THE ROOMFUL OF DALLAS BUSINESS BOOSTERS might have been transported back in time. The ballroom at the Plaza of the Americas hotel was packed. The party had been heralded for weeks with elaborate teaser invitations reminiscent of the days when Dallas developers spent thousands of dollars to promote their shiny granite towers. But the crowd wasn’t gathered at the Plaza of the Americas hotel in late April for the unveiling of a sexy new downtown office tower, to mingle with the famous architect or the almighty developer- though the nostalgic atmosphere was right on the money. No, this was a party announcing the Greater Dallas Chamber of Commerce’s annual membership campaign.
Back in 1982 when Dallas was blowing and going, you couldn’t have paid this crowd to show up for a chamber membership drive. But it’s not 1982 any more. And the announcement party for the Win Dallas 1988 chamber membership campaign is as good a symbol as any of just how much Dallas has changed.
The pregame show for this event began with the singing of the national anthem, and though there were no cheerleaders, a beauty queen was in the show. Finally, the crowd got what it came to hear: inspiring words from the chairman of the campaign, Roger Staubach, one of the few remaining heroes in Dallas, someone who symbolizes a winning spirit in Dallas’s past that the business boosters want to recapture.
“With the current economic situation, Dallas businesses need a strong game plan, ” says Staubach in his best quarterback-speak. Right now, part of that game plan is to attract record numbers of new members to the Greater Dallas Chamber. With the added revenue from the increased membership, the chamber hopes to further expand its economic development activities for the greater Dallas area.
So the chamber struck up the band, called in the football hero and the smiling, waving beauty queen, and tried harder than ever before. That’s the difference between now and 1982. That’s the key to the present Dallas and the future Dallas. The people out there working to get by and to turn this economic situation around are trying harder than ever before. The why of it is simple: they have to if they want to survive. But that is just the beginning. First, a little history.
WHEN THE LIVING WAS EASY
Dallas is just kidding itself, says Dallas economist John Sartain, if it refuses to believe that this has been an oil-driven boom and bust. “Dallas was the hottest place in the world in 1981 and 1982, ” says Sartain. “The rest of the country was having a recession and we were booming. So, all of the people who had money and were afraid that their money was going to be debased funneled it into Dallas, and we built this beautiful set of new buildings. “
In other words, Dallas was growing ferociously with the expectation that the price of oil could go to $100 a barrel. Compound that daily with favorable tax laws that prompted millions of income dollars to be sheltered in Texas real estate, and you have the biggest boom in Texas history.
“It was just too damn easy, ” says real estate broker Wayne Swearingen of those giddy days in our past. He won’t go as far as to say that he hated that period when it was easy to make money in Dallas, but he does say he’s having more fun in today’s more challenging business climate. Swearingen, fifty-four, is into the third real estate cycle in his business career. He says he didn’t like those boom days because there were too many people in the business. Kids five minutes out of college were slinging down deals and tying them up faster than a prize-winning bulldogger. And sometimes, apparently, faster than Swearingen. “I resented it, ” he admits. Now, he says, he’s having fun again because the people left in the business are the ones with experience. He may have to work harder for a deal, but when he gets it, he says, it’s on merit-not because he beat some fresh kid to the punch.
Philip Perry, thirty-five, was one of those kids drawn to Dallas by the lure of making big money. In 1981, he came to Dallas from his home in Kentucky with $500 in his billfold. By 1986, he had built up a $2 million financial statement primarily as a developer of condominiums and high-end houses in the Park Cities.
“We were doing well, rolling along, ” says Perry of his former company, Sadovsky Perry and Associates. “We never saw the market going down. It was like someone turned the water off. “
Now Perry sells chemicals for Southwest Sanitary Distribution Corp, ’ and though his financial statement hit the skids in 1986, he says he’s again watching it rise slowly back up.
“You could have been a chimp and borrowed money to develop real estate back then, ” Perry says of the Dallas boom days. He tells of a million-dollar condo project his firm built where the lender never performed an inspection.
“We could have literally put the money in our pocket and built nothing, ” Perry says. “But now we have all been educated. You didn’t have to be analytical back then. Now we have to be more sophisticated. “
Being more sophisticated inevitably means the involvement of lawyers. Local law firms have grown like crazy in this economy, says Lewis LeClair, an attorney with Johnson & Swanson in Dallas. The old style of handshake business where men cut deals privately among themselves is gone, says the thirty-seven-year-old LeClair. Now Dallas is more like Los Angeles, LeClair says, where the almighty contract-not the handshake between good old boys-rules the business world. LeClair practiced in L. A. for a short time after law school before coming home to Texas. He says many people in Dallas thought they would never see the day when borrowers and lenders sued each other over their differences, or when “my lawyer will call your lawyer” were the words on the street. But now those days are upon us.
Some have begun to call this new way of thinking, this new style of doing business, a “crisis” mentality, a sort of personal retrenching and protectionism. But while that mentality may keep a business person from making a move without his lawyer’s nod of approval, it is also forcing some positive changes among our collective business psyche. Dallas businesses have had to regroup and work harder to stay in the game.
Larry Fonts, president of the Central Dallas Association, came here in the summer of 1985 from a similar economic development group in Atlanta. Fonts says the kind of critical self-appraisal going on among Dallas businesses these days is healthy in the long run, though the process is certainly painful. “You can absorb losses when profits are good, but when profits fell off, then you have to start looking hard. You have to work harder to just retain your position, ” Fonts says.
Thirty-six-year-old David Dean, former secretary of state for Texas and a partner in the law firm of Winstead, McGuire, Sechrest & Minick, says that the current hard times and resulting crisis mentality are forcing people to be more cautious.
How will this new, more cautious stance change a city known for its undaunted entrepreneurial spirit? We posed that question and many others about this city’s future to some three dozen business leaders. And true to the old form, Dallas business people are willing to speculate. Their answers paint a picture of Dallas as a wildcatter that has been tamed. But don’t fret: that’s not necessarily bad news.
WHAT DALLAS WILL BE
Whenever the topic is the future, the tone is uncertain. And conversations about business and the economy are no exception. But the psychology of the people doing business is all-important. Just as the crisis mentality has shaped the way Dallas does business now, our current perception of the future will shape the future.
Though the businessmen and women interviewed for this story certainly differed in opinion, some common descriptives of Dallas’s future did emerge. Plug the following into the phrase “Dallas will be”:
Cautious. Thomas Abbott, vice chairman of NorthPark National Bank, knows from experience that being cautious doesn’t necessarily mean being less profitable or less dynamic. Through a more conservative lending approach, NorthPark has emerged as the largest independent bank in Dallas and one of the few bright spots on the state banking scene.
In the future, Abbott says. Dallas lenders will continue to be more cautious, to demand more collateral, and take less risk. Though he says NorthPark is not without its problems and has actually seen its loan portfolio shrink, the bank’s prudence is paying off: it is growing quickly with deposits that are part of the fallout from Dallas’s large bank holding companies with widely publicized problems. Abbott thinks the retrenchment, the trimming back in lifestyle and in business that has occurred in Dallas, is good for the city’s future.
“I think we were living beyond our means and we got overheated. And what has happened is the pain and suffering is bringing about a new maturity. ” Abbott says.
Mature, That is another common description of Dallas in the future. But does more maturity also imply that Dallas will be less dynamic? Fifty-seven-year-old Jess Hay, chairman and chief executive officer of Lomas & Nettleton Financial Corp., says the answer to that question is “absolutely not. “
Whether Dallas likes it or not, says Hay, it has left the arena of the small developing metropolitan area and is now in the much bigger league of major centers. In that arena, he says, maturity and dynamism coexist- as witness New York, which had its own doldrums in the mid-Seventies.
Less entrepreneurial. More mature may, however, mean less entrepreneurial, depending primarily on the financial markets and the availability of money to risktakers. C. E. “Doc” Cornutt, executive vice president and chief financial officer of Hunt Consolidated Inc., is one Dallas businessman who thinks it’s going to get harder and harder for entrepreneurs to find lenders. Venture capital will become much more dear in the future, he says. Money center banks are doing business in Dallas-but only with nationally and internationally oriented existing corporate customers, Cornutt says, adding that as large lenders continue to deal more exclusively with large corporate clients, it is inevitable that investment in new facilities here will become more corporate in nature. This sort of “Fortune 500 mentality” will have major impact on the way Dallas grows in the future.
To wit, the regional banking customer, who has depended on the regional banks for financing, may get squeezed out in the future as national money center banks come in and take over our hurting regional bank holding companies. Economist John Sartain says of the approximately 1, 800 banks now in Texas, only half will still be here a decade from now. He thinks that all of the large Texas bank holding companies will be owned by out-of-state interests.
So what will happen to the entrepreneurs? Jerry Fults, president of Fults & Associates real estate brokerage and management company, says that as a result of the change in the financial markets, there will be a greater in-stitutionalization of the development process. In Dallas, that means what may have been the new generation of young Trammell Crows and John Eulichs will be more likely to work for the big institutions-the Prudentials and Equitables-rather than starting their own development companies.
Dallas attorney Eric Moyé says the squeezing out of the small entrepreneur has already begun and is likely to get worse the longer we remain in the doldrums. “If Exxon, for example, uses the largest law firm in Dallas and they don’t pay their bills for two months, the firm can handle it, ” Moyé says, “A smaller firm has less ability to ride along, to wait it out. “
Stronger. It is inevitable, though, that Dallas will bounce back, say many interviewed for this story. Oil prices aside, some of the major assets that fueled Dallas’s growth remain intact: the Dallas/Fort Worth International Airport; Dallas’s central location as a national distribution point; basic migratory patterns that show Texas will be the second most populous state in the next decade. Without exception, those interviewed pointed to the D/FW airport as our biggest comparative economic advantage. And yes, that diverse economy will figure prominently in Dallas’s future. Telecommunications, defense, and manufacturing-areas that have been overshadowed by the growth in real estate and oil and gas-are now seen as the strong points of the Dallas economy that they really always have been. As a result, Dallas’s unemployment rate has remained moderate, with huge losses of jobs in construction offset by significant job growth in manufacturing.
Another example: the University of Texas Health Science Center and other Dallas medical facilities spawning medical technology development in this area.
A more specific example: Electronic Modules Inc., one of those “TI spinoffc” you always hear about. Founded by former Texas Instruments executive George Shrime, EMI started from nothing three years ago-when the bad times were supposedly beginning in Dallas. This year the company, which produces electronic typewriter enhancements, tripled sales of a year ago to $9 million. But Shrime’s business is not exclusively dependent on the regional economy; fully half of his sales last year were exports. Which brings us to the next descriptive of our destiny.
Worldly. In the future, Dallas will not only be a regional hub. With some of the main engines of our regional economy down or running in neutral, Dallas business people are finally seeing the light about exports and foreign capital.
Nancy Huggins, managing director of the First Boston office in Dallas and a member of the Mort Meyerson task force on international development, says that beyond the top-tier corporations she has observed a parochialism in Dallas among small- and medium-sized companies. But, she says, Dallas is well positioned in the industries that are a part of the export boom.
Hunt Consolidated’s Doc Cornutt says that Dallas’s role as a center for international trade and capital investment is best shown by the international companies that own Dallas-area companies. He lists among those Tokio Marine & Fire Insurance Company, Ltd. of Japan, which owns Houston General Insurance Company; Allianz A. G. Holding of Germany, which owns Fidelity Union Life Insurance Company; Petrofina S. A. of Belgium, which controls 82 percent of the large refiner American Petrofina; the British Petroleum Company’s ongoing acquisition of Lear Petroleum; and Hoechst Aktien-gesellschaft of Germany’s recent acquisition of the Celanese Corp. and Dallas-based Celanese Chemical Company.
Loud and clear, the people interviewed for this article say that in the future, Dallas will need to focus outwardly to develop new markets-both on a national and international scale. Scott Eubanks, executive vice president of The Dallas Partnership, the marketing arm of the Greater Dallas Chamber, puts it pretty simply: “In the past, Dallas has been an order taker. Now we have to go out and sell Dallas. “
PULLING ON THE BOOTSTRAPS
The selling of Dallas is a real concern of local business people these days. The turnout at that Greater Dallas Chamber membership drive kick-off is just one visible example. But the first question on most everyone’s mind is not how but when-when are we going to climb out of this trough?
If the people talked to for this story are any indication, Dallas may already have begun to pull itself up by its bootstraps. Swear-ingen, Fults, and Staubach are leasing property, doing more deals lately than they were six months ago. Nancy Huggins’s First Boston just represented EDS in acquiring MTech. And the Hicks and Hass boys haven’t done too badly in this economy. Tom Davis, senior vice president of Donaldson, Lufkin & Jenrette Securities Corp., the investment banking firm that has completed several transactions for Hicks and Hass, has had a bang-up year. The Dallas office of his firm had a record 1987, completing more than $1. 2 billion in transactions.
Skim Business Week’s Top 1000 U. S. Companies Ranked By Stock Market Value and you’ll find numerous Dallas-based companies among the top quarter of the list. Certainly a big part of Dallas’s future is as a corporate headquarters city. Attracting those corporations is Scott Eubanks’s full-time job at The Dallas Partnership. And he offers some encouraging news on that front: currently, the partnership is dealing with twenty-eight solid corporate relocation prospects. That’s more sincere interest than Eubanks has had in the last twelve months combined.
And Dallas business people can’t say enough about JCPenney, our savior in 1987. Robert F. Pavlis, director of marketing for Camden Development Company, is just one Penney booster. His company purchased property in Frisco near the EDS development several years ago because it felt like that development would grow with the influx of headquarters companies. Penney ended up buying property for its headquarters complex right across the street from Camden’s Stonebriar, an 835-acre master planned community. Camden has presold thirty-one home building jobs in Stonebriar. Fifteen of those homes are for top Penney management, including the chairman of the board.
So, there are some encouraging signs for those who can’t wait a minute longer for the recovery. But Dallas has major hurdles to jump before it rises from the doldrums. Following are some of those concerns.
Financial markets. The crisis in our financial markets is clearly the number one problem on Dallas’s list of things to do. Most business people agree it is only a matter of time before all of the large bank holding companies in Texas are acquired by outside ownership-and that is not a negative but a requirement for Dallas’s recovery. If Dallas is to remain as one of the leading cities in the United States, it must have capital injections from outside of the state.
Also, the problem Federal Home Loan Bank Chairman Danny Wall calls the “black hole of the Federal Savings and Loan Insurance Corporation”-namely, Texas savings and loans-must be solved. Wall’s Southwest Plan to consolidate sick Texas S&Ls with less-sick S&Ls, which he announced in Dallas in general terms way back in January, has yet to accomplish much.
Perception. According to the business leaders interviewed for this story, those who perceive Dallas from the outside-whether from Tokyo or Des Moines-believe that the situation here is much worse than it actually is. As investment banker Tom Davis puts it, “things aren’t rosy, but we don’t exactly have food lines at the Crescent. “
Says Jess Hay, “Yes, [New Yorkers) think we are bad off, and they may be getting a little pleasure out of it, but not many of them want in any permanent sense to abandon their positions in Texas”
That still-distorted image means more work ahead for Dallas’s many, many economic development groups and their continued efforts to get the story out that we are not necessarily starving in the streets down here in Dallas. But, says Scott Eubanks, Dallas can’t gloss over its real problems-problems that corporate relocation prospects continue to voice concern about. He says some of the questions he is most frequently asked by corporate prospects have to do with Dallas’s high ranking in violent crime statistic comparisons and the current racial tensions that have surfaced in police-citizen relations-both negative stories that have garnered national attention.
Leadership. The name that came up more often than any other in conversation with these business leaders was that of J. Erik Jonsson. There is a general perception out there in Dallas that we have no strong leader, no man of vision like Jonsson to railroad an expensive but massively important project like the Dallas/Fort Worth airport past the less-visionary masses.
“Dallas is looking for a business leader, looking for guidance, ” says Roger Staubach. “We don’t seem to have that now. “
The resulting perception is that of general chaos: several economic development groups promoting the city and region as opposed to one focused group; many special interest groups each pushing issues most important to them. To put it bluntly, Dallas is no longer run by the Dallas Citizens Council and its hand-picked wisemen like Erik Jonsson. What’s interesting is that some Dallas business people say that they know it has been many years since a powerful “old boy network” ruled Dallas with an iron hand. But only lately-in the economic chaos-have they begun to miss that exclusive, focused, controlling, and loving hand.
Perhaps Jess Hay expresses the changes best. He says this perception of chaos and lack of solid leadership is part of Dallas’s’ maturation. He says a strong, sharply delineated group of leaders marks one stage of a city’s growth, but it is not a permanent state.
“In San Antonio today there tends to be a sharply identified group of leaders among | the business community and the business establishment, ” Hay says, “which are sharply focused on a very precisely stated set of objectives for the city. That is because [San Antonio] is not yet quite to the state in its development where Dallas is. It is still very clear to everyone who is interested in the development of that city that the opening of Sea World was a hell of a step forward, and they were all involved in it together. “
But, says Hay, San Antonio’s singular group pushing that city’s economic development is a function of San Antonio’s being a less complex city than Dallas is today.
“The larger a city or metropolitan area becomes, ” Hay says, “the more smaller and diverse separate oligarchies, if you will, are required to keep it moving. I hope we have not lost the concept of networking, but we are too big and too complex to rely on a single network. There is a time in which you have to trust the creativity of a broader group, and I personally think out of that more plural view will come a stronger, more thriving Dallas. “
