The air inside Dallas’ old statler Hilton Hotel is dusty and stale. Debris are scattered across the dusty floors, and sheets are pulled over many of the abandoned guest beds.
Blink and you may see phantom guests in ball gowns descending the ornate lobby staircase, caught in the memory of the Statler’s former glory.
“I think it could be used as a set for a spooky movie,” says Christine Rombouts, a spokesperson for Forest City Enterprises, the Ohio development company that’s taken the Statler Hilton’s closest neighbor, the Mercantile Tower, through a remarkable rebirth.
Standing in open space in east downtown between Main and Commerce streets—space that’s been cleared for a new signature park next to the Mercantile, and in front of the Statler—the two projects couldn’t be more different.
The Mercantile is everything that is hoped for downtown. Cranes swing overhead, lifting a new high-rise condo tower adjacent to the original, 1940s Mercantile Bank building that’s now home to apartments and offices.
Across the future park site, meantime, the Statler is what downtown was for so many decades: empty, unkempt, and slightly creepy.
Despite its neglect, this building—the W Hotel of its time and a former symbol of Dallas’ style, optimism, and high society—can’t help but embrace its surroundings, affecting the urban space with balanced grace.
Marcel Quimby, FAIA, a principal with Quimby McCoy Preservation Architecture LLP and a former president of Preservation Dallas, said the 1956 William Tabler-designed building is significant. Not only because it’s one of the first and finest examples of International Style architecture in Dallas, she says, but because the Statler represents the spirit of a time in Dallas that has informed how the city understands itself today.
The 19-story building was operated as a Statler Hilton until the 1980s. It then became the Dallas Grand Hotel before being shuttered in 2003.
The hotel’s authenticity aside, architecture is a strange art—inextricably tied to the practical demands of real estate. So the building’s beauty hides its neglect—and the fact that its revival seems financially unviable.
Earlier this year, the old hotel was placed on the endangered-building lists of local, state, and national preservation groups. Though preservationists, public officials, and local developers all want to see a future for the Statler, the reality is that this redevelopment project may never happen.
But it won’t be for a lack of trying.
NUMBERS WON’T PENCIL
The Statler has been under contract no fewer than three times in five years, says Tom Keen, a lawyer who represents the building’s international owners, Hong Kong-based Hamsher International Ltd. Most of Hamsher’s owner’s real estate holdings are in Asia, and the investment firm has tried to unload the Dallas property for years.
The building is under contract again, Keen says, and the second extension of that contract was set to either expire or finally “go hard” in August, after this issue went to press.
Developers looking at the Statler aren’t surprised that so many interested buyers haven’t been able to get the numbers to pencil out. For one thing, the owners may have shot themselves in the foot when the building’s 17,400-square-foot parking garage was given to the city in 2005 in lieu of $709,000 in back taxes and liens for water leakage on the property.
Eliminating the parking, however, has only added to the costs any future investor would have to absorb to turn the Statler around. “You could build it without the parking, but the market wouldn’t accept it,” says Larry Hamilton of Hamilton Properties.
Hamilton is one of the earlier pioneers in the downtown resurgence, and his Davis Building and Dallas Power and Light redos are still benchmarks for what aging downtown buildings can become. His company looked at the Statler, but a simple obstacle stood in the way: price. “They were north of $25 per square foot, and that can’t work,” Hamilton says.
(The Statler’s asking price has never been disclosed. But, with square footage totaling nearly 590,000, Hamilton’s figure means the building would have a price tag of at least $14.7 million.)
The difficulty isn’t just the parking, Hamilton adds. The cost of the interior demolition and build-out, upgraded building systems, and environmental studies and abatements—and more—make turning around any downtown building an expensive, risky process.
The key dilemma, experts say, is that downtown is still not a true market—meaning the cost of reviving its aging infrastructure is market-prohibitive. To make downtown projects work, some entity has to tip the market in the favor of private investors and banks.
Up until now the city of Dallas has played that role, aggressively reinvesting in the urban core over the last 10 years with tax abatements, grants, and most importantly, funds from Tax Increment Finance districts, or TIFs. (TIFs, simply put, allow the city to take future property tax revenues and spend them today on the projects that will generate those future tax revenues.)
Jim Truitt, a Forest City vice president, says 40 percent of the Mercantile project was funded through public dollars, primarily from the downtown TIF. Twenty-five percent of the investment was private equity, he says; the rest came from banks. “The city government wanted it to happen, and it is important the city is eager,” Truitt says. “It is the same thing with the [Statler]. With no established rents, the costs don’t justify the rent. [Except] for the TIF, the project couldn’t work.”
When TIF funds are involved, they offset the gap between the cost of the project, on one hand, and the combination of private equity and leverage that banks are willing to put into the deal. It’s this delicate balance between private equity, public investment, and traditional loans that has made downtown projects work.
Unfortunately for the Statler, the availability of bank credit and these public funds is tighter in the current economic climate. The bigger problem for a redevelopment project like the Statler, however, may not be the much ballyhooed economic slump. The slowdown the Statler should worry about comes from the city.
“We probably don’t have funds in the existing TIFs,” says John Crawford, president and CEO of Downtown Dallas, an advocacy group for downtown. “It will probably be seven to eight years once we get funds added to that.”
Karl Zavitkovsky, director of the city of Dallas’ Office of Economic Development, says that while the downtown TIF has exceeded initial projections in terms of added land values within the district, the immediate availability of funds from the TIF for new projects is tied up by obligations already on the ground—most notably, the Mercantile deal.
Zavitkovsky says there are other incentive arrows in the city’s quiver, such as tax abatements, economic-development grants, and development-fee rebates. The Statler’s listing on the National Trust for Historic Preservation also may help make renovation funds available in the form of preservation grants.
But with the mounting financial obstacles—and an owner eager to sell the asset—there is one more option developers may be able to work out more easily on paper: demolition.
Despite the attention being paid to the Statler, Quimby with Quimby McCoy says the preservation organizations lack the ability to prevent an investor from taking the current building down to the dirt and starting over. The only way to prevent demolition would be for the city to grant it landmark status and place an overlay on the property—a process that, to date, hasn’t been started.
That’s why Quimby says Preservation Dallas is trying to gather and make available to any interested developers due-diligence materials—everything from basic analyses to environmental studies.
The Statler “has as much historical significance as the Adolphus” Hotel, Quimby says. “To tear it down would be a huge loss.”
Unfortunately, there may be no other choice.