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DEALS MAKING HIS MARK

HBE Corporations Fred Kummer wanted to get his hotel chain into Dallas. And there was only one way to do it.
By DEALS MICHAEL ORREN |

FED KUMMER HAD HIS EYE oil Dallas a long time ago.

1 But Kummer, 67, founder, ’ president and CEO of St. Louis-based HBE corporation (the parent of Adam’s Mark Hotels), couldn’t find a property in Dallas that fit his philosophy. “I wasn’t interested in anything less than the whole deal.” said Kummer on a recent Saturday afternoon from his St. Louis headquarters. “[Dallas] is a tough town to be an also-ran.”

“The whole deal” that he found includes the Southland Center, at the corner of Olive and Bryan streets, and two adjacent pieces of property, forming a package that, once transformed, will be the largest hotel/conference center in Texas and the ninth largest in the country.

What is particularly unique about this transaction is its relative speed and absolute secrecy. Dallas is accustomed to a specific protocol with big deals. First come rumors, leaked in real estate columns and over drinks at the Melrose Hotel. Rumors are followed by casual denials, more rumors, adamant denials, admission of discussions, semi-public negotiations and. finally, an anti-climactic announcement of the deal that everyone has known about for a year.

In contrast, the surprising sight of Adam’s Mark signs on what used to be the downtown Harvey Hotel had many locals rubber-necking.

Even Greg Elam. vice president of the Dallas Convention and Visitor’s Bureau, was surprised. “We usually know all about these deals. All that we had here was a guy from Adam’s Mark who showed up looking for general numbers about downtown-Several months passed, and then the next thing we knew, it was in the paper.”

The first mention locally was in the Dec. 12 edition of The Dallas Morning News only a week before the signs went up.

The source for the hows and whys behind the deal-and all other matters important to Adam’s Mark-4s Kummer, who. with 8,000 employees spread over five divisions, still runs his business like a small family company. He personally hires all managers and is grooming his son, Fred Kummer III, to take over the business-but not anytime soon.

“I’m always on the prowl,” says Kummer with a predatory grin, “and I’ve always wanted to get into Dallas.” Two and a half years ago, Kummer lost a bid for the Le Méridien property across the street from the site of the new Adam’s Mark.

Through a broker friend in Dallas. Kummer got together with real estate investor Craig Hall, who had some Arts District land downtown he thought might work for an Adam’s Mark hotel. Kummer wasn’t interested in building a hotel from scratch, however, and took a pass.

It wasn’t that Kummer hadn’t built anything before. A large portion of HBE’s business is the construction of hospital and financial facilities. But the modus operandi on HBE’s hotel side is to take an existing property-usually one in dire straits-and renovate and enlarge it. This spring, for instance, Adam’s Mark is opening a 415-room property in Denver, built on the gutted skeleton of a vacant Sheraton.

So thinking there was no deal to be done, Kummer and Hall adjourned to the Crescent for dinner. On the way, Kummer took another look a! the Southland Center, which Hall says he had suggested some time before and which Kummer had dismissed as a “bad location.” This time, with the DART rail operating just a block away-connecting to the Dallas Convention Center and soon to reach NorthPark Center-Kummer saw more potential in the property.

What really caught his eye, however, was the property across the street. Two parcels of land, one with an old garage, presented the opportunity to build meeting space and additional parking. After considering using one of the two Southland towers for office space, Kummer decided to go all the way with a world-class meeting facility that would dwarf all others in town.

“We like, as a small hotel chain, to have the biggest property in the market,” says Kummer. “That’s nice to say in Winston-Salem) North Carolina], but in a market like Dallas, it really means something.”

A number of obstacles remained, daunting even to a man whose doorway is guarded by a tuxedo-clad sculpture of himself as “the Maestro” wearing a baseball cap proclaiming him as “Commander and Chief.”

“If we didn’t have all three properties, the deal didn’t happen,” says Kummer. “It couldn ’t come together in a linear fashion.” There were two very real fears: One, that a competitor would catch wind of Kummer’s plans, snatch up the two apparently worthless pieces of land and stymie the project. Two, the property owners would realize they were linchpins in a $150 million deal and suddenly revalue the parcels.

So Kummer didn’t only have to deal concurrently with New York Life, owner of the Southland Center, but also PMRA Land Income Trust and Transcontinental Realty Investors, not to mention having to negotiate with the city of Dallas for S5.3 million tax break.

Enter Ray Hutchinson, the local attorney representing Adam’s Mark, who quietly guided the project through the system. “I wanted Adam’s Mark to act like just another developer in Dallas, to not short-circuit the rules,” he says.

“We took a bit of a gamble with the city.” says Kummer. “Things could’ve gotten out on that end, but all around the city was great. More than any other city, they are knowledgeable, aggressive and you don’t run into a bunch of bureaucratic nonsense. We got quick yesses and quick nos. They were very effective people, and our deal required special effort on their part.”

Negotiations with Dallas weren’t a cake-walk. A number of City Council members believed the size of the Adam’s Mark would deter construction of a hotel adjacent to the convention center itself.

“I absolutely 100 percent disagree,” says Kummer. “It is much more important to be part of the urban dynamic… If you look at Chicago, which is the No. I non-resort convention destination, there is no hotel attached to the convention center. Convention centers, as public endeavors, are usually built on old rail yards that no one wants. People come to a city like Chicagoor Dal las because it is a great city. The convention center is incidental.”

Now that the deal is done, the real work begins. “We have a huge problem in Dallas,” says Kummer. “To open a new 1,800-room convention property, you need four years’ lead-time to book business. We’ve given ourselves two years.”

The design, expansion and construction comes easily to a company like HBE. But the challenge is to promote not just the hotel, but also Dallas as a city.

“We can’t just share the business already coming in,” says Kummer. A PKF study done in conjunction with an abortive attempt at another hotel indicates that only 25 percent of room-nights downtown comes from business travel and only 26 percent comes from conventions at the convention center or other facilities. Forty-one percent comes from conventions held inhouse ai the hotels. That’s the business Adam’s Mark will pursue.

Kummer is intent on making a big name with the locals, too. In addition to updating the turquoise facade on the buildings, he has obtained approval from the city to build a40-foot-tall. $200,000 Adam’s Mark sign atop the building. “You’ll see it from miles away,” he promises.

Meanwhile, Adam’s Mark is staffing up for its largest hotel ever. In total, the hotel should bring more than 1,000 new jobs to the area. Kummer is shuffling top staff from his other 14 hotels. Stan Soroka, the general managerof the Dallas hotel, was pulled away from the Denver property before it even opened.

This hotel obviously is a priority for HBE. Kummer points out that Adam’s Mark will be one of the largest convention sites in the country and suggests that downtown Dallas will one day compete with Chicago’s “Magic Mile.”

“And,” he adds with a salesman’s grin, “I hope to be part of making Dallas a little more magic.”

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