John Sughrue was on top of the world. it was 2001, and a deal he had going at 1807 Ross Avenue was looking like it was going to pay off—big time. Redeveloped as a telco property, the 300,000-square-foot asset was 70 percent leased to two fast-growing companies and was being hotly pursued by investors.
“We had a $100 million offer for a building we had $30 million in,” says Sughrue, founder and director of Brook Partners. “I was thinking, ‘This is my day!’ But within two weeks, that buyer’s stock cracked in half, and the deal was off. Six months later, both of our tenants had filed for bankruptcy—and we were left with an empty building.”
The property sat vacant for months. Sughrue was still licking his wounds when a group of fashion designers approached Brook Partners about opening a showroom in the space. It was a far cry from the high-tech haven he had envisioned, but when Sughrue learned the group was willing to pay $24 per square foot in rent, his interest was piqued. He and Lyle Burgin, director of development at Brook Partners, set about getting to know the fashion business.
They studied top galleries in Los Angeles and New York and soon got excited about the idea. The lenders weren’t so sure—until they learned Tommy Bahama would be among the designers participating. “In the fashion world, [the brand] is considered low-brow,” Sughrue says. “But they were credit, and the lenders could understand it.”
Fashion Institute Gallery, or f.i.g., opened in 2003 and has since expanded four times. With the showroom utilized only about five weeks a year for fashion markets, Brook Partners began looking at other event opportunities. The wide-open, finished space in the center of the Arts District soon got bookings for everything from bar mitzvahs to Super Bowl parties.
Today the events operation on its own is a multimillion-dollar operation. (1807 Ross also hosts the Dallas Art Fair, a labor of love Sughrue launched with esteemed art consultant Chris Byrne in 2009.)
As f.i.g. began to flourish, 1807 Ross also began attracting more traditional office tenants, including Amegy Bank, landscape firm Mesa USA, and Beck. Sughrue tapped Mesa to develop a park off the building’s west side, which honors Beck’s late founder, Henry C. Beck Jr.
During an event at Beck Park, Dallas caterer Wendy Krispin looked up and asked Sughrue what he was going to do with the property’s street-level space. As it happened, one of her restaurant friends was looking for a spot in the Arts District. “Can you rip off the front of the building?” she asked.
The chef was Stephan Pyles.
“Like the fashion business, we had no intention of getting into the restaurant business,” says Sughrue. “I also have no thought in my mind of getting into the Broadway business; but if Andrew Lloyd Webber shows up, I’m going to think about it.”
The lenders were convinced to do the deal—after the acclaimed chef cooked dinner for them—and Stephan Pyles, the restaurant, opened in 2005. The once-empty 1807 Ross was now 90 percent occupied, and in a perfect position to sell. Ray Hunt, whose Hunt Oil home base sits just north of the building, snapped it up, giving him control of the block from Woodall to Ross.
Sughrue formed an enterprise to take ownership of the fashion gallery. Between f.i.g. and his Brook Partners office, he leased a total of 70,000 square feet, going from the building’s landlord to its largest tenant.
The project ended up generating about a 12 percent return—and exemplifies the creative dealmaking and urban renewal efforts for which Sughrue has become known.
“This building has been a wild ride, but it’s pretty indicative of our capabilities, our interests, our passions, and our conviction in downtown Dallas,” Sughrue says. “I sometimes joke that we probably could have made a lot more money building strip centers in Flower Mound, but that’s not how we’re wired.”
From Boston to Dallas
Sughrue grew up in Braintree, Mass., “pretty much the Boston version of Mayberry R.F.D.,” he says. He attended Harvard University (thanks to solid grades and a generous financial aid package), then, like many of his peers, headed to Wall Street. He worked in real estate lending for Chemical Bank, then in Merrill Lynch’s capital markets group.
In 1990, one of his banking clients, a wealthy Italian family, asked him to move to Dallas. The North Texas real estate market was depressed at the time, and there were bargains to be had. Operating as SCI Real Estate Development, the firm made a flurry of acquisitions, then reached its limit. But Sughrue kept seeing deals.
He got approval to begin investing on his own behalf and soon was able to launch his own firm, partnering with Robert Petrucello. (Sughrue bought Petrucello out of the business a number of years ago, although the friends remain partners in various deals.)
Burgin joined Brook Partners in 2001. He had served as architect for several of the company’s projects in the West End. But it was The Magnolia that in 2001 lured Burgin away from Corgan, where he’d worked for 20 years. At the time, he was overseeing a team of 50 architects; he missed having more hands-on design involvement and also wanted to tap into his entrepreneurial nature.
“The opportunity presented itself to partner with Mark Cuban and roll out a new movie theater chain,” Burgin says. The plan was to do about 24 theaters and marry it to Magnolia Pictures, an independent film company led by Eamonn Bowles and Bill Banowsky, who had approached Sughrue about getting involved. The team built four theaters before Cuban bought Landmark Theatres—and things changed.
“He was our shareholder and became our biggest competitor,” Sughrue says. “Mark thought it would be a good idea if the two companies merged and all of the gadfly investors, Lyle and me included, go away. He handled it very well; I applaud him. He didn’t overpay—but he didn’t take advantage of the situation either.”
The real show-stopper among Brook Partners’ projects is Museum Tower, a 42-story, glass-encased, $200 million condominium project under construction in the Arts District. Designed by Los Angeles architect Scott Johnson, it will include between 100 and 112 luxury units, ranging in size from 1,600 square feet to more than 9,000 square feet.
Brook Partners and co-developer Turtle Creek Holdings, led by Dan Boeckman and Greg Greene, began working on the project nearly 15 years ago. It’s slated for completion in 2012—not quite the timetable the developers originally had in mind.
“We thought we knew it all and that we’d have a building up in five years; Mr. Nasher told us it would be at least 10,” says Sughrue, referring to the late Raymond Nasher, whose renowned Nasher Sculpture Center sits immediately west of the condo tower.
When pre-development work began, Nasher made his opinions known about the project. “He didn’t pull any punches; he damn sure didn’t want anything mediocre on the site,” Sughrue says.
And that was in line with the developers’ goals. “From the moment we got involved we knew we controlled an important site,” Sughrue says. “The original partners are all Dallasites. We wanted to make sure that what was built was not just a commercial success, but a civic success as well.”
Construction of Museum Tower finally kicked off in mid-2010. To move the project forward, the developers gave up their equity stake. The $200 million tower is 100 percent owned by the Dallas Police & Fire Pension System.
Sughrue says it’s surreal to see the project take shape, after so many years of looking at renderings. Model units will be available at the end of 2011, and sales are under way.
To date, Brook Partners has been involved in $1 billion in developments and $2 billion in investments; it also oversees a $4.5 billion advisory assignment. Late last year, former Crescent executive Paul Smith joined the firm to lead the advisory group, and Gary Sherman, who once served as a lender’s representative for 1807 Ross, was tapped to manage principal investments and Brook Partners’ New York office.
“I don’t think I ever intended to stay [in Dallas], but the longer I did, the more I realized I enjoyed contributing to city-building,” Sughrue says. “We have been remarkably fortunate to play a part, along with so many others, in recreating a city’s center.That Dallas has so transformed itself over the last 20 years is a tribute to the talent and commitment and passion of Dallasites. Twenty years from now, Dallas is going to be a bustling urban center—and the gold coast will be the Arts District.”