BUSINESS Will Anybody Come?

TAKE A STROLL DOWN GRIFFIN Street from the Holiday Inn to the infamous McDonald’s by the federal courthouse and here’s what you’ll see: some conventioneers in brand new gimme caps ogling the skyline, a few students lugging books toward El Centro, and young lawyers walking fast and trying hard to look busy. But mostly, you’ll see people standing. People on corners staring one way or another for a glimpse of a yellow DART bus. People dressed in old sweat shirts and jogging shoes. People who look bored because they’ve come here only to get someplace else.

Now, imagine all of these people inside of a spanking new downtown mall like the one proposed by the city of Dallas and Bramalea as a public/private joint venture. And think about purchasing power. If you were the owner of a store, would you be excited about opening your doors to this crowd every day?

It’s easy to shoot down the downtown mall. All you have to do is imagine a roof over the head of today’s Griffin Street pedestrians. Or look at some of the numbers: according to the International Council of Shopping Centers, in 1988 customers in shopping centers rang up average sales of $2,390.81 per person. But downtown office workers spend less than half that-only $945 for department store-type purchases.

Or listen to a retailer like Jim Nordstrom of the enormously successful Seattle-based store that bears his name: “It’s very risky to go into a downtown. It takes tremendous financial incentive. The nights are deadly and weekends are not as strong as in suburban locations. It’s so fragile, and if it goes wrong, it’s terrible- especially in a downtown like Dallas that has fallen on hard times retail-wise.”

In October, when the Dallas City Council authorized the city to negotiate with Bramalea Texas to build a mall on the developer’s Griffin Street property, it was a long-awaited culmination of the most recent push to revitalize downtown, spelled out in the Central Dallas Association’s 1986 Downtown Plan. Negotiations have begun with a city commitment of $95.6 million and a Bramalea investment of $644.8 million as a starting point. Bramalea’s proposal has the city paying for land and anchor construction, parking garages, and truck terminal construction. But the numbers are not set in stone, nor is a start date for the mall construction. Bramalea expects to haggle over the contract until June of 1990. The firm says that by its third year of operation the downtown mall will have annual sales of $133.5 million, which would rank it above Valley View and NorthPark, two of the most successful malls in the country.

Since the beginning of the “competition” among developers bidding for the project, detractors of the city’s plan for downtown retail have been abundant. Some didn’t like the way the city was going about finding a site for the mall. Instead of commissioning a study to find the optimum site, city planners let developers submit proposals for sites they already owned. Many of the plans turned in were just revamped office projects that had been shelved since the market turned sour. Since the city gave the go-ahead to Bramalea, pessimists have multiplied.

Many of those saying the mall won’t work, of course, are competitors. Some had downtown mall plans of their own that the city passed over; others are suburban mall developers and retail brokers who say Bramalea’s projected sales are pure folly.

And others outside of the real estate profession share the contrarian view: in a recent informal telephone poll by the Dallas Times Herald, 3,536 people were asked if the city should help finance the construction of a mall to revive downtown Dallas. An overwhelming 91 percent answered no, which shows a certain lack of interest in the city’s involvement in a downtown mall.

Want more naysaying? That’s simple. Just follow the pointing fingers of laissez faire types across Woodall Rodgers Freeway to where Rosewood Property Company plans to build its own mall-without tax dollars. While the city was helping to pay for a mall feasibility study inside the loop, the Rosewood people, in planning a mall across the street from their Crescent project, were using their own money to study the mall question. Rosewood’s thorough approach is an indication of its commitment to build the project, which has some people asking why the city should get involved in a project that may happen in the private sector anyway.



BUT EVEN THOUGH THE DOWNTOWN MALL HAS attracted all manner of snipers, the city, Bramalea, and Rosewood all claim their studies indicate that a market does exist for a “center city” mall.

Bramalea points to Oak Cliff and affluent Kessler Park and says shoppers there who suffer from mall-nourishment will flock to its very accessible mall along Griffin Street. Rosewood cites studies that show Dallas is an important regional mecca for shoppers who now pass right by its site on the way to the great malls of the North. Still, all parties agree that the shopping experience downtown or near downtown must be something very special to survive in what has become a very tough retail market.

The Dallas market looks particularly bleak since major department stores like Joske’s and Foley’s abandoned their downtown stores. But these are not the best of times for retailers nationwide. Today, any new mall-even a suburban one-is a tough proposition. Shoppers’ habits have changed, and shopping strips chock-full of little shops specializing in everything from imported lace to ski boots are gaining ground on the traditional mammoth mall.

Also, most of the major department store chains, from Dallas-born Neiman Marcus to Bloomingdale’s to Macy’s, have undergone leveraged buyouts in recent years, leaving the new corporations that own them severely burdened with debt. And now that means that department stores are looking to the mall developer for capital. The evolution of retail malls has been such that the developer has accepted more and more of the financial burden to lure the big stores. It has been common in the past for developers to ante up land to anchor tenants. But now developers typically pay for construction and give away a percentage of profits reaped from smaller shops as well. It’s a very risky proposition-some think too risky for city involvement.

“I don’t see [the mall] as a profit-making venture,” says Mike Prentiss, whose Prentiss Properties did not emerge the victor in the great downtown mall competition. Prentiss insists that the pessimists miss the point. He says he wants to see the downtown mall happen-even if it isn’t on his property- because it’s good for downtown. And, he says, what’s good for downtown is good for Dallas. “The city will get its money back in spades through increased tax revenues down the road. But the city has to be an activist or it’s not going to happen.”

Prentiss points to other cities like Atlanta and Indianapolis that have made much greater monetary commitments to build downtown malls-while in Dallas, the CDA had to put up half of the money just to get a feasibility study done. Indianapolis is investing $230 million in a downtown mall project that has been twelve years in the planning. Along the way, Indianapolis mayor Bill Hudnut was up front and pushing hard. Hudnut believes that cities must take an active role in development, just as a businessperson shares in risks and reaps rewards. He believes in the concept of the “entrepreneurial city,” where through public/private partnership a city is willing to take risks to build on its strengths and turn its liabilities into assets.

Hudnut says the $230 million that Indianapolis is pouring into a decaying part of its downtown will eventually be paid back and more through tax increment financing and lease payments from the developer of its $750 million mall. The Indianapolis mall is a good example of how anchor tenants can make or break a project. It has been praised for incorporating two cornerstones of Indy retail. L.S. Ayres and Lazarus, while luring Saks Fifth Avenue and the successful Nordstrom as anchors-great coups since mall developers in this strained retail climate are recruiting from an ever-smaller list.

Rosewood and Bramalea are familiar with that limited list. And ultimately it will be those retailers that decide where and if a downtown or near-downtown mall will be built in Dallas. Only one will become a reality, and predictably, both Tom Persch, Bramalea Texas’s executive vice president, and Paul Rowsey, president of the Commercial/ Retail Group of Rosewood Property Company, are confident that their respective malls will emerge the victor.

An object of both groups’ affection is, of course, Neiman Marcus. Many onlookers believe that Neiman’s presence, or lack thereof, will be the deciding factor. Though Neiman’s hasn’t officially announced any move, there have been many reports that this grande dame of Dallas stores has already been wooed to The Crescent: most days, Neiman’s real estate consultant, Ted Hoch-stim, can be reached at a Rosewood Property phone number.

Still, the city-and what it is finally willing to commit-could give Bramalea an edge with the retailers, allowing the developer to cut rents and compensate for much higher building costs downtown. The city of Dallas has a mixed track record with public/private development ventures. While it claims bragging rights to the enormously successful Reunion Arena on the opposite side of downtown, the city would just as soon forget its involvement in the still-struggling Bryan Place housing development. Certainly a government-out-of-business attitude has been part of what made Dallas flourish, but mall proponents believe that there is a time for the city to be a risk-taker and that time is now. The debate will no doubt continue until the first retail lease is signed.