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WHAT’S MISSING? RETAIL

By CHRIS THOMAS |

THE CITY OF DALLAS’S OFFICIAL charge to developers interested in bidding to build a downtown shopping mall would have been daunting to the fainthearted: bring us at least 300,000 square feet of shopping space, including two “anchor tenants” (usually big-name department stores); put it close enough to downtown workers so that they can shop on their lunch hours; add public amenities like tree-lined streets, public space and art, connections to DART stations, or underground and overhead walkways; throw some historic preservation or residential development in or near the site, and create new jobs both during and after construction.

Oh, and one more thing. “It can’t be a prototypical suburban mall.” explains John Crawford, manager for the City of Dallas Office of Economic Development, “It has to be something really unique. Otherwise you can’t expect people to drive past other malls to get there.”

City Hall has decided that the best possibility for breathing new life into a limp downtown is to build a shopping mall in the Central Business District. And though the standards are high, developers will try to meet the challenge.

An “expert” panel appointed by the Office of Economic Development (OED) is studying proposals that will, it is hoped, bring a mall downtown. Instead of choosing a single “winner,” the plans will be compared and ranked-first, second, third, etc. “It’s our intention not to have just one for the council to endorse,” Crawford stresses. “We’ll lake however many are workable and prioritize them. The council will then endorse that ranking and start negotiating with the developer at the top of the list. If the first deal falls through, we go to the next alternative.”

The tentative contract is expected to be in place by April 1. To that end, seven developers sat down at their drawing boards and tried to meet the city’s stringent specifications. Four of them dropped out of the competition before it was over.

And not without some public grumbling. Several developers criticized the city for soliciting ideas in an unproven market.

“The city is going about the whole thing ass backwards,” Newt Walker complains. His firm, the Preston Carter Company, had planned to co-develop (with J.L. Williams Properties) some fifteen acres, now mostly parking lots, adjacent to the West End between Ross Avenue and Woodall Rodgers. The plans called for a mixed-use development including retail, residential, and office space and a hotel. However, Preston Carter pulled out of the process in September.

“The city wants to cause a mall to be in the downtown core,” Walker says. “’But first, the city should have had an independent consultant determine if there is a market for a mall in the downtown core, even down to deciding which quadrant of the core might give developers and tenants the best options. Instead, here we are spending thousands of dollars and hundreds of hours doing the city’s planning for them.”

That criticism has been echoed by others, including Bob Halpin, a partner in Lincoln Property Company, which is still in the race. But, as Halpin adds, “the city has not put a gun to anybody’s head and forced them to be involved.”

The public-private give-and-take is not new in Dallas. And though grumbling may be inevitable, we can point with pride to more than one project that wouldn’t have gotten off the ground without it. The Reunion complex is one; Bryan Place (the city’s only intown housing cluster) is another.

In today’s flat economy, few developers would undertake a major project such as this one without the promise of the city’s $20 million to $40 million share. In preparing to ante up this chunk of tax money. Dallas finds itself in good company.

According to Dr. Bernard Frieden, a professor of city planning at the Massachusetts Institute of Technology who studies urban retail development, about a hundred downtown shopping malls have been built in the U.S. since 1970, and in almost every case the city has taken the initiative, brought developers in, and shouldered some of the financial burden as a partner in the project.

“People have been skeptical of every one,” Frieden adds, “until it was built.”

Other cities that have made similar commitments have generally covered about one-third of the total project costs. At City Hall, Crawford claims there has been little opposition so far to the idea of spending Dallas taxpayers’ money for a downtown mall. “There is a general recognition that something needs to be done to shore up downtown,” he says. “All public improvements come from some sort of tax base. Remember, we are creating more lax value by doing this, and encouraging spinoff developments.”

In some cases, the developers vying for the project appear to be looking for a way to turn a post-boom sow’s ear into a high-rent silk purse. Lincoln Properties, for example, bought the old Southwestern Life Insurance building and 5.2 acres between The Fairmont Hotel and the Dallas Museum of Art several years ago, when the city was in mid-boom. Like some of the other developers in the running, Lincoln is sitting on downtown land that was originally destined to hold more corporate high-rises. Lincoln once bragged that the development on this property would be the “Rockefeller Center” of Dallas. But stymied by a sluggish economy and faced with a glut of office space, the company figured it might as well take a chance on a retail project instead. So Lincoln’s partners dug up those old plans, added a multistory shopping mall, and planned for two future office towers-as opposed to the three towers in the original plan. Lincoln’s long-term plans would also include a walkway connector through a new tower addition to The Fairmont Hotel across the street, and development of the site adjacent to the Interstate Bank Tower at Fountain Place behind The Fairmont. There, on what now serves as bank parking lots. Lincoln would locate its third anchor retail tenant.

“We don’t think for a minute that there’s a market for those office towers today,” Halpin admits, “but if the mall is successful. I can almost guarantee that the towers will follow. Mixed use on the site creates a healthy environment for other things to happen.”

Bramalea Texas also plans to mix retail with its high-rise office tower, the green neon skyscraper once known as First Repub-licBank Plaza (at 901 Main Street), and several other buildings in the area. Brama-lea’s specialty is shopping center development, with 14 million square feet in Canada and another 5 million in the U.S. There’s also a chance that Bramalea and Delphinance Development Corporation will pool their land and resources in a limited partnership.

Delphinance was one of the original seven developers vying for the city money, but the company pulled out when it couldn’t find a shopping center developer willing to commit to the project. Dary Stone says the mall developers “kicked tires” with his company’s site, but in the end. he says, they are waiting for the city to pick a site first. Stone also adds that Bramalea will include the Delphinance site in its proposal.

The city’s goal is to convince more names on the Fortune 500 list to move to Dallas- or at least hold meetings and conventions here. As OED’s Crawford puts it, “When you think of Dallas, or any city, the mental image is automatically that of the downtown area. If you have a vital downtown, it says a lot in the minds of investment bankers, corporate relocation specialists, and so on. It says you’re attractive and competitive.”

Prentiss Properties Ltd. is also in the running. Its site includes the old Mercantile Bank building, the 1700 block of Main Street (formerly Momentum Place), and two blocks adjacent to the east end of the downtown Neiman Marcus store. Michael Prentiss has been at this plan longer than most. He’s been talking about retail on that site with city planners since 1984. The Prentiss plan is strictly retail and office, assuming- as several developers do-that the natural place for more residential development is not in downtown proper, but in the State-Thomas area directly north of it.

Another strong contender for future retail (but no longer a player in the city’s sweepstakes) is Northrup Properties. Northrup’s terrain is on the eastern edge of downtown. Stretched over more than forty acres, future development from Northrup would envelop the Farmer’s Market, an area currently occupied by warehouses and parking lots. Northrup calls it a “festival marketplace,” but stresses that it’s not the Festival Marketplace that Belgian American Investments had planned for the property several years ago. Belgian American’s plans never made it through City Hall in the public-private partnership form the developer had sought. Consequently, the property eventually went back to the lender, and then, by default, to its former owner, the Northrups. Chip Northrup stresses that his plans would include moderately priced shopping and maybe even that much-coveted baseball stadium: former city manager George Schrader is heading up a Centra) Dallas Association (CDA) effort to aid the city in its bid to bring the Texas Rangers to downtown Dallas. The Farmer’s Market has emerged as a front-runner among Dallas sites.

These are heady plans, ripe with the promise of better days ahead. It is easy to get caught up in the excitement of new development downtown. With the flush of success in the West End warehouse district still warm on our cheeks, skeptics are likely to be drowned out by a chorus of boosters who have just begun to warm up.

But Stanley Marcus, longtime chairman emeritus of Neiman Marcus, sounds a sour note. In a biting letter to Mayor Strauss and council members dated September 14, Marcus denounced the city’s efforts as “twenty years late and $200 million too short.” Marcus predicts that within the next five years the two major retail establishments remaining downtown (Neiman’s and Foley’s) will relocate outside of the core. Based on his fifty years’ experience as a retail merchant and observations of similar problems in other cities, Marcus “knows of no comparable resuscitation efforts that have met with success.

“As a citizen, I regret to be a witness to, and incidentally a payer of, this wasteful expenditure,” Marcus wrote.

The debate will doubtless rage on well into 1989. But the city, backed by the CDA, will continue to fight both with facts and ideals. CDA planning director Mark Stein points to several large urban success stories, especially St. Louis, whose downtown Busch Memorial Stadium was built by private interests with city support and tax breaks under a state law designed to encourage redevelopment. But the CDA is more than aware that belief in the project requires a leap of faith. “The City Council needs to be comfortable with the idea that this is an investment in the city’s future,” Stein says. “It will eventually mean more sales tax and property tax revenues, and it will also make living in the central and southern parts of Dallas much more desirable. So the arguments for building a mail with the city’s involvement are very real.”

Fine-but who’s going to shop there? The CDA is quick to point out that 117,000 employees work downtown and 48,000 households lie within two miles. In addition, there are 4,700 downtown hotel rooms, and an estimated 14 million visitors venture into the area annually. They take pictures of the Kennedy Memorial, stroll through the Dallas Museum of Art, or shop in the West End. Two million of them are conventioneers.

“A lot of people will be attracted to a nice downtown mall,” says Prentiss principal Bob Short. “Have you tried to find a parking place at any of the suburban malls lately? If it’s done right, it could actually be more convenient. And besides the people who live here, there is a whole market of people who come here from East and South Texas to shop. They’re not being properly served.”

If you believe what you’ve read so far, it seems the city has plenty of plans, money, and shoppers-just about everything to make a mall successful. But you can’t have retail without retailers.

And the retailers who count have been decidedly coy about the whole idea. “Unfortunately,” says Bob Halpin of Lincoln Property Company, “the retailers’ inclination is to sit there until somebody offers them enough money to make a decision.”

Bramalea senior vice-president Thomas Fersch agrees. “The interesting thing about this whole exercise is that ultimately, developers aren’t going to drive it. and neither is the city.” Persch explains. “The retailers are the ones who are going to say when, where, and how big. They will decide if there is a market for them in downtown Dallas. And remember, they have a lot of opportunities-not just here, but in other cities.”

Perhaps no retailer is as crucial to the downtown game plan as Neiman Marcus. While other chains have closed their downtown locations, the flagship store at 1618 Main, which opened its doors in 1914, is still doing business downtown. Richard Marcus, who stepped down as chairman and CEO of Neiman Marcus in September, says he spent several years reevaluating Neiman’s presence in the downtown core. “I can no longer speak for the corporation, but before I left I had been most vocal about looking at alternatives to the present site. I think it’s time to redefine, to challenge the boundaries of that freeway loop.”

Marcus isn’t the only person who has ventured that opinion. Its other chief proponent is Rosewood Property Company, of The Mansion on Turtle Creek and the Hotel Crescent Court fame. Reliable rumor has it that NM may have already inked a deal as an anchor tenant for Rosewood’s 800,000-square-foot urban retail center to be built next to The Crescent on Cedar Springs.



The official word? “We are evaluating a number of options and have made no decisions on any of them,” says Peter Farwell, vice-president of corporate relations for the Neiman Marcus Group, the corporation that owns Neiman Marcus.

The bombshell that will accompany news of a Rosewood-Neiman’s deal is the fact that no city money is needed. Detractors can point to the traffic congestion that already plagues the lower McKinney area and can point out that The Crescent’s previous array of pricey retail tenants went bust, victims of too few customers. But the fact remains that Rosewood’s new plans may forever alter the good intentions of the city, the Central Dallas Association, and other developers.

“If they go ahead with their plans,” says Short of the Rosewood site, “I don’t see how two malls in the area could both be viable.”

Tom Persch agrees. “If the rumors are true, it would preclude two malls. They’re just too close. We would back down” Persch adds, however, that Bramalea would still develop a portion of its retail space as planned. Chicago-based Homart Development Corporation, the nation’s largest shopping mall developer and one of the original seven vying for the downtown mall, has already called it quits, citing problems assembling its site-though rumor has it Homart didn’t think its downtown project could work without Neiman Marcus.

Is it possible that after all this, after building support for a multimillion-dollar boost from the city, there might actually be better uses for that tax money? The City Council could decide to do nothing, to endorse no one. “We’ll live if that happens.” says Mark Stein of CDA. “But ultimately, it’s a question of quality. What great downtowns do you know that don’t have a shopping area? The developers who are part of this process are working in a goldfish bowl. Everybody’s watching what they are doing.” Stein says. “They are taking some unique risks, and if one of them succeeds he’ll deserve a lot of credit.”

But, Stein adds, with an uncharacteristic flash of caution. “I hope there is as much upside potential as there is downside risk.”