BRAVE NEW Corporate WORLD

IN NOVEMBER OF 1984, Zale Corp. announced its purchase of the world’s largest diamond in the rough. Weighing in at 890 carats-about one-half of a pound-it will take the eye of a master planner, the execution of the finest artisan and 18 months of work to cut and polish this stone into a single, multi-faceted gem.

Eleven years ago, plans were announced for another of nature’s precious resources to be refined-a massive parcel of undeveloped ranch land. In 1973, four men from the Southland Financial and Las Colinas corporations began developing a master-planned community with every facet of life embraced in its design. To realize its potential, this family ranch of rolling hills and pasture lands, stretching some 18.75 square miles, would require the vision of a master planner, the execution of the best developers and decades of work.

It will be at least several months before we know the results of the Zale diamond cutter’s stroke. But the fate of “the little ranch of the hills”-El Ranchito de Las Colinas-is more clearly assured. Not only has it survived its critical early development (with 40 to 45 percent of its development now completed), but within the past 18 months, Las Colinas has definitely taken on a life and momentum of its own.

LAS COLINAS HAS had its problems. Not too many years ago, development of that rugged land was said to be “Ben’s folly.” Building west of Harry Hines Boulevard was considered foolish, and Las Colinas was “way out there.”

But Ben H. Carpenter had a vision. As the 15-year-old foreman of his family’s Hack-berry Creek Ranch, he had traveled that property-across the flat pasture lands of the Trinity River bottom, over the mesquite-covered hills and down to the waters of the Hackberry and Cottonwood creeks. Carpenter still lives in the house he built in the early Fifties, and he intends to stay there for the rest of his life. But in the late Sixties, construction of D/FW airport changed forever the ranch land’s use. Land value rose, and with that, property taxes-foretelling the end of profitable cattle raising. Carpenter couldn’t bear the thought of the unplanned development that would result from selling the land piecemeal. But he knew he must deal with the property’s shortcomings if his vision and that of his brother-in-law Dan C. Williams, then chairman of the board of Southland Financial Corp., was to materialize. The ranch land lacked a real estate essential-location. Not only was it still considered to be “way out there,” but it was inaccessible, as well.

Carpenter donated the right-of-way for major road construction and worked to get nearby property owners to do the same. Consequently, Las Colinas is framed and crossed by major thoroughfares: State Highway 114 (a k a John W. Carpenter Freeway- for Ben Carpenter’s father) runs along one edge of Las Colinas’ downtown, called the Las Colinas Urban Center, and connects downtown Dallas to the airport; Northwest Highway (Spur 348) runs on an opposite edge of the Urban Center, then joins Highway 114 further west. The LBJ Freeway extension (completed only a few years ago) is north; Stemmons Freeway (Interstate 35E), about three minutes to the east; Highway 183 (Airport Freeway), to the south; and Belt Line Road, west.

The next key step in the development was the building of what’s known as an “infrastructure.” In its most limited definition, an infrastructure is the network of water lines, sewer lines, roads, etc. Las Colinas Corp. went far beyond the basics to include such amenities as the extensive landscaping for which Las Colinas is now known.

Slowly, Carpenter’s careful groundwork began to pay off as companies moved to Las Colinas. Today the influx of new businesses is rapid. The first major corporate moves were announced in 1976, and by 1979, Las Colinas had hit the 100-company mark. Within four more years, another 300 corporations had moved in. In 1984, Las Colinas jumped past the 500 mark, increasing annual gains to more than 100 companies and nudging the daytime population up to 40,000 people.

Although Las Colinas does have some small businesses, it is primarily a big-user market. Says June Lykes, president of Rosewood Properties, “You can just take the Fortune 500, and you can find a great percentage of those companies located in Las Colinas. If they’re not there today, they’ll be there in the future.” The list of companies that have picked Las Colinas includes such giants as IBM, Diamond Shamrock, Abbott Laboratories, The Associates Corporation of North America, Xerox, Allstate Insurance, Gif-ford-Hill, Caltex Petroleum, E.I. Du Pont de Nemours & Co., Panasonic, Hitachi Semiconductor (America) Inc., AT&T, NCR, Burroughs and Zale Corp. SOHIO Petroleum Co., Brik Pak, Canon and Hewlett-Packard are on the way.

Although market studies and pro formas tell a great deal about the potential success of a particular real estate investment, a developer’s track record is often the deciding factor. Likewise, the caliber of those developing and investing in Las Colinas can tell a lot about the market. Doug Tibbetts, senior vice president of Equitable Real Estate Investment Management, has seen his share of investment proposals and is not easily impressed. Equitable is a joint venture partner with Southland Financial on the centerpiece development of the Las Colinas Urban Center, The Towers at Williams Square (costing over $200 million with 1.7 million square feet), as well as The Mandalay Four Seasons Hotel and the Embassy office building. Says Tibbetts: “I’ve always been impressed by who is developing Las Colinas. If you look around the Urban Center, basically it’s either a Carpenter development, a Trammell Crow development or a Lincoln Property Co. development.” Other developers include Prudential Realty Group, Homart Development Co. (a Sears subsidiary), Rosewood Properties, Henry S. Miller Co., Realtors and Xerox Realty Corp.

Rosewood Properties has purchased 40 acres and is in the planning stages for a retail, office and hotel development. “One of the reasons we bought there was the strict architectural controls. We would not be in Las Colinas were it not for those controls and deed restrictions,” says Lykes. Any development at Las Colinas must conform to a detailed list of architectural controls that not only address basic exterior design and materials but also interior finish-out and even replacement landscaping. Those restrictions are tied to the deed, so that if the property changes hands, the controls still apply.

Bill Duvall, a regional partner for Lincoln Property Co. (LPC) and the person responsible for all of LPC’s commercial development in Texas and in the eastern half of the country, is impressed with the amenities: “You can go to a lot of places, and there is nothing that matches what the Carpenters have done in Las Colinas-the kind of thought that went into the details.” LPC is moving on to its second office building in the Urban Center. Its first, Canal Plaza, reached the 85 percent mark in occupancy within a healthy 15 months.

Mike Wallace of Busiek and Wallace Properties, builders of the Riverhill and the Chaparosa luxury apartments, also sees the quality of the details as a major reason that his partnership is developing in Las Colinas: “The foresight, imagination and planning has been incredible. One of the things that most people don’t notice but that my partner picked up on immediately was the granite curbs. Who would have thought of that? It does give a clean appearance. Las Colinas has four or five plantings of flowers a year in the common areas. They have underground utilities. You don’t see any wires or poles carrying electricity to the site. They’re very, very careful that there is no sign pollution.”

About one-third of the 12,000 acres is set aside for open spaces and waterways. Offices in the Urban Center face a 125-acre lake and canal system; some residential villages wrap around golf courses and park spaces; residential areas are buffered from offices and other development by large trees. Part of the up-front investment has been in those trees: 3,500 were planted on the Las Colinas Sports Club golf course. Rather than put in small trees-a sure sign of spanking newness-mature trees were planted. Parks and medians maintain year-round color with flowers from the 60,000-square-foot greenhouse; 150,000 bulbs are planted annually.

Other key amenities include the Las Col-inas Sports Club, four golf courses (including one designed by Robert Trent Jones HI), the Equestrian Center and the 27-story Man-dalay Four Seasons Hotel with its French nouvelle restaurant, Enjolie. An inn and conference center are currently under construction. According to James E. Truitt, president of Las Colinas Hotels Corp. (which is joint-venturing the center with USAA Financial Services Co., a San Antonio insurance company), the complex will double the typical meeting space of a downtown hotel and employ state-of-the-art audio-visual aids and lighting.

But just two years ago, the Las Colinas market was seriously overbuilt. Today, most developers and leasing agents are seeing a different picture. Says Equitable’s Tibbetts, “We see the whole Las Colinas market firming up. The top leasing people have been impressed throughout 1984 and are projecting that in ’85 it will be one of the hottest markets in the city.”

Jim Voisinet Jr., a broker for Coldwell Banker Commercial Real Estate Services, concurs. “Overall, occupancy is improving. Demand is catching up with supply. Las Col-inas takes a very good percentage of the overall absorption in the [Greater Dallas] marketplace,” he says. Last year, it accounted for almost 20 percent of that absorption, even though it provides only 10 percent of the area’s actual multi-tenant space, according to a report by Fults & Associates, a real estate brokerage firm.

Despite the optimism, occupancy rates still appear abysmal-58 percent, according to the most recent figures available from M/PF Research, a real estate analysis firm. Ron Witten, president of M/PF, points out that occupancy doesn’t really tell the story, particularly in a rapidly evolving market and one that typically caters to large-space users. “Instead of looking at occupancy rates, we’ve begun to look also at a measure known as number of years’ supply-given the vacant space we have plus what’s under construction, how long it would take to use that up,” Witten says. “The North Irving market (of which the bulk is Las Colinas) absorbed a record 1.8 million square feet last year, nearly as much as the Dallas Central Business District (CBD). Including the space that is to be completed over the next year, it has a relatively healthy 2.2 years’ supply of vacant office space.” Witten projects a 16 percentage point gain in occupancy by this fall, and with that tightening of the market, he believes that more construction will begin.

Based on square footage of multi-tenant space, Las Colinas is already the third largest office market in the greater Dallas area and is the second largest single-tenant market. And the future for growth is sound: Physically, its 960-acre Las Colinas Urban Center, only one of the office areas, is larger than the Dallas CBD.



THOSE WHO THINK of Las Colinas primarily as an office center would be surprised by the enormous amount of new residential construction. “More than anything else, it shows an awareness of the job centers that they have created and that there are spinoff benefits such as housing demands that they were not capturing,” Witten says.

Even more significant is the type of housing being developed. Says Lincoln’s Duvall, “Las Colinas has had a higher-end housing market, but it hasn’t had any place for a lot of employees to live. So Southland Financial has corrected that by selling large tracts to Lincoln and different developers to put in apartments. You’re starting to see a base where the employees can live.” Lincoln has completed 264 units of its Ensenada de Las Colinas and is currently building a second phase. Rents start at $388. The Chasewood Co. (a Trammell Crow entity) is also in its second phase of developing The Marks. With the conversion of Quail Run into condominiums, prices for condominiums are now under $100,000, with some as low as $69,000. Townhomes at Country Club Place still stay in the exclusive range, which goes up to $360,000.

Until recently, single-family houses were designed only for the top executive. The newest high-end single-family development, Cottonwood Valley. is the Bent Tree of Las Colinas. Garden homes (zero lot line) start at $270,000 and others are priced up to at least $750,000. To supply what are medium-priced homes by Las Colinas standards, Southland Financial sold 273 acres for Hack-berry Creek Village, which is being developed by a joint venture between Westwind Properties and Dal-Fed Development Co. Homes being shown in the first phase are between $230,000 and $375,000. Fox & Jacobs entered the market with Ladera Village and broke the $200,000 barrier with homes from $149,000 to $168,000.

Las Colinas is nearing a point at which more retail shops are justified because of the increased density of the residential population. But today, the majority of shoppers that amble along the Mandalay Canal to the two dozen or so stores there aren’t from the families who live there. At least one-third of the people who patronize these shops are tourists. On weekends, neighbors from Irving, the Mid-Cities and Fort Worth visit the stores; weekday noon hours draw the business crowd from the Las Colinas Urban Center.

The retail businesses at Las Colinas consist primarily of start-up specialty businesses less than three years old. Two have reported hitting healthy sales of $300 per square foot. Carpenter family members and the Southland Financial retail subsidiary have pioneered with a number of shops, although a few entrepreneurs, local multistore operations and even a McDonald’s have joined them. Shops can be approached by water taxi, by foot along cobbled walkways or by car. Adjacent parking is provided in a “camouflaged” garage-with a facade that continues the theme of the surrounding architecture and that can be entered through massive carved doors like those of adjoining shops. In a few years, an overhead tramway system will connect the shops (projected to number 200) to offices surrounding the canal, according to the master plan.

Market Square is a specialty strip shopping center with Spanish-style architecture similar to Highland Park Village. Its tenants include an Italian restaurant, a Lebanese restaurant, a Chinese restaurant, an exclusive ladies apparel store and a travel agency. With its primary trade from the business community, the center is drawing enough customers that an additional 12,000 square feet are planned.

Although the potential for more retail centers, particularly large-scale developments, depends on the development of a denser residential population, that time may not be far off. Says Duvall of Lincoln Property Co., which owns at least one site suitable for retail development, “There is no question that major retail is coming to Las Colinas. It’s right around the corner. That will be the final bow on the box.”

As a multi-faceted community, Las Colinas also contains warehousing, distribution, showroom and service centers. Although these facilities are not architecturally elaborate by design, they are cleanly constructed to benefit visually from the rolling hills and landscaped grounds. Two other key business complexes, each a pioneering effort in the Dallas area, are located at Las Colinas. The most well-known is the Dallas Communications Complex, which is providing the type and scale of facilities needed to draw the entertainment business. Another, Royal Tech Center, is designed for a special “high-tech” tenant. The Trammell Crow Co. has purchased 65 acres at Royal Tech Center and has nearly completed the first 350,000 feet of an eventual 800,000 square feet of tech space. IBM and Digital Equipment have signed on.



NO ONE WOULD call Cadillac Fairview Urban Development Inc. a follower. But its president, Michael Prentiss, explains that Las Colinas was a factor that led him to buy 320 acres on the corners of Luna Road and MacArthur Boulevard at the extension of LBJ Freeway when he moved to Dallas five years ago: “When I came down here, people talked about Las Colinas as being ’Ben Carpenter’s folly’ because he was putting lots of money into the land, but nobody really thought it was going to happen. We looked at that development and thought that Las Colinas was going to be successful in the long term without any question. The location of his Park West development-eight miles from the Galleria, a short run from the airport and a straight shot to downtown-was Prentiss’ primary reason for buying. The company (in joint venture with IBM) is currently developing the second phase of Park West, bringing the total square footage of office space to about 1.6 million square feet. The third phase is the most ambitious, with office buildings and possibly a hotel surrounding a 120-acre lake.

Another development taking advantage of the marketplace is Valley Ranch, the Triland Development Inc. development that will provide a new home for the Dallas Cowboys. When Triland began piecing together the land for the Valley Ranch back in 1979, Las Colinas had not gained the momentum it has today. Says Triland executive vice president of sales Tom Coughlin, “I think Las Colinas had to go through a long growth period just like Valley Ranch is going through. We’re going to do it at a quicker pace because Las Colinas has forged the way in that area. We have adopted the same kinds of restrictions and controls in Valley Ranch and, fortunately for us, Las Colinas Is responsible for the acceptance of these rigid types of restrictions and controls in the marketplace. It was a very gutsy move on Las Colinas’ part, and they have now generated that acceptance. As a result, all the major developments in the LBJ extension area and in Northwest Dallas are adopting similar types of restrictions.”



AFTER 11 YEARS of development, the critical stages of carving out the Carpenter ranch have passed. The work isn’t complete; more decades of effort and patience are ahead. But Las Colinas today is that multi-faceted, premier community originally envisioned-unique and unduplicated both in size and quality.