Dallas Revisited
Still Struggling After '80s Bust,
Downtown Tries to Woo Families
City Offers Incentives to Draw
Retailers and Apartments;
Competitors Build Nearby
A Place to Make Your Own Wine
By STEVE LEVINE
Staff Reporter of THE WALL STREET JOURNAL
November 28, 2005; Page A1
DALLAS -- Seventeen-month-old Beau Aveton may hold a little piece of the fate of downtown Dallas in his tiny hands.
Beset with one of the nation's most forlorn downtowns, Dallas is seeking salvation in a radical cure: a plan to convert most of the glass-and-steel business district into an upscale residential neighborhood. With his shock of brown hair, Beau is one of downtown's pioneering first babies -- the occupant, along with his parents, Noel and Zane Aveton, of the district's sole single-family home. The Avetons and others like them may be downtown Dallas's last great hope.
Lots of cities are trying to piggyback on the nation's new taste for condominiums and urban living. Atlanta, Denver, Los Angeles and others have encouraged developers to recycle old downtown buildings into chic residences while continuing to promote themselves as prime office locations. These areas mainly draw childless couples, couples with grown children, gays and wealthy, single professionals. But no city comes close to Dallas in residential zeal. Dallas, a city of 1.2 million, has given out some $160 million in grants and tax abatements with the goal of creating a residential haven for those seeking to escape the hundreds of square miles of sprawl that surround it.
The city's goal is to attract a critical mass of 10,000 downtown residences, which its consultants say will be sufficient to reel in a stable, tax-paying base of neighborhood boutiques and restaurants, ultimately launching a self-propelling economy. The plans don't call for swallowing up downtown's best office towers. But planners hope these buildings, which are still largely filled with office workers, will become islands in a sea of lofts, condominiums, apartments and shops.
Across the country, Americans are embracing urban living, particularly in places where they can live, work and shop all within a few city blocks. Many seek urban excitement in projects that promise clean streets and protection from urban crime. So-called mixed-use development is all the rage. According to real-estate research firms Property & Portfolio Research and Reed Construction Data, 21.6% of all new construction this year will be mixed use, compared with 17.5% in 2002.
One of Dallas's biggest challenges is competition. Just across a freeway from downtown, Ross Perot Jr., son of the computer entrepreneur and former presidential candidate, is building Victory, a $1 billion project of upscale condominiums, apartments and hotels. Even 40 miles up the road, developers are expanding Legacy Town Center, a successful urban project with $300,000 duplexes in the suburb of Plano. Both those rivals are also using the same strategy as Dallas -- set themselves apart by attracting unique shops selling brands and products unavailable almost anywhere else in the region.
If Dallas's gambit fails, its downtown may be consigned to long-term blight, as city residents, already saddled with debt for the current set of incentives, may be reluctant to take on more taxes to try anew. Instead, developers, retailers and homebuyers may turn even more aggressively to Dallas's outlying areas.
First settled in the 1840s as a trading post, Dallas became a hub for hide merchants, cotton sellers, bankers and European immigrants pouring into the flat, often blazing hot city situated 260 miles from the nearest coast.
In the 1980s, downtown Dallas was a swaggering business district. Fewer than 200 people lived there, but it buzzed with booming banks, oil companies and real-estate firms. Restaurants and shops filled the streets.
But in 1986 global oil prices plummeted, followed soon after by the collapse of the savings and loan industry. Office towers thrown up in the go-go years emptied out, and retailers fled to suburban malls. When the real-estate market stabilized, a third of the city's office space was vacant.
Today, the streets of Dallas's 1.3-square-mile downtown are largely deserted apart from homeless people toting backpacks and commuters darting between their cars and their offices. There are almost no stores, and some 20 vacant high-rises. About 160 acres of surface parking lots sit across downtown, many of them covering the ground where buildings once stood.
Signs of an apparent reawakening have buoyed downtown advocates. Cranes carrying out residential conversions dot the skyline. Hard-hatted construction crews interfere with foot and vehicle traffic on almost every street. Developers lured by grants, free rent and long tax holidays have already carved some 2,400 mostly upscale apartments, lofts and condominiums from old downtown offices and hotels, and another 2,040 or so are on the drawing board. Many of the converted buildings are almost full, and sales and rentals are brisk in many of the unfinished towers.
"It's not department stores and big office buildings so much as it is people magnets, walkability, density and diversity that will bring downtown Dallas back," says William Hudnut, an authority on municipal revitalization at the Washington-based Urban Land Institute.
Larry Hamilton, a 64-year-old Denver developer, gave Dallas's rebirth a jumpstart when he arrived to take a look in 1997. With a friend, he bought what were Dallas's two tallest buildings when they went up in the 1920s as the headquarters for a bank and an oil company.
"We thought it was cool, two yokels from Denver buying the two coolest buildings in Dallas," says Mr. Hamilton. At first, banks didn't agree -- some 60 rejected his application to convert the boarded up old Republic Bank building into 183 apartments. To seal a deal for $16 million in financing, or half the renovation cost, he and his 38-year-old son, Ted, finally had to pull together $2 million of their own money, plus city grants, tax credits and loan guarantees. Two years later, the former bank's 1926 facade was restored, and the building rapidly reached 98% occupancy.
Encouraged by their initial success, the Hamiltons bought two more downtown buildings for apartment conversions. One, the old Dallas Power & Light building, they wanted to convert into a "real hip, edgy project" by installing a multilevel Asian bar-restaurant in the apartment lobby, with blue lights, bamboo and an outdoor pool. Their architect cautioned against it, saying they might "alienate 90% of our market." They went ahead anyway. Today, the restaurant, called Fuse, is among downtown's most popular. Dallas Power & Light's 158 apartments are 81% occupied and have become a home for some city celebrities, including three Dallas Mavericks cheerleaders.
So far, few retailers appear interested in Dallas. Louis and Peggy Davion are among the exceptions.
Three years ago, Mr. Davion, 59, a laid-off computer specialist, and his real-estate-agent wife decided to go into business for themselves. When they began looking for a place for a wine shop, landlords in Dallas's suburbs largely ignored them. Not downtown, where city officials agreed to pay half the shop's $350,000 design cost and cover the first 18 months' rent, Mr. Davion says. In July, the Davions opened a mahogany- and oak-lined shop called Swirll.
The shop's big attraction is the chance to be your own winemaker, by combining Chardonnay, Merlots, Cabernet Sauvignons and other varietals into your own half-barrel-size blend.
That same month, Manuel Zambrana opened Urban Market, the district's first grocery.
A year ago, Mr. Zambrana was hired by a developer who planned to convert Dallas's former trolley depot into 134 lofts and a food store. Mr. Zambrana, a 56-year-old grocery consultant, was brought on to figure out whether the store was feasible.
Mr. Zambrana realized downtown lacked sufficient population to sustain a grocery. But in the classic downtown Catch-22, many people would not move to a place where they couldn't walk to buy a quart of milk. So he devised a hybrid, a grocery-cafe-bar. Patrons would be able to grab a scotch, a quesadilla and a bag of apples, all in one place. Mr. Zambrana prevailed over skeptical state licensing officials by installing plants as barriers and designating the bar not as a unit of the grocery, but a mezzanine.
"I wanted it to become a neighborhood place to relax and share with friends," Mr. Zambrana says. "It's not a singles bar. It's not a businessman's bar. It's Cheers." Just four months after opening, Urban Market is boisterous, and Mr. Zambrana expects to turn a profit in 24 months or so.
Among Mr. Zambrana's frequent patrons are Noel and Zane Aveton, along with their toddler, Beau. The Avetons seem to have been heading downtown all their lives. As a teenager in the Dallas suburb of Arlington, Zane Aveton saved $75 in waitressing money to buy a 3-foot, Empire State Building that lights up. In her 20s, ascending the crest above Dallas in her car "made my heart skip a beat." So, three years after she and Noel, a 33-year-old architect, met outside Dallas's trendy Club One and eventually married, they started looking for downtown property.
One day in 2002, Zane, 39, spied a "for sale" sign outside a boxy, peeling, two-story printing factory. Some might have disregarded the 6,000-square-foot factory, filled with asbestos and stinking from printing chemicals. But Zane saw an ideal fixer-upper. After some haggling, the owner settled for a price of $260,000.
Though six years into the city's ostensible regeneration drive, it wasn't clear that Dallas was ready for the Avetons. A dozen banks pre-approved a loan but reversed themselves after seeing the building's condition. The couple was forced to revert to the seller, who agreed to proceed with the sale in exchange for a year of interest payments while the couple continued to hunt for a courageous lender. Ultimately, the couple gave up on Dallas banks and went to Houston, where photographs of other urban-loft renovations persuaded a bank to make the loan. The loan included an additional $30,000 to clear out the asbestos and tens of thousands more to make the building habitable.
In 2003, the Avetons moved in. Mrs. Aveton was three weeks pregnant.
Though there are no elementary schools downtown and the district has no playgrounds, the couple never considered moving elsewhere. "People thought when we were moving downtown that we weren't going to have children," says Mrs. Aveton, who is director of sales for Voicecom Telecommunications LLC. "But I don't believe that. I believe the family is what you create." Though three or four more families with young children also have moved downtown, it still sometimes seems Beau is the district's only kid, a colorful presence on the gray streets as he walks or is pushed in a stroller to Zambrana's or elsewhere.
Dallas faces competition from developers who have long been creating a cleaner, more convenient downtown experience throughout Dallas's suburbs. Plano's Legacy Town Center, for example, offers plums that were previously the sole preserve of big cities, such as a walking promenade, ritzy restaurants, cool boutiques and a busy nightlife. Farther north on the very fringes of the Dallas suburbs, the town of Frisco is doing the same thing, even subsidizing rent on Main Street's pizza joint to tide the owner over until a critical mass of people move in.
Against these forces, Dallas's original downtown needs to find another 5,500 or so people seeking a hard-core urban life. The city is pushing ahead, confident that it can. Recently, it agreed to its largest payout ever -- $70 million toward a more than $200 million refurbishment of nine blighted downtown structures by Cleveland-based Forest City Enterprises. The company plans to build about 840 apartments and condominiums.
Housing prices are working in Dallas's favor. While the condo boom has pushed up prices in many cities and raised concerns about a possible bust, the boom has passed Dallas by. A two-bedroom condo can go for about $260,000. Karl Zavitkovsky, director of Dallas's Office of Economic Development, says that downtown Dallas won't be much affected by a market reversal because "you haven't had anything close to a condominium bubble here."
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