hickman with Blue Star Land — said he's seen the community blossom in the past 35 years.
"It is remarkable to see how fast it has occurred," said Glendenning, who grew up on a cotton farm in Celina. "Today, the epicenter of development is in Frisco. The city really gets it and they understand how to be cutting edge and attract big business."
Jones and Godwin aren't alone. Other investors are making big buys and land prices are escalating, said Jim Riggert, associate managing director at Newmark Grubb Knight Frank.
Riggert said he's seeing asking prices for an acre of land in the Golden Corridor reach $325,700 per acre, which has quadrupled in the past seven years. In Jan. 2007, investors could expect to pay about $75,000 an acre of land.
"The amount of development and the pace of development is increasing in Frisco and I think we'll continue to see that for some time," said Jim Gandy, president of Frisco Economic Development Corp.
In the past year, Gandy has been building up his economic development team — recruiting longtime executives from other cities — to accommodate the growing interest in Frisco.
"In the next five years, we'll see far more development than we've seen in the past 10 years," he said.
Jones hasn't been the only investor to see the potential in Frisco, with the '$5-Billion Mile' bringing in Dallas-Fort Worth and international investors.
Family-owned company, The Rudman Partnership, has held onto a 242-acre tract near the Cowboys-anchored development, waiting for the right time to develop the property fronting the Dallas North Tollway. Now, it's time to develop the property, said Trey Sibley, general manager for the Dallas-based family-owned partnership.
The $1.7 billion development, called Frisco Station, will put millions of square feet of office space, thousands of apartment homes and other entertainment and medical facilities on the ground. The project will be developed in partnership with Hillwood Properties and VanTrust Real Estate.
"It's a positive to have Frisco Station adjacent to and surrounding the Cowboys development," said Mike Berry, president of Fort Worth-based Hillwood Properties, a Ross Perot Jr. development company.
The two projects will have a synergy between the neighborhoods to appeal to a broad spectrum of visitors, he said.
"The big picture is there is a lot of compatibility between the Cowboys development and Frisco Station," Berry said. "The way this plan lays out, it will be cohesive and compatible with each part of the project."
The development group hopes to attract a Toyota-sized corporate relocation to Frisco Station, which could bring thousands of jobs.
And the developers behind the two other projects have similar expectations.
Thomas Land & Development President and CEO Stan Thomas said he's excited the Atlanta-based company gets to play a part in Frisco's major growth, with hopes his $2 billion; 175-acre Wade Park development will become a destination upon completion.
In becoming a destination, Thomas said Wade Park is developing a retail village that will get Frisco residents and people from surrounding communities to shop, dine and enjoy an experience-based environment.
Dubai-based real estate investment group — Invest Group Overseas — is also playing off Frisco's fast-growing stature in the United States, making a $700 million bet on nearly 41 acres of land on the Dallas North Tollway.
"True to its name, The Gate is conceived to be a gateway to the bustling corridor along the Dallas North Tollway in Frisco," said CEO Anaz Kozbari. "The development will offer a refreshing take on the live, work, play environment in one of America's fastest-growing cities.   
Candace Carlisle/ Dallas Morning News 

How Champion Partners will transform a once troubled Turtle Creek tower into prime property

After buying a once troubled office high-rise on Maple Avenue for $64.2 million, Dallas-based Champion Partners plans to spend millions rebranding and modernizing the 18-story glass mirrored office building.
The 376,000-square-foot building — once known as 3500 Maple — will be rebranded as Parkside Tower, highlighting the building's proximity to the parks along Turtle Creek Blvd.
"This is the most comprehensive renovation in Uptown for a quality building in some time," said Champion Managing Partner Jeff Swope, adding he wants the office tenants to feel healthier when they come into work.  
Champion Partners and its partner on the building, Stamford, Connecticut.-based Building Land and Technology, has hired Gensler to design the vast renovations to the building, which was neglected for some time from the past ownership group.
Prior to defaulting on a loan, the prior ownership group — a 33-investor tenant-in-common group — was unable to keep up with building improvementsand lost tenants as a result.
The 1985-era tower sits near Reverchon Park near Turtle Creek, and at the time of the deal was 56 percent occupied. It was also valued at $51.9 million, according to the Dallas Central Appraisal District.
Plans for the renovations include a new building lobby and entries, a new outdoor plaza and courtyard area, a new common lounge and seating areas with Wi-Fi connectivity, a high-quality fitness center with club-like locker rooms, a modern cafe with a healthy menu and a new front door drop area along Maple Avenue for tenants.
Construction is currently underway, with renovations slated for completion by the end of the year.
If Champion Partners and Building Land and Technology's renovations are pulled off as foreseen, the rebranded building could get a boost in occupancy rates, as well as see an uptick in rental rates.  
The Uptown area is one of the submarkets in the region that has seen a rise in office leasing rates, according to a recently releasedCushman & Wakefield report on the second quarter of 2015. In North Texas, the average rental rate for Class A property is $27.12 per square foot.
DTZ Executive Managing Director Johnny Johnson said he hopes the new Parkside Tower will serve as a gateway to Uptown.
"Companies are looking to attract and retain quality employees and these are the types of amenities people are looking for, so our job as leasing agent for the building is to help create and office atmosphere that caters to this growing need and give the market and our tenants what they want," he said.   
Candice Carlisle/ Dallas Business Journal 

Office rents reach all-time high as companies eye DFW

Office rents for Class A space in Dallas-Fort Worth rose 3.4 percent year-over-year reaching an all-time high of $27.12 per square foot in the second quarter, according to the latest Cushman & Wakefield research.
Overall, office rents across all classes in the region rose 4.4 percent to $22.13.
The rental rates in North Texas have grown as a result of companies continuing to look at the region as part of their site selection processes, Cribb Altman, senior director of brokerage at Cushman & Wakefield's Dallas office, told the Dallas Business Journal.  
"We expect demand for office space to remain strong through the end of the year," Altman said. "Summer is typically a slower period, but activity has still been very good.
"We are starting to see some of the vendors for these large corporate relocations coming into the DFW market needing space," he added.
The North Texas office market has been bolstered by decisions from Toyota and State Farm to open major headquarters and hubs. In the second quarter, the region also landed Kubota Tractor and Farmer Brothers Coffee.
Other relocations are expected in the future, he said.
The leasing velocity also increased in the second quarter totaling 3.9 million square feet of office space, which is roughly the same as the second quarter of 2014. That absorption is 10 percent higher than the 10-year second quarter average of 3.6 million square feet of space.
The North Texas vacancy rate fell to 16.4 percent. Although, three submarkets in the region reported rises in vacancies caused by higher rents, which include Turtle Creek-Uptown and Preston Center.  

Even as vacancies increase, Altman said researchers don't expect rental rates to fall significantly because of the strong demand for space in those submarkets.  
Currently, there is 6.2 million square feet of office space is under construction, including 23 speculative office buildings totaling 3.5 million square feet of space and nine built-to-suit projects totaling 2.7 million square feet of space.
Researchers expected nearly 3.8 million square feet of construction to be delivered by the end of the year, but heavy rains and flooding during the second quarter has delayed work on some of those projects.  
Candice Carlisle/ Dallas Business Journal 
The Frisco City Council approved a $1 billion development plan that will transform 242 acres within the city's touted '$5 Billion Mile,' along the Dallas North Tollway between Warren Parkway and Lebanon Road.
The one-mile stretch of roadway actually has development plans on it totaling $5.4 billion and is unlike any other stretch of roadway in the Lone Star state.
The City Council put its stamp of approval on the development plan Wednesday evening, in part because it directly aligned with the city's economic development and comprehensive plan goals, said Mike Berry, president of Fort Worth-based HillwoodProperties, which is one of the three-member development groupoverseeing the Frisco Station project.  
"During the approval process, we met with city officials, each of the HOAs adjacent to Frisco Station, as well as various community groups," Berry said, in a prepared statement. "At each turn, we received an enthusiastic response, and we're excited to kick off our project with the collaboration of the community."
Development plans for Frisco Station include building more than 6 million square feet of Class A office space and corporate campuses, adding more than 200,000 square feet of restaurant, retail and entertainment space, putting 2,400 urban-living residential homes on the site, as well as adding a number of hotel concepts.
Other portions of the project include parks, trails, urban plazas and a health and wellness programming to the overall project.
Frisco Station — along with other projects included in the '$5 Billion Mile' — will set the stage for the city's development over the next two decades, said Frisco Mayor Maher Maso.
"Because Frisco Station links to a future entertainment district anchored by theDallas Cowboys world headquarters and Frisco's Multi-Use Event Center, this development will build upon the '$5 Billion Mile,' synergy and Frisco's growing reputation as a sustainable, destination city," he said.  
In that vein, Berry said the development group plans to make several major announcements related to Frisco Station in the next few months.
"The level of interest that we're receiving from potential customers is incredible," he said.  
Candice Carlisle/ Dallas Business Journal 

City council approves Frisco’s $1B Frisco Station project next to Cowboys HQ

Frisco city officials have approved plans for Frisco Station, the 242-acre mixed-use development on the Dallas North Tollway north of Warren Parkway.  
The development surrounds the new Dallas Cowboys headquarters and is being built by Hillwood Properties, VanTrust Real Estate and The Rudman Partnership.
Frisco’s city council on Wednesday night approved plans for the $1 billion development.
“We believe our master plan is in direct alignment with the city’s economic development and comprehensive plan goals, maximizing land value for the surrounding area, and providing a unique urban district for Frisco residents and companies to converge,” Hillwood Properties president Mike Berry said in a statement.  
“We’re excited to kick off our project with the collaboration of the community.”
Frisco Station is planned to include more than 6 million square feet of office space, 2,400 residential units, hotels and more than 200,000 square feet retail space.
“The level of interest that we’re receiving from potential customers is incredible,” Berry said.
Architects RTKL, HKS and BOKA Powell will design the project, which includes office, retail, residential and medical buildings. Kimley-Horn has been hired as the engineer for the development
And Retail Street Advisors will market commercial space in the development.
MRA International an entertainment development consulting firm is also part of the project team.  
Steve Brown/ Dallas Morning News

Cypress Waters development lures big companies with North Texas location and mixed-use construction

Las Colinas, Legacy, CityLine, AllianceTexas – North Texas has some of the country’s top suburban business parks.
Companies have added another location to their shopping list.
The 1,000-acre Cypress Waters development on LBJ Freeway during the last year has landed some of the area’s largest office deals.
Construction is underway in the project on a headquarters for convenience store chain 7-Eleven.
And about a month from now there will be a groundbreaking for a regional corporate campus for information firm CoreLogic.
Nationstar Mortgage, British Telecom, Meritage Homes, AMN Healthcare and Toyota have also made big office deals at Cypress Waters, which is being built by Billingsley Co.
“We will have about 5,000 people working here by early 2017,” said developer Lucy Billingsley. “We are adding another 200,000-square-foot multi-tenant office building and have still another one on the drawing boards.”
In all, more than 6 million square feet of offices are planned in the development. And roughly 26,000 people will eventually work at Cypress Waters.
“That’s so much more than we ever anticipated.”
More than a decade ago when Billingsley Co. bought the land for Cypress Waters, the project was considered primarily an apartment and home development.
Cypress Waters is zoned for about 10,000 apartments. About 700 units have been built and more are on the way.
It wasn’t until 2012 that plans were announced for the first office park at in the development at Belt Line Road and LBJ Freeway.
News of the proposed business campus didn’t rate a lot of attention in a market where big office developments are commonplace.
But with more than a million square feet of office deals now done in the project, real estate brokers and corporate tenants all have Cypress Waters on their radar.
“It’s the real deal and a competitive force in the market now,” said Greg Biggs, managing director with commercial real estate firm JLL. “Billingsley is very aggressive and the product they build meets the needs of today’s business.
“They are always under consideration for new deals.”
Mixed-use appeal
To make sure Cypress Waters continues to land new employers, Billingsley is expanding the project with mixed-use buildings to appeal to employers and residents.
Construction will start soon on a new town center at the south end of North Lake.
Dallas architects Good Fulton & Farrell designed the project – called The Sound -- to include mid-rise apartment buildings, restaurants and shops fronting on the water
“We’ve already been talking to restaurants,” Billingsley. “We’ll have the restaurants on the water with a trail going in and out between them.
“We are ramping up to be more sophisticated and urban,” she said. “We already had a few very large corporations looking at this development.”
Legacy business park, the CityLine development in Richardson and AllianceTexas in North Fort Worth have all added restaurant and retail villages to help businesses attract and retain workers.
At Cypress Waters, Billingsley has built a series of small parks with large sculptures and is adding more green space in other parts of the development.
“We’ve already planted 500 trees and are landscaping along the shore of the lake,” Billingsley said.
Six- to 7-story apartment blocks in the town center will overlook a small cove that is crossed by a signature bridge.
The cove and bridge have just been built. Construction will start in the next couple of months on the streets in the new town center.
Work on the buildings will begin in early 2016.
Large companies on the way
Since most of Cypress Waters is in the city of Dallas, the economic development office has provided incentives to land the major employers including CoreLogic and Toyota.
“Cypress Waters is a great investment for the city,” said assistant city manager Ryan Evans. “The project will add significantly to our tax base.
“And it’s a new part of the city that will not have to have a lot maintenance expense.”
7-Eleven starts relocating more than 1,200 workers from downtown Dallas to Cypress Waters in early 2016.
Toyota Industries Commercial Finance Inc. late this year will move more than 150 people into its office headquarters in the project. The company is bringing people from Southern California for the new operation.
In September, AMN Healthcare will start moving several hundred workers into 109,000 square feet of office space at 8840 Cypress Waters Blvd. They company currently has offices in Irving.
Billingsley senior vice president Marjike Lantz said the development’s location near Dallas/Fort Worth International Airport and easy access to LBJ Freeway and Bush Turnpike are big factors in attracting business.
And it doesn’t hurt that there is plenty of room for more construction.
“A lot of corporations want to be in the park because they can expand here,” said “They like that we have the ability to handle their growth.
“It’s also making a big difference now that they can see what we are building here.”   
Steve Brown/ Dallas Morning News

New 'upscale lounge' expected to open in Dallas Design District

The Dallas Design District's first dedicated cocktail lounge will be called Quill, the owners say. It'll be a "bar first" but will also have food, says co-owner Richard Ellman.
The project is a collaboration between Ellman and his wife, Tiffanee Ellman -- who co-own nearby restaurants Oak, Pakpao and El Bolero -- and restaurateur Joe Palladino, of Nick & Sam's, Nick & Sam's Grill, Coal Vines and the coming soon Biergarten on Lamar
Chef John Tesar will also be involved in Quill, Richard Ellman says.
The lounge will be located where Bo Concept used to be, next-door to Ellman's restaurant Oak on Oak Lawn Avenue in the Design District.
"We're trying to do something really cool for the Design District that Dallas has not seen before," Ellman says.
Palladino describes the design of the place as "gothic," perhaps with 1940s style decor.
The space is 5,000 square feet, currently empty. When open, the owners plan for part of it to be private dining space, both for smaller groups like dinner parties and for larger ones like wedding receptions. The menu will be driven by the team at Oak, Ellman says. They haven't identified who will run the bar, but Ellman expects it to be a "progressive cocktail project" with wine and bubbles, too.
Patrons will enter through the front door or from a door in the adjoining Oak restaurant.
"I'd like for us to develop an institution to where if you live in Dallas or are coming into Dallas, this is the place you need to see and go to," Palladino says.
Projected opening date is September or October.  
Sarah Blaskovich/ Dallas

ARCO/Murray Completes 186,700 SF Expansion for Klein Tools in Metro Dallas

MANSFIELD, TEXAS — ARCO/Murray has completed a 186,700-square-foot expansion for Klein Tools. The facility is located in Mansfield and serves as the company’s manufacturing headquarters.

The expansion included an 18,000-square-foot, two-story office and multiple crane bays. The space is fully air-conditioned and also features insulated tilt wall panels and a steel bar joist structure. Jason McLaughlin and Mark Klump of ARCO/Murray represented the construction team.  

Texas Real Estate Business

Wednesday, July 01, 2015

Shark Tank investment Tom + Chee headed to North Texas

Shark Tank success story Tom + Cheewill open its first Texas restaurant in Richardson later this month.  

In an 2013 episode of the hit CNBC show, “sharks” Barbara Corcoran and Dallas’ own Mark Cuban each received a 15 percent stake in the company after investing $300,000 each. While Tom + Chee's relationship with Cuban ended after the show, Corcoran is still an investor and has an agreement to receive franchise fees from every Tom + Chee location in New York. 
Cuban no longer has a stake in the company.
Since its prime-time debut, Tom + Chee has grown to nearly 30 locations, with one of its newest scheduled to open July 16 at Richardson’s CityLine development. Greg and Wendy Sippelare the restaurant’s local franchisees.
"We are excited to introduce this fresh, fun, new concept to Dallas/Fort Worth and Texas,” the Sippels said in a news release. “Tom+Chee reminds us of the comfort foods of days past, but with a twist. We believe the cheesy goodness of Tom+Chee will be a great addition to CityLine."
The new restaurant will feature Tom + Chee’s 20 grilled cheese sandwiches, fresh salads and three versions of tomato soup. Customers will find specialties such as the grilled cheese donut and Hippy + Chee, with hummus, cucumbers, mixed green, tomatoes and cheddar cheese.
Richardson’s Tom + Chee location will be open 11 a.m. to 9 p.m. daily.  
Korri Kezar/ Dallas Morning News 

Tuesday, June 30, 2015

Dallas-based Wingstop soars in market debut

Stock in Dallas-based Wingstop took off like a rocket Friday, in the company’s first day in the public market.
Shares of Wingstop Inc., trading on the Nasdaq under the symbol “WING,” closed at $30.59, up 61 percent from the initial public offering price of $19 a share. Investors hoisted the stock price to more than double the $14 figure that was at the high end of the company’s earlier estimated range.
“At the end of the day we're very happy,” said company chief executive Charlie Morrison. “I think investors are definitely interested in the growth story of Wingstop.”
Wingstop, one of the nation’s fastest-growing chicken chains, has 745 locations, including 700 in the U.S. and 85 each in Dallas-Fort Worth and Los Angeles. Those are the chain’s two largest markets.
About 97 percent of the locations are owned by franchisees who, like Friday’s investors, have been drawn to the chain’s appeal to millennials, its positioning in the rapidly growing fast casual restaurant segment and its strong cash generation. The company has posted increases in same-store sales for 11 consecutive years.
Morrison said the company is not giving growth guidance for 2015 or 2016. Eventually the company expects to triple the number of U.S. locations.
For Friday’s IPO, Wingstop offered up 2.15 million shares of stock, and affiliates of owner Roark Capital Partners offered 3.65 million. Roark purchased the company in 2010 and still will own more than 60 percent of the shares after the public offering.
The underwriters for the offering have a 30-day option to buy up to an additional 870,000 shares at the initial public offering price, less the underwriting discount.
Earlier this month the company estimated that its initial public offering price would be between $12 and $14 a share. A $19 price placed the value of the offering at about $110 million.
Morgan Stanley, Jefferies, and Baird acted as lead joint book-running managers for the offering, which is expected to close June 17.
Wingstop’s debut sets the bar high for another North Texas restaurant company looking to wade into the public market: Fogo de Chão Inc.
The Brazilian-themed, meat lovers’ paradise expects to raise between $67 million and $77 million in an IPO with a midpoint price of $17 a share. The company is owned by private equity firm Thomas H. Lee Partners LP, which will continue to own at least 80 percent of the company after the IPO.  
Karen Robinson-Jacobs/ Dallas Morning News

Dallas’ Fogo de Chão restaurant sizzles in Wall Street debut

Wall Street’s hunger for new restaurant stocks pushed another North Texas brand beyond its initial public offering price.
Dallas-based Fogo de Chão Inc., a Brazilian-themed full-service restaurant chain, debuted Friday on the Nasdaq after pricing late Thursday at $20 a share. The initial price was above the earlier stated range of $16 to $18 a share.
The stock closed at $25.75, up nearly 30 percent.
Fogo de Chão is the second North Texas restaurant chain to go public in a week. Last Friday, stock in Dallas-based Wingstop soared in that company’s first trading day, gaining 61 percent from the initial offering price of $19 a share. Before that pricing, the high end of that company’s range was $14.
Fogo chief executive Larry Johnson thinks consumers are drawn to his chain because of the value proposition, the ability to have an affordable “white tablecloth experience.” That in turn “resonates with investors,” he said as the stock price continued its day-one climb.
Johnson said he thinks investors will take note of the brand’s growing popularity and acceptance by different age groups.
The company’s 26 U.S. locations, which range in size from about 7,500 square feet to 10,000 square feet, bring in about $8 million each annually on average.
‘Concept travels well’
The company expects the store count to grow by at least 10 percent each year, with Fogo eventually launching at least 100 U.S. locations. Johnson offered no timetable for the full buildout.
“We are comfortable that the concept travels well,” he said of the chain’s popularity in different markets across the country. “When you put all that together, I’m confident investors are going to get the story and are going to reward us for our performance.”
No new locations are planned for North Texas this year, but next year Fogo plans to appeal to carnivores in Uptown, which already is home to several popular steakhouses including Morton’s and Perry’s Steakhouse & Grille.
The company, which is owned by affiliates of Thomas H. Lee Partners, sold 4.41 million shares in the IPO. Lee Partners retains control of the company.
Fogo de Chão, which came to the U.S. in 1996, is the latest restaurant chain to whet Wall Street’s appetite.
PrivCo, which provides financial data on privately held companies, listed four restaurant IPOs this year, each of which posted a significant first-day pop. Each one — Shake Shack, Bojangles, Wingstop and Fogo — was priced at about $20 a share.
Burger joint Shake Shack closed at about $46 during its market bow, and jumped to more than $92 in May.
Fast casual
Many investors are trying to find the next Chipotle. The Mexican-themed fast-casual chain went public in 2006 at $22 a share and closed the first day at $44 a share. The stock closed Friday at $614.22.
Unlike most of those chains, Fogo de Chão is a full-service restaurant, rather than fast food or the current industry darling, fast casual.
Johnson noted that his chain’s average sales per location are much higher than those for a fast-casual concept.
The flip side, noted Sam Hamadeh, founder and chief executive of PrivCo, is that expenses are higher at a large full-service restaurant.
“That’s something [for investors] to keep in mind,” he said. “That’s a very expensive operation. That could be a problem at the first sign of a slowdown.”
Darren Tristano, executive vice president of Chicago-based Technomic Inc., a restaurant research firm, thinks the success of fast-casual IPOs is helping fuel growth of other restaurant stocks.
“Fast-casual restaurant chains continue to dominate growth,” said Tristano. “Technomic’s forecast five-year compound growth for fast casual is greater than 10 percent. As analysts and consumer investors look toward continued patronage and success of fast-casual restaurant brands, IPOs have been and are likely to continue to be strong going forward. This success will likely positively impact other major restaurant brands with IPOs.”  
Karen Robinson-Jacobs/ Dallas Morning News

Monday, June 29, 2015

Building blocks: Likely Oak Lawn HEB site shows how investors, developers piece parcels together

It can start with a knock on the door, a letter in the mail, or both.
Property owners in older parts of town are being made offers they can’t refuse. Without empty land to purchase, investors and developers have to create their own clearings to build new projects.
If you have a lot of money, you can quickly put acreage together even in a densely developed part of the city.
We followed two blocks in Oak Lawn that were bought up over the last year. There’s one holdout, but after the land is ready, HEB’s Central Market has confirmed that it’s interested.
OGM Group, whose address is the same as a San Antonio-based law firm, has purchased 11 residential and commercial properties from 15 owners in Oak Lawn since August.
It bought a Taco Bueno, townhomes, apartments and businesses in two adjoining city blocks in the neighborhood sandwiched between Uptown Dallas and Highland Park. The blocks are on Lemmon and Bowser avenues between Throckmorton and Reagan streets. Together, the properties are on the Dallas County tax rolls for $7.75 million and make up about 3 acres.
OGM isn’t talking. A spokeswoman for Central Market, Heather Senter, said HEB is considering adding the property to its portfolio of land holdings in North Texas. But, she said, “they are still in the very early stages of evaluating this particular opportunity.” Plus, the property is “still being assembled and still in active real estate negotiations,” Senter said.
Only one property owner hasn’t sold to OGM. Nickos Panousopoulus, a Greek-American cobbler who runs Nicko’s Shoe Repair, owns the two-story building at 3900 Lemmon. He says he is considering an offer.
Taco Bueno, on the corner of Lemmon and Throckmorton, closed June 1 after selling to OGM in December. It was an older building that didn’t have a drive-through, and the company is looking for another Oak Lawn location, a spokesman said.
There are still tenants with leases to be dealt with.
La Madeleine at 3906 Lemmon has no plans to close, a spokesman for the Dallas-based restaurant company said.
Ron Berlin, a Dallas real estate investor, sold the two-story building that houses La Madeleine and a dozen other small businesses last fall. Berlin didn’t respond to requests to be interviewed.
It’s not clear from the secretary of state’s office incorporation filing who owns OGM. Paperwork lists “managers” Stephen Golden and Ami Gordon, who are partners in the San Antonio law firm of Golden Steves Cohen & Gordon and have done work for HEB. Gordon hasn’t responded to interview requests.
Anonymity is a big part of the process.
Carol Morrison was the first person to sell to OGM. Her former residence at 3929 Bowser is one of four New Orleans-style townhomes at the Villas of Franconia that were built in the late 1990s. The three others face Throckmorton.
When she was approached, Morrison said, she was told that the buyers were accumulating rental property in the area.
Her advice to others: “Don’t let them rush you into a decision. They’ll dangle a carrot and then say it’s going to be off the table soon,” Morrison said. She realized too late that she had been priced out of her longtime Oak Lawn neighborhood. She has now bought a home in Addison.
OGM increased its offer to Morrison a couple of times by $10,000 each time. She was paid more for her house than she asked for, but she still regrets not doing more homework. “My home needed some work, but it was quality construction and high-end finish out,” Morrison said. “It breaks my heart that it’s going to be torn down.”
The sale closed Aug. 1, and the buyers gave her free rent through the end of the year. She moved out in January.
The timing of OGM’s offer was good for Sabu Varghese of 3512 Throckmorton. He tried to sell in 2013 but pulled it off the market because he and his wife were adopting a child. “We didn’t want to change our address and complicate the paperwork,” he said.
OGM also offered Varghese six months of free rent after the Aug. 6 sale. The adoption was finalized in November, and the family is building a house in Frisco.
“All through the process, they were very accommodating to our situation,” Varghese said.
An aging building on Bowser that had five individual condo owners who all sold in August has a chain link fence around it now. So does the Image Arms Apartments, which was cleared out of tenants quickly when it was sold in September.
Fighting the city
Putting these deals together often means dealing with a person who is not ready to sell.
Panousopoulus, who says he’s “about 90” and doesn’t want to retire, has been running Nicko’s Shoe Repair for 25 years. He intends to open a new shop on Oak Lawn Avenue if he agrees to sell his corner two-story building and the parking lot behind it.
He’s also running into problems with the city of Dallas.
Two years ago, he was told by the city that he had to make repairs to the exterior of the building. He installed new siding and a roof that cost him more than $30,000.
Now the city of Dallas Water Utilities department has turned off his water and told him that he owes more than $5,000. He was told he has a leak that would require tearing up his foundation to fix.
“I’m afraid they are going to create more serious problems if they break up the foundation,” he said.
Panousopoulus has a court date in July about a new citation for operating a “substandard structure.” Last week, at a required appearance for the charge that comes with a maximum fine of $2,000, Panousopoulus declined an option to pay a reduced $200 fine.
“I want to tell my story to a judge,” he said.
Panousopoulus believes the city is harassing him. He keeps good notes and records.
When asked why he doesn’t sell and make all these problems go away, Panousopoulus said, “I like to work. If I don’t work, I will die earlier.
“I need the activity,” he said.
Assembling land this way is going to become more common, Dallas real estate broker King Laughlin said. In the 1980s, Laughlin secretly bought land along North Central Expressway for the huge Cityplace development.
“When you have a fully developed city, nothing gets built on raw land,” Laughlin said. “You have to put it together to get enough to do anything. That’s the nature of urban development.”
The Cityplace acquisition took years and was over 1,000 transactions, he said.
“The key to all land assembly is you care only what your average price is for the whole thing,” Laughlin said. “You may pay $100 per square foot for one property and $20 for the one next door, and it all works out just fine.
“It’s not so much what you pay for these urban sexy locations,” he said. “It’s can you get it at all?”   
Maria Halkias and Steve Brown/ Dallas Morning News