Former private-equity investor Peter Brodsky, shown here at Red Bird Mall, believes the southern Dallas market is grossly mispriced. Sean Berry

Business

Can Peter Brodsky Jump-Start Southern Dallas?

First they asked him to fix the stray-dog problem. With his latest project—redeveloping Red Bird Mall—he’s out to fix an entire community.

It was May 2016, and Dallas’ stray-dog problem was out of control. A pack of loose dogs had attacked a 52-year-old woman living in southern Dallas and bit her more than 100 times. When she died a week later, the city was horrified. Local media bemoaned the persistent neglect of the city’s southern neighborhoods; national outlets reported on the estimated 9,000 stray dogs terrorizing Dallas residents. Dallas Mayor Mike Rawlings, embarrassed by a scandal centered in the part of town he’d spent much of his tenure trying to turn around, announced a characteristic strategy to deal with the dog problem: He would tap a smart businessman to come up with a sensible solution. And Rawlings knew exactly who to call.

Peter Brodsky’s experience in animal control amounted to keeping his two Cavalier King Charles spaniels fed, happy, and secure in their comfortable North Dallas home. But the Brooklyn-born private equity investor had mentioned to the mayor over drinks a year before that he was interested in becoming more active civically. Now, Rawlings called in a favor.

“I said be careful what you ask for,” Rawlings recalls. “This isn’t sexy, but it is a real problem.” Brodsky promised he’d give it a shot.

The truth was, while Brodsky may not have had any prior experience with stray dogs, he did know the southern part of the city where the problem was worst. And when he began digging into the issue, he found that, as he’d discovered in his dealings throughout much of southern Dallas, part of the problem was a lack of understanding of the problem itself. “Nobody could agree on a base set of facts,” Brodsky says.

So, he set out to find the facts. He spoke with residents and animal control officials. He raised private funds to commission the Boston Consulting Group to develop a strategic plan. He led an effort that saw the city replace the head of Dallas’ animal control division with two police commanders, then helped raise more private funds for a citywide spay and neuter program. Brodsky’s effort to curb Dallas’ stray dogs was widely praised, but his work in southern Dallas wasn’t finished.

If anything, Brodsky saw the stray dogs as a symptom of a larger problem that he’d been turning over in his head for years—long before the mayor made him chair of the Animal Advisory Commission. The problem with southern Dallas, he believed, was that nobody really understood the market. Southern Dallas comprises nearly half of Dallas’ land mass, but just 17 percent of its property tax base. Cleaning up stray dogs wasn’t going to fix that imbalance. The only way to do that, Brodsky believed, was to fix the fundamental economics that constrained its growth.

Brodsky wanted to invest in southern Dallas and “prove” its market. In 2015, he found the right opportunity to do so. Red Bird Mall, an enclosed, 1970s-era shopping center surrounded by acres of nearly always empty parking lots at the intersection of U.S. Highway 67 and Interstate 20, had long been an albatross around southern Dallas’ neck. It was a symbol of the prior generation’s promise—and of contemporary decline. Now it was up for sale again. Brodsky, an investor with virtually no real estate experience, believed the mall could be something more than a symbol of historical failure: it could be southern Dallas’ salvation.

And so, he bet the house on Red Bird Mall.

Privileged Upbringing

Like many others before him, Brodsky came to Dallas from elsewhere and made a fortune in North Texas’ welcoming business environment. He was born in 1970 and grew up comfortably in the upper-middle-class community of Brooklyn Heights, N.Y. He attended a public magnet school in Manhattan and graduated from Yale.

Brodsky moved to Dallas in 1995, when he was 24, to take a job as an associate with the renowned private-equity firm Hicks, Muse, Tate & Furst (renamed HM Capital Partners in 2006). By his 30s, he had made more money than he ever imagined, and his mind turned to socially beneficial ways of spending it.

He joined the board of the AT&T Performing Arts Center and became active with KIPP Charter Schools, eventually becoming chairman of the Dallas board. He made the society pages in 2014 when he successfully bid on an Andre Agassi-led private tennis lesson at a KIPP charity auction and gave the lesson to his wife, Lael, a University of Texas graduate and former Neiman Marcus couture department manager.

Brodsky had married Lael in 1997. The couple moved to Oak Lawn, then Greenway Parks, and eventually settled in North Dallas. Their three children attend Greenhill School.

In his 20s and 30s Brodsky lived comfortably, content to focus on excelling in business and starting a family. That changed in 2009, when he enrolled in Leadership Dallas, the Dallas Regional Chamber’s civic leader development program. Brodsky calls Leadership Dallas a “crossroads” experience. It was the first time, he says, that he had interacted with people from outside his tight-knit, homogenous social and business circles. He met people who lived throughout the southern part of Dallas and learned that he, like many other business leaders, had harbored misconceptions about it. Rather than a monolithic region of poverty and urban decay, Brodsky discovered, southern Dallas was a richly diverse collection of dozens of distinctive communities.

Plans call for the former Dillard’s space to be converted into an office building at Red Bird Mall, whose redevelopment is depicted in the aerial rendering.

Southern Sector Misperceptions

At first Brodsky’s work in the south was philanthropic. But the more he learned about the area, the more it seemed there might be business opportunities as well. “What became very apparent in different parts of southern Dallas is that there are very strong middle-class communities, but a real lack of amenities,” he says. “I began to feel like there was an opportunity to accomplish two goals based on that misperception.” Those goals rested on a simple investment thesis. The southern Dallas market, Brodsky believed, was grossly mispriced. If he could prove that it could support the amenities the community desperately lacked, he could both do something positive for the community and make a return on his investment.

Brodsky knew that more than just economics were at play in the misevaluation of southern Dallas. “Somebody had made the joke that, maybe the reason there were no IHOPs [in southern Dallas] was that black people didn’t like pancakes,” he says. “I was like, goddamnit, I’m going to show that that’s the stupidest thing I’ve ever heard.”

Brodsky began to kick the tires on southern-sector business opportunities. Over time he realized that if he was going to validate the market, he would need to make an investment large enough to tip the scales. The problem was, there weren’t that many properties that could have the kind of transformative impact Brodsky wanted. Then, in 2015, he learned that Red Bird—which had been renamed Southwest Center Mall in 1997 in one of many failed attempts to revive it—was for sale.

An experienced real estate investor might have warned Brodsky away from Red Bird. A long succession of owners had spent the better part of two decades milking it, or failing to turn it around. But what Brodsky saw was a piece of property located at the intersection of two major highways, within a mile of a number of middle-class neighborhoods, and in the vicinity of several new mega-churches. Plus, he believed, it was a piece of property that had the scale to impact the way the entire southern Dallas market was perceived.

Great Expectations

Nineteen seventy-five had been a banner year for southern Dallas. Notices and advertisements throughout the year announced the opening of major stores like J.C. Penney, Sears, and Titche’s at the brand-new Red Bird Mall about 10 miles south of downtown Dallas.

In 1975, everything about Red Bird penciled out. It was the only enclosed mall south of downtown—well-situated near major highways, near middle-class suburban single-family homes. But within a few years of the mall’s opening, things changed. As white residents began to flee into the suburbs, the city in the late 1970s and ’80s steered low-income housing projects almost exclusively into the southern sector. School desegregation, a systematic neglect of city services, the growth of southern suburbs that extracted upwardly mobile families, falling average area incomes, and a subsequent rise in crime—both real and perceived—all helped turn southern Dallas into a poster child for Post-Civil Rights urban segregation.

“They were like, ‘This guy’s a Mr. Money Bags.’ I think the market figured out quickly that wasn’t the case.”

Peter Brodsky

Red Bird’s demise couldn’t be attributed exclusively to changing conditions in the southern sector, though. Just as the northern inner-ring suburbs were dotted with malls that would fall victim to the cycles of boom and bust generated by continuous suburban sprawl, Red Bird was a retail model with a shelf life that lasted barely a decade. When the DeBartolo Group, which had owned Red Bird since its opening, sold the 1.12 million square-foot mall to a California investor in 1997, it was only 65 percent leased. Red Bird would go on to trade four times in eight years, and its value on the tax rolls plummeted from $22 million in 2000 to just $6.25 million in 2008.

When the mall came onto the market again in May 2015, the only thing that was really for sale was the enclosed “mall” portion of the property—341,000 square feet of leasable area on 27.4 acres. “I think one of the main reasons why it has never been redeveloped until now is that, that was really all you could get,” Brodsky says. “I was arrogant enough—or ignorant enough—to think that either I could make it work with that, or I’d be able to cobble it together.”

Over the next 12 months, Brodsky set about cobbling. He separately purchased the former J.C. Penney and Dillard’s spaces from owners who’d acquired them through bankruptcy or foreclosure. After Macy’s finally closed its Red Bird location this past spring—part of a national downward trend in brick-and-mortar retail—Brodsky snapped up that space, too. He negotiated individually with owners of portions of the parking lot and the many individual pad sites located on the property’s perimeter. Some happily unloaded their parcels, while others tried to press the idealistic private equity investor to overpay for their lots. “They were all like, ‘Oh, this guy’s going to be a Mr. Money Bags or something, and he’s going to come pay,’” Brodsky says. “I think the market figured out pretty quickly that wasn’t the case.”

In time Brodsky managed to buy up 78 acres, including the parking lots, most of the mall structure, and enough of the pad sites to incorporate them into the development and to open the site up to the street. To avoid the difficulties that come when banks finance purchases in southern Dallas—their loan-to-value ratios are invariably lower there—he used his own equity to acquire much of the land. “That was expensive, but it was easy,” he says.

Brodsky won’t say how much the entire project cost, or how much of his own money he sank into the property. But he believes he got a steal.

If Brodsky’s plans are successful, Red Bird Mall again will become the “hang-out spot” it used to be.

Shared Vision

Because he had no experience turning around defunct shopping malls, Brodsky turned to real estate experts to help him craft a viable plan. Frank Mihalopoulos and Terrence Maiden of Dallas-based Corinth Properties signed onto the Red Bird project in mid-2016. The bullet points of their résumés lined up with Brodsky’s broad vision for Red Bird. Mihalopoulos had successfully redeveloped malls throughout the country, as well as leased shopping centers in the southern part of Dallas County. Maiden brought experience in banking, corporate relocations, and retail leasing in southern Dallas County. Perhaps most importantly, the former Texas Christian University football player grew up in Oak Cliff, graduating from Carter High School.

Maiden, who remembers when Red Bird was “the hang-out spot,” also recalls watching its steady decline over the years. When he and Mihalopoulos first met with Brodsky, what most impressed Maiden was that Brodsky didn’t seem interested in flipping or milking Red Bird. Rather, he seemed to sincerely want to return Red Bird to its status as a community center—a place where southern Dallas residents could shop, go to restaurants, and hang out.

A sparsely patronized food court leads to rows of vacant storefronts. It all resembles the setting of a 1980s teen horror flick.

Brodsky leaned on Corinth to help formulate a real estate plan based on the firm’s success in redeveloping other malls. For Red Bird, a vision was created that features traditional mall retail, but also introduces restaurant space, outdoor parks and pedestrian promenades, new residential development on former parking lots, a hotel situated towards the back of the property, and popular retail-pad-site users that can draw more people into the development. In the mall’s renderings, pedestrian corridors wrap around exterior sections of the mall, and parts of the mall structure are cut open, either to separate a big box from a planned movie theater, for example, or to open up a fountain-lined outdoor promenade the developers hope will be lined with restaurants.

The simple secret to the plan is adaptive reuse. The mall’s entire second floor will be designed for office space, and Brodsky and Corinth believe there’s a sleeper market for medical as well as corporate back-office tenants. They’ve already inked a deal to bring Starbucks to one of the pad sites and, at presstime, were close to cutting deals with a national hotel chain and a residential developer. Brodsky says that if they can get the financing together, the hotel and residential development—as well as some of the manicuring of the mall structure—should break ground next year.

But, financing for development and redevelopment “is going to be a challenge,” Brodsky concedes. So, he’s turned to the city for help. The city of Dallas has contributed $2.4 million to the development, and there are TIF funds and other public incentives that the development could receive. Then there’s the GrowSouth fund that was established by the mayor. It provides mezzanine funding for southern sector projects that need to bridge the gap between equity and the amount of financing that traditional banks are willing to pony up. Red Bird snagged a $4.2 million GrowSouth loan, making it the first—and so far, the only—beneficiary of the fund.

It’s Alive!

One weekday afternoon in July, Red Bird is a picture of the kind of dystopian dereliction that has come to characterize so many of America’s once-bustling shopping malls. A sparsely patronized food court leads to rows of vacant storefronts; cordoned off, empty wings of mall space; massage parlors; and locked department-store entrances. It all resembles the setting of a 1980s teen horror film.

As I wander down a broken escalator and make my way towards Sears, however, Red Bird suddenly seems to come alive. There are clusters of boutique shops: sneaker stores, sports apparel, audio equipment, jewelry, African imports, women’s clothing. A few parents mill around some quarter-a-ride amusements, and toddlers cling to a little carousel. On a hot day in the dead of summer, there are shoppers at Red Bird Mall!

The scene is a reminder of what went wrong with the shopping center—and, indeed, of so much that’s gone wrong with Dallas’ attitude toward southern Dallas in general. When a previous owner changed the name of the mall from Red Bird to Southwest Center, the intention wasn’t merely to reposition the brand. Rather, the owner was trying to break the associative connection between the place and the community around it. And yet today, the only thing that keeps Red Bird going is the small cluster of shops that never abandoned serving their community.

It’s one of the reasons Brodsky decided to change the mall’s name back to Red Bird. He wanted it to be clear that he wasn’t investing in the mall in order to lure residents from outside the area to a new haven for trendy restaurants, boutiques, and nightlife spots. He wanted to restore Red Bird for the community.

Will it work? Mihalopoulos and Maiden have done it elsewhere, and early indicators suggest that Brodsky has read some aspects of the southern Dallas market correctly. But it’s also safe to say that Red Bird Mall is unlikely to be a silver bullet for the area–that southern Dallas is too large, too multi-faceted, and too complicated to fix with a single development, however well-meaning or well-conceived it might be.

Not that Brodsky isn’t trying. “Our biggest challenge is convincing retailers and developers and corporations that the perceptions they may have about this area aren’t necessarily correct,” he says. “It’s not easy, but I’m not doing it because it is easy. It’s easier to go to Frisco.” 

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