For years, the core of downtown Dallas suffered from a lack of attention. As office tenants moved to shiny new buildings in Uptown or the Arts District or, God forbid, the suburbs, the old-guard towers began to lose their appeal. Several landlords fell behind on maintenance and upgrades, which just exacerbated the problem. The recent economic recession proved to be a death knell for some.
Real estate brokers dismissed the downtown skyscrapers as too old and inefficient. But that argument doesn’t hold true, says investor and developer Bill Cawley. “Every other big city across the country has old, inefficient buildings in their downtowns that are full,” he said in a recent roundtable hosted by D CEO. “It’s not the buildings that are the problem.”
The problem has been a lack of public and private investment—and that’s where things are finally starting to change. Following in the footsteps of pioneer Tim Headington and his spectacular remake of The Joule, investors are stepping up to acquire and improve properties in the downtown core, and finding city support.
Among them is Jonas Woods, the under-the-radar founder and CEO of Dallas-based Woods Capital. Last year his firm acquired one of downtown’s largest skyscrapers, Thanksgiving Tower.
The 50-story, 1.4 million-square-foot property was just 52 percent leased when it was put up for sale. Still, it attracted about 20 serious offers—an indication of just how much investor attitudes toward downtown Dallas properties have changed. Woods won out, in part by offering a lot of certainty and a quick close. Shortly thereafter, Santander Consumer USA committed to lease nearly 400,000 square feet in the building for its headquarters—what many are saying is the largest single relocation downtown Dallas has ever seen. The deal took occupancy of Thanksgiving Tower up to around 80 percent.
Woods tapped Altschuler + Co. to oversee leasing, Lincoln Property Co. to handle management, and kicked off a multimillion-dollar spruce-up and infrastructure overhaul.
Thanksgiving Tower is the young investor’s first Dallas deal since launching his own firm seven years ago. “It has opened our eyes to what’s happening in Dallas, specifically downtown,” Woods says. “Almost every building in our immediate vicinity is either under contract or in redevelopment. The downtown of 10 years ago or even today is not reflective of the downtown we’ll see five years or even two years from now.”
High Times at Hillwood
Growing up in the Houston suburb of Katy, Woods spent summers working on his father’s rice farm. In school, he loved math. But his obsession was football. His success on the field led to an invitation from Southern Methodist University to play for its first team back from the NCAA’s “death penalty,” following the school’s player-payment scandal in the late 1980s. Once Woods arrived, though, he decided to hang up his cleats and focus on academics.
“I didn’t think I was going to turn into some incredible Division 1 linebacker,” he says. “And I had been [playing football] obsessively since I was 7 or 8 years old; I was burned out.”
After graduating from SMU in 1993 with a degree in finance, Woods went to work as an analyst in the corporate banking group of what’s now Bank of America. A year later, he joined Ross Perot Jr.’s Hillwood. It was still a small company at the time—about 15 employees—but it was on the cusp of transformational growth. For a smart visionary like Woods, it offered a rare opportunity to learn real estate from Perot, one of the best in the business, and to play a key role in Hillwood’s expansion.
Woods began in acquisitions, buying distressed properties from the Resolution Trust Corp. and Federal Deposit Insurance Corp. He quickly impressed Perot, and in 1995 was moved to Hillwood’s sprawling Alliance development in North Fort Worth, which was just beginning to gain momentum. In short order, Woods became a principal—the youngest in Hillwood’s history—and president of Hillwood Capital.
“I got an incredible education through my 20s and 30s, working at Hillwood,” Woods says. “Ross has phenomenal vision. He can really see the big picture. and he isn’t afraid to take on new challenges.”One of those challenges was American Airlines Center. Before the arena could get built, Perot needed to own a team. So he worked out a deal to buy the Dallas Mavericks in 1996. Woods, just 26 years old, was named the team’s president, a position he held for about 90 days until Terdema Ussery was brought in to run things.
Woods’ primary role was to lead the development of the arena, which opened in 2001, and the mixed-use area surrounding it, Victory Park. The project stalled in the wake of 9/11, but eventually began to take shape. A game-changer came in 2002, when Woods put together a deal for the W Hotel. Office buildings and residential followed, as did high-end retail. Victory Park and Woods were both riding high when he left to launch Woods Capital in early 2007.
Not long after, though, with the deteriorating U.S. economy and real estate market, Victory Park began to suffer. Demand for luxury residential tanked. Hillwood was criticized for Woods’ strategy of focusing on edgy, high-end retail and restaurants, not places that would attract typical residents or office workers in the district, or sports fans who frequent the arena.
In 2009, Hillwood threw in the towel and admitted a rare defeat, relinquishing its stake in Victory to the project’s German investors.
Now operated by Estein and Associates, and with the market bouncing back, much of Victory Park is flourishing. The W Hotel is working on a $4 million room renovation, the arena hosts more than 200 events a year, residential development is on fire, and office space is 95 percent leased to tenants like EY, Haynes & Boone, and HFF. A $100 million improvement effort is under way to make Victory Park more pedestrian-friendly and fix its retail ails.
Woods Capital didn’t become a victim of the economic downturn, but it came close. In 2007, after 13 years with Hillwood and having worked on “just about every type of real estate imaginable,” Woods felt it was time to follow in his father’s entrepreneurial footsteps and go into business for himself. He was joined by two Hillwood colleagues, John Helton and Billy Prewitt.
Woods began pursuing development projects and had several things under contract when he began hearing rumblings about a looming mortgage meltdown—something that could have dire consequences across the entire real estate sector. Feeling jittery, he killed the contracts and instead focused on opportunities he believed would come about due to the looming crisis.
And they did. Through Hayman Woods LLC, which Woods Capital formed in 2007 with hedge-fund investor Kyle Bass, Woods began making real estate debt and private equity investments in distressed properties. “It didn’t matter who you were or what you were doing,” Woods says. “If you owned a real estate portfolio in 2008 or 2009, you had some stressful periods. With a clear head and real focus, we have been able to participate in the resolution of the financial crisis.”
Although he declined to provide return specifics, Woods says most of what was bought in its first fund has already been resold. “It has mostly been monetized,” he says. “It all worked out very well.”
By 2011, distressed opportunities were on the wane. So Woods Capital began buying multifamily properties across the southern United States through its newly formed REIT, Hayman Woods Apartment Properties. Then last year, the firm formed a partnership with New York hedge fund manager and billionaire Dan Loeb. It’s that partnership that acquired Thanksgiving Tower.
An avid golfer, Woods is playing a key role in the development of the new Trinity Forest Golf Course, a 400-acre project in South Dallas that will begin hosting the Byron Nelson PGA tournament in 2019. But it’s the renovation of Thanksgiving Tower that’s consuming most of his time these days. He’s also looking at other office and residential opportunities downtown.
Woods brings “not only a wealth of experience but fresh ideas and creativity, too,” says John Crawford, president of Downtown Dallas Inc. “He has local connections and global expertise. Jonas and his partners realize the importance—and the return on investment—of doing things right. And they ultimately will be successful because of that strategy.”