Tuesday, August 09, 2011

United Fidelity building to become Homewood Suites hotel

An Irving hotel firm is transforming a vacant downtown Dallas office building into an all-suite hotel.
The former United Fidelity Life Insurance Building at 1025 Elm St. has been vacant for more than a decade.
Earlier this year, Lowen Hospitality Management bought the property out of foreclosure. It has begun work to convert it to a Homewood Suites by Hilton Hotel.
The first phase is to gut the old building and ready it for redevelopment, Lowen officer Sanjay Naik said Monday.
“It will definitely take the rest of this year to clean it out,” Naik said. “We don’t have an opening date scheduled yet.”
Built in 1918, the 10-story high-rise originally housed the offices of the Texas & Pacific Railroad.
In 1920, United Fidelity bought the Texas & Pacific Building located between Elm Street and Pacific Avenue and moved its office into the lower floors of the high-rise. Most of the building remained occupied by the railroad into the 1950s.
The insurance company in 1959 decided to modernize the classical-style high-rise with a glass and metal exterior.
That’s when an adjoining five-story parking garage was constructed facing Griffin Street.
The brown glass building for many years housed operations of First National Bank of Dallas and its successor companies.
Dallas architecture, engineering and design firm Aguirre Roden Inc. is handling the work on the renovation project.
“We are in the design phase of the renovation as well as performing some demolition work,” executive vice president Gary Roden said.
The Elm Street project is the third new hotel development under way downtown.
Construction will be completed later this year on the Omni Dallas convention hotel on Young Street. South of the convention center on Lamar Street, development has begun on a 76-room Nylo Hotel.

Dallas-area commercial foreclosures fall from last year

During the first half of 2011, almost a half-billion dollars in Dallas-Fort Worth area commercial properties were sold by lenders on the courthouse steps.
The total sounds big, but the dollar volume and number of commercial property foreclosures in the area are down from the same period last year. And the expected flood of commercial real estate sales by lenders just hasn’t materialized.
“What we are seeing is just phenomenal compared to what it could have been,” said George Roddy, whose Foreclosure Listing Service tracks North Texas property foreclosure postings and sales. “We heard predictions of how much commercial property would be foreclosed on, and it hasn’t gotten there yet.”
In the first six months of the year, just over 300 commercial properties — including offices, retail buildings, apartments, warehouses and development land — were sold at auction by lenders, Roddy’s data shows. That’s about a 7 percent decline from the same period last year.
The dollar volume of the foreclosures is down even more — about 30 percent less than in 2010.
In number and dollar amount, the current downturn’s commercial foreclosures are nothing like what North Texas saw in the late 1980s and early 1990s real estate crash.
“We were running in Dallas County 300 to 400 sales a month back then,” Roddy said. “Compared to that, the last few years have been anemic.”
Not that North Texas hasn’t had plenty of commercial foreclosures so far in 2011.
The largest included an LBJ Freeway office complex — the Fenton Center in Farmers Branch — and theCrowne Plaza hotel in Addison.
Lenders also foreclosed on parts of a new shopping center on State Highway 121, the Lewisville Town Crossing. And big development sites in Irving and Frisco went into lender control.
Lost land
Development land accounted for the biggest share of commercial property foreclosures so far this year in the D-FW area. More than 100 tracts with more than $178 million in debt went into foreclosure.
Office buildings, with almost $85 million in debt, and apartments, with more than $80 million in mortgages, were also sold at foreclosure, according to Foreclosure Listing Service’s data.
So far, some lenders have been reluctant to take over failed commercial real estate deals.
That’s given the market time to sort out some of its problems, said Stuart Wernick, senior vice president of Grandbridge Real Estate Capital.
“A lot of the lenders have been able to work out the problems with their borrowers,” Wernick said. “They are being patient and working with their clients, who have acted honorably.
“There is also some new capital out there that has shown up to save the day,” he said. “Interest rates have remained low, and that’s helped, too.”
Train wrecks
Still, hundreds of North Texas commercial properties face debt issues in the year ahead, analysts say.
And billions in local property loans will come due over the next few years and must be refinanced.
“There are train wrecks waiting to happen, still working their way through the system,” said Tom Fink, managing director of Trepp LLC, a New York commercial mortgage information firm.
Trepp estimates that of the more than $19 billion in outstanding commercial mortgages in the D-FW area that have been sold as securities, about 11 percent are delinquent.
“You should see some time over the next 24 months another $1.3 billion hit the courthouse steps,” Fink said.
He estimates only about a third of the problem deals have been foreclosed on so far.
“The process has gone a lot slower than anyone ever thought it would,” he said.
Top foreclosures
Some of the most expensive of the commercial properties sold at foreclosure auction in the first half of 2011 and their original loan values:
Fenton Center office complex, Farmers Branch: $62 million
Crowne Plaza Hotel, Addison: $30 million
Parts of Lewisville Towne Crossing shopping center: $20 million
Frisco Main Street and tollway mixed-use land: $19.8 million
Irving land, 109 acres, State Highway 114 and Belt Line Road: $14.3 million
SOURCE: Foreclosure Listing Service

In bad times, big-ticket amenities in Dallas are booming

In the teeth of the worst recession in eight decades, Dallas is undergoing a building boom.
Not in real estate, heaven knows, or in construction of high-rise office buildings, but in an area in which the city has always been judged weak — in projects devoted to the quality of life.
The opening of the AT&T Performing Arts Center in 2009 brought international attention, but it was only one of more than a dozen high-profile, big-ticket amenities that have opened in the past few years — or will come on line in a few years hence.
The projects include four downtown parks, a presidential library, a natural history museum , a nature center along the Trinity River and major expansions at existing institutions such as the Dallas Zoo and the Dallas Arboretum. The total cost of the list, which is only a partial one, comes to well over $1 billion.
Transportation projects, ordinarily the most mundane of civic projects, have been enlisted in the movement to improve urban life here. Millions in private funds were raised to turn the Margaret Hunt Hill Bridge from what would have been a utilitarian structure into a city landmark. Meanwhile, the McKinney Avenue trolley will be expanded, and the Santa Fe Trail, a bicycle and pedestrian path, has opened in East Dallas.
The list does not include recent expansion of the DART rail, which some urban experts consider the most crucial amenity of all.
Darwin Payne, author of Big D, the best known of the city’s histories, said Dallas has experienced two similar periods — the decades near the turn of the century when cultural institutions such as the city library and art museum were founded, and the era of the Centennial Exposition in the mid-1930s.
But, in sheer variety and scale, the accomplishments of those eras pale compared with the current boom.
“If you total up everything that’s being done now, I don’t think I can come up with a period in Dallas history that has had anything like that,” Payne said.
No grand plan
What is striking is that the amenities boom was not the result of any grand blueprint.
While the performing arts center had its origin in urban renewal plans that originated 30 years ago, most of the projects were conceived and developed independently of one another. Indeed, the Trinity River Project, perhaps the most ambitious local example of grand planning, still largely sits on the launching pad.
Furthermore, the projects have progressed when the economic downturn has dampened construction of almost everything else.
In part, this is because nearly all were approved and funded before the downturn struck. They also draw from sources — such as bond issues, donations from wealthy individuals and tax increment funds — that are less sensitive to the downturn than are commercial real estate projects funded by the private sector.
“The things under construction now were started in better economic times,” said Veletta Forsythe Lill, director of the Arts District. “The feeling of the city fathers and mothers has been that the show must go on.”
There is no doubt the struggling economy has had an effect.
Although bad economic times may actually increase demand for free amenities such as the parks or the trolley, the effect on more expensive forms of entertainment has been significant.
The Dallas Symphony Orchestra and the Dallas Opera have announced cutbacks recently. Indeed, opera officials noted that the move from Fair Park to the Winspear Opera House raised their costs by $4 million per season.
‘Growing up’
Some urban experts and civic leaders said they thought local interest in quality-of-life projects increased after 2001, when Boeing officials cited a lack of amenities in Dallas when they chose Chicago as their new headquarters.
Bill Lively, who was raising funds for the planned Performing Arts Center at the time, finds that explanation overstated.
“People say Boeing was a catalyst. I don’t think it was,” Lively said. “But I do think it was remembered by a lot of thoughtful people who were looking at ways to raise the culture of the city to a level equal to those of other great cities.”
In many ways, he said, the dramatic activity is a reflection of the city’s current place in its history.
“I think Dallas is growing up, and now we are maturing culturally,” Lively said.
That explanation was echoed by other commentators, among them Aaron Renn, an urban analyst based in Chicago.
“I think that’s the history of most big cities. First, you want to become rich, then you want to become classy,” he said. “I think of Chicago; it was a filthy, gritty town for a long time. But once it got rich, businessmen started building amenities.”
On the other hand, cities such as New York had a long head start, Renn notes. Eastern cities, especially, have an urban density that will be hard for Sun Belt cities such as Dallas to re-create.
“Dallas is never going to be competitive for the kind of people who want that kind of environment,” he said. “It’s not Manhattan; it’s just not.”
Nature hasn’t been particularly helpful either — North Texas has no large natural bodies of water or nearby mountains.
“You have to make up for not having a waterfront by building parks,” advised Andy Kunz, director of New Urbanism, an Alexandria, Va., nonprofit that seeks to encourage livable downtowns.
Overcoming criticism
The most frequent criticism of the recent cultural building frenzy is that it reflects an erroneous belief that Dallas can simply spend its way into vibrancy.
Earlier this year, Blair Kamin, the Pulitzer Prize-winning architecture critic of the Chicago Tribune, walked around the AT&T Performing Arts Center and found its street life disappointing.
“Despite the architectural firepower, the Dallas Arts District can be an exceedingly dull place,” he wrote in his review. In a particularly stinging aside, he said some of its designers referred to it as “an architectural petting zoo.”
Although Kamin conceded later in the critique that people-friendly amenities such as the Woodall Rodgers deck park might change the equation, even Dallas supporters don’t completely deny his point. But they plead that a vibrant city does not happen overnight.
Karl Zavitkovsky, the economic development director for the city of Dallas, argues that the incremental nature of reurbanization of downtown often hides its progress. The announcement of a new museum gets lots of attention; the opening of a restaurant, much less so.
“There’s a lot of stuff going on right now under the radar, particularly with the adaptive reuse of old office buildings,” he said.
Defenders are surprisingly muted about justifying big-ticket amenities as a direct spur to future development. Invited to make that argument, Zavitkovsky went no further than to cite quality of life as “one of the issues that makes a location attractive to a business thinking of coming in.”
“Do big amenities alone assure you of success? No. But if you have the opportunity to do some significant things, then all that reinforces the basics needed for urban development,” he said.
Kunz said a city’s walkability has become a crucial factor in determining its quality of life, especially among young professionals. As a result, the construction of the DART system may be the most important element in the city’s future, Kunz said.
“Unfortunately the recession has put a lot of things on hold, but when it ends, you can bet that the developers will be coming in to be near the rail system,” he said.
Terry Nichols Clark, a professor of sociology at the University of Chicago, said that emerging cities worldwide, particularly in Asia, are pondering the same quality-of-life issues.
He recalled an incident in which Japanese businessmen were being courted by officials of Seoul, South Korea.
“The Seoul people asked, ‘How can we attract your businesses?’ And the reply they received was, ‘Make life pleasant for our wives.’”

After a breather, Dallas’ Uptown is ready to boom again

With the building downturn, the construction cranes have flown the coop from Dallas’ Uptown district.
But don’t expect them to stay away for long.
Developers are already working on a handful of projects, and more are in the wings.
“I think the market in Uptown is going to bounce back a lot quicker than many people think,” said John Zogg, managing director of leasing with Crescent Real Estate. “We’ve caught our breath for a bit.
“And we have a lot more velocity than Las Colinas or, say, Richardson,” Zogg said. “Uptown has fared better in the downturn.”
Before the recession hit, the Uptown area was the fastest-growing Dallas real estate market. Developers put up billions of dollars in offices, residential high-rises, retail and hotel space.
Because the Uptown area didn’t get dramatically overbuilt — particularly for office space — commercial builders are betting the area will come roaring back over the next couple of years.
Crescent Real Estate — which owns the Crescent complex on Cedar Springs Road — is working on an office tower on vacant land it owns at McKinney Avenue and Olive Street.
“We think it’s the best building site in Uptown,” Zogg said. “This area is where all the energy is.”
Crescent’s proposed office project is one of three percolating in the same area.
The company’s three-building Crescent office complex — which celebrates its 25th birthday this year — is more than 90 percent leased.
Investment firm Highland Capital Management just inked a 45,000-square-foot lease to move its Dallas headquarters from the Galleria complex to the Crescent.
The Crescent’s owners are spending $6 million to upgrade the elevators and have invested more than $2 million in the buildings’ power systems.
“It still requires a lot of capital so we can keep the Crescent in the condition our clients demand,” Zogg said.
Just across the street from Crescent’s proposed office building, investor Spyglass Equities Co. has begun leasing a four-story office project that would be constructed on top of an existing parking garage at Olive and Cedar Springs.
Called Harwood Court, the 100,000-square-foot building could be ready in as little as 14 months.
Strong market
“Uptown is clearly the strongest office market in Dallas,” said real estate broker Jon Altschuler, who’s rounding up tenants for the deal. “Rents are increasing and space is tight.
“It’s the area where the big services firms and financial companies want to be,” he said.
Three of Dallas’ largest commercial real estate firms — CB Richard Ellis, Colliers International and Cushman & Wakefield — recently moved their regional offices to Uptown buildings.
Of the five office towers built in the area during the recent boom, only one still has significant vacant space.
“We’re just under 40 percent leased,” said Greg Fuller, chief operating officer of Granite Properties, which opened its 19-story 17Seventeen McKinney office tower last summer. “We’ve been able to lease about 25,000 square feet a quarter, which is about what we planned.”
With space in the area tightening up, Fuller said, quoted office rents are up by as much as 15 percent from a year ago.
“Rents are still off of their highs by as much as 10 percent, but that is a whole lot better than most markets,” he said. “There has definitely been an increase in momentum in the market.”
Joel Pustmueller of Peloton Commercial Real Estate agrees that Uptown is poised for a comeback.
“The Uptown is almost back to where it was two years ago, price-wise,” Pustmueller said. “Nearly all the new buildings constructed over there are full.
“We expect another building to be kicked off down there in the coming months.”
Harwood International’s new 26-story Saint Ann Court office tower at Olive Street and Harry Hines Boulevard is 75 percent leased. The 314,000-square-foot building has lead tenants including Amegy Bank, Boston Consulting Group and law firm McGuire, Craddock & Strother.
Developer Gabriel Barbier-Mueller is already working on his next Uptown office tower — this one near the entrance to the Dallas North Tollway.
“Hopefully, we’ll start construction this year,” Barbier-Mueller said. “If we get a signed tenant who is creditworthy, the money is available to start a project.
“Sometime between now and 2016, I think you’ll see at least two or three towers in the Uptown district, based on the demand we see,” he said. “I think by 2012 and 2013, you’ll start seeing the cranes here again.”
Along with the office tower, Harwood International’s proposed project near McKinnon and Wolf streets will contain retail space and an apartment tower.
“Our planned Harwood Village will have at least seven restaurants and a grocery store that will serve takeout food,” Barbier-Mueller said. “All of those buildings will have direct access to the Katy Trail, so if you want to bike to work, you can.”
With construction of the Woodall Rodgers Park connecting Uptown to the downtown Arts District, the central business district will be more closely linked.
“This area has really taken on an active life, and I think it’s becoming a real city,” Barbier-Mueller said.
Residential and retail
Residential and retail activity in Uptown is also rebounding.
Developer Gables Residential has broken ground on just under 300 units in its apartment project near the Katy Trail between Fairmount and Routh streets. Gables is already a major rental landlord in Uptown.
And in Cityplace on Blackburn Street, developer JLB Partners is about to begin construction on a 194-unit apartment project that will cost more than $30 million.
Inland American Communities is about 90 percent leased at its new 227-unit Cityville Katy Trail apartments on Lemmon Avenue and Cole Avenue.
“Overall, the apartment market down in Uptown is doing very well — even better than the downtown stuff,” said Greg Willett, vice president with apartment analyst MPF Research. “We are pretty optimistic about the urban core in the next few years.”
With occupancy over 95 percent, landlords are ratcheting up rents, Willett said.
“The big story for the Uptown market is the rent growth — up 9.5 percent in the first quarter from a year earlier,” he said.
And with fewer apartment deals in the development pipeline, there won’t be many units coming on the market this year.
“It is looking pretty sparse in terms of new product deliveries,” Willett said.
Of course, developers are working on that.
Cityplace Co. president Neal Sleeper said he’s already getting a lot of tire kickers for the building sites left in the area.
“I think the prospects are very good that we’ll get construction under way on another building in the next year,” Sleeper said. “It’s quite likely that the freeway building sites we have at Blackburn and Lemmon and North Central Expressway will end up being office projects.”
Cityplace space
Sleeper said retail space in Cityplace — including the popular West Village complex — is staying full.
“And for every space we empty, we have three deals working on it,” he said.
Cityplace is talking to a range of tenants from restaurants to offices about taking over the former Borders Books space at McKinney and Lemmon, he said.
“The only big hole in the West Village area is that Borders store,” said broker Jack Gosnell of UCR Urban. “Prices are holding up in the area, and the sales volumes are very steady.
“The market seems to be bouncing back real strong.”
UCR estimates almost 20,000 people live in Uptown and have an average income of more than $82,000.
Restaurant space in Uptown is doing particularly well, Gosnell said.
“Where we are really weak is for neighborhood services,” he said. “We need another strong grocery component in Uptown.”
The only large retail vacancies are in the Victory Park project, which has suffered retrenchment over the last few years. The future of the big mixed-use project on Uptown’s western edge is still up in the air.
Earlier this year, Cousins Properties took over management of Victory Park, and it is still working on repositioning the development.

Major real estate investor buys Fairmont Dallas for $69 million

A major real estate trust said Tuesday it has purchased the Fairmont Dallas for $69 million, marking the second acquisition of a historic Dallas hotel in two weeks.
Inland American Lodging Group Inc., a Florida subsidiary of Illinois-based Inland American Real Estate Trust Inc., takes possession of a 42-year-old fixture on the Dallas skyline. The Fairmont Dallas opened in 1969 as one of the first luxury hotels in Texas. The hotel, with 545 guestrooms in two towers and 70,000 square feet of meeting space, received $14.9 million in renovations in the past four years.
The purchase, from California-based Pacific Coast Capital Partners and DiNapoli Capital Partners, also adds to Inland American’s presence downtown. Last October, Inland American acquired the 407-room Westin City Center downtown and rebranded it as a Marriott.
“The Fairmont Dallas fits all of our value and strategic investment criteria,” Marcel Verbaas, president and chief executive of an Inland American subsidiary, said in a prepared statement. “This transaction also extends our commitment to furthering the success of downtown Dallas and the Arts District.”
Most of the company’s Texas hotels fall into the “limited service” category with brands such as Courtyard and Residence Inn, which appeal largely to business travelers.
“Now we’re starting to get more into the full-service, luxury space,” said Dan Lombardo, senior investor relations manager for the REIT.
Dallas hotels have been especially attractive to investors of late. Last week, Rosewood Corp. and St. Louis-based Maritz, Wolff & Co. sold five Rosewood-branded hotels to Hong Kong investors. The properties included the Rosewood Crescent Hotel and the Rosewood Mansion on Turtle Creek.
Lombardo said his company was drawn to North Texas’ resilient economy, population growth and appeal as a convention destination.
“Texas is an area we’re looking at not only for lodging but also for other property types,” he said, noting that Inland American also owns industrial, office and multifamily buildings.

Perot’s Hillwood buying land for more development

Hillwood's AllianceTexas project north of Fort Worth already is one of the country’s biggest developments.

Ross Perot Jr.’s AllianceTexas project north of Fort Worth is already one of the country’s biggest developments.
But the project is about to grow even larger with additional land acquisitions and development along Interstate 35W.
“It’s hard to say for an 18,000-acre program we are running out of land,” Perot said Tuesday. “We are starting to look for land to grow our program north.”
Perot’s Hillwood Development Co. recently acquired a 158-acre tract from lenders at I-35W and FM 1171.
“It has very good commercial zoning ready to go,” said Perot, who met with reporters following media tours of the property.
And Hillwood is about to begin work on a 3,300-acre former ranch it owns on I-35W in Denton County.
“It’s mostly going to be residential and commercial,” Perot said. “It’s a wonderful piece of property; it’s in the path of growth.
“Our residential team is putting together plans and lining up homebuilders,” he said.
AllianceTexas — which the Perot family started back in the 1980s — is now about 40 percent developed. More than 28,000 people work in the 65-square-mile project, which is located in both Tarrant and Denton counties.
There are about 7,500 homes and apartments in the community.
And millions of square feet of warehouses, office and retail space have been built.
“A lot of our land has been developed,” Perot said. “We are actively pursing acquisitions.”
Hillwood has purchased residential community land in Austin and Las Vegas.
With the local real estate market recovering, Hillwood is first concentrating on further residential and retail development at AllianceTexas.
“We have a couple hundred apartments that are up, but we have 10,000 on the drawing boards,” Perot said. “We should be starting Phase 2 this fall.
“We are going to build as fast as the market lets us build.”
Perot is also scouting more land buys for his residential development firm, Hillwood Communities.
“Our residential guys are looking for property all over North Texas,” he said. “All of our communities are out of lots.”
AllianceTexas has been best known for the millions of square feet of industrial space, the commercial airport and the huge rail cargo facility.
But for the last couple of years, the warehouse building part of the operation has “been a little sluggish,” Hillwood Properties president Mike Berry said.
“We still have over 1 million square feet of corporate-driven construction under way,” Berry said. “We have a tremendous amount of future development in the pipeline we are going to do.
“There’s land left for 35 to 40 million square feet of industrial,” he said.
Hillwood also continues to be an owner of about 27 acres of land in the Victory Park project in Dallas’ Uptown district.
Perot said Hillwood is focusing on developing a vacant tract fronting Woodall Rodgers that’s next to the Perot Museum of Nature & Science, which is under construction.
“That’s the next development play,” he said. “We have zoning for more than 1 million square feet on that site.”

Sunday, August 07, 2011

On and off in recent years there have been several attempts to fill that vacant lot across Marilla from the Dallas Farmers Market , and each plan has gone nowhere. Which is why I got interested when I saw this : This morning the Farmers Market TIF District Board of Directors met to discuss something called the Farmers Market Square project. I called the Office of Economic Development for more info, and Karl Stundins, area redevelopment manager, confirmed: Yup, this is supposed to go in that lot, fingers crossed.

Stundins says it's a 110-unit, 236,900-square-foot town-home project spearheaded by Houston developer Frank Liu of
 InTown Homes , who hopes to plant "moderately priced" for-sale properties on the lot -- which is more or less one of the centerpieces of theDowntown Dallas 360 plan .

"We worked with Brent Brown at the CityDesign Studio to look at the site plan and street elevations, and they did a lot of modifications to get to this point," says Stundins, who sent the conceptual renderings you see above and after the jump. "We also looked at Downtown Dallas 360 and looked at that site as more moderately priced. The land's expensive, which makes it harder to do for-sale at really, really inexpensive [prices]. But the units will be priced at the lower end of what's for sale downtown."

The reason it's on the Farmers Market TIF board agenda: Liu, who expects the development to run around $33 million, is seeking $3 million in TIF incentives, which the board suggests the city council approve after it returns from summer vacation. (It'll go in front of the Economic Development Committee before the whole council espies the project.) Stundins says of all the projects proposed for the cite, this one "seems like it's going to happen, and they're looking to the city for support from the TIF district. It's contingent upon that."

If Liu gets the TIF incentive, he would expect to begin building by the end of December, with completion date set for September 30, 2013.

But Stundins knows there will be objections; he's already heard from folks who want to know why the project doesn't contain a retail component, or at least a live-work piece on the ground floor. That was part of a previously planned project set to go on the site, but Stundins says it's much more difficult to demand that with a town-home development.

"The city overall has a larger concern with Farmers Market," he says. "The city wants to privatize it, but we only got one bid, and retail's difficult down there. You don't want to put in retail if nobody shops there. Marilla, because of City Hall Plaza, doesn't really go anywhere. Eventually we'll have to look at: Is there a better way to use our resources with Farmers Market and what's the appropriate amount of retail space. There's more work we have to do.

"And it's difficult, because if you look at the space, 20 percent is allocated to shopping and 80 percent to storage and trucks. The question is: For downtown land, is that the most efficient use?"