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Panel: Grocers eyeing McKinney Ave., DART board mulling big rate hike for non-residents

Haynes and Boone's Victory Park office.

Urban density evangelist Michael Buckley recently hosted a star-studded panel of real estate experts to talk about the future of Dallas. It was a fascinating discussion. But what else would you expect from Buckley, who left his post as director of Columbia University’s graduate real estate development program to join the University of Texas at Arlington and help tackle the nation’s mortgage crisis. (Don’t miss D’s terrific profile of him.)

At UTA, Buckley is introducing a Certificate in Property Repositioning and Turnaround Strategies program. This study of distressed assets designed to help participants “address acute economic and societal challenges while boosting their chances for immediate employment.”

The lively panel discussion, held at Haynes and Boone’s Victory Park office, featured some of the best and brightest minds in the business: David Zatopek, president of Dallas AIA; Mickey Ashmore, president of UCR; Linda McMahon, president of The Real Estate Council; Paul Rowsey, managing partner at E2M Private Equity; Lucy Billingsley, principal of Billingsley Co.; Rick Martin, partner and real estate attorney at Haynes and Boone LLP; John Cullins, partner at Ernst & Young LLP; David Leininger, CFO of Dallas Area Rapid Transit; Karen Walz, executive director of Vision North Texas; and Don Powell, principal of BOKA Powell. Here’s a look at some of the things they had to say.

Michael Buckley: It’s important to pay attention to quality of life and business drivers. If you think about the DFW region, it’s a gateway city, it’s actually a city-state. It’s big enough to have its own influence beyond the state itself. Gateway cities have international airlift, they have expansive road networks, they have quality of life, and, most important, I think, they have a proven work ethic. This is an unusual thing to say for a guy who just moved down here from New York, but it’s true. … This area is going to grow. It’s going to grow and become either L.A. or Phoenix—or it’s going to become something special.

David Zatopek: I’ll start with an anecdote. last summer, AIA hosted 20 architects from France, who came on an architectural tour. They came to Dallas. Dallas is on the map. They wanted to see what’s happening here in Texas, what’s happening in Dallas. To a person, they all said, “We went to Houston. We walked around downtown. We visited downtown Dallas, and it’s alive.” And I had to think about that for a second. I wondered, “Is my French good enough to follow what they’re saying?” To me, it was an indication that we may be hiding something special. One of the most provocative things Michael mentioned was “proven work ethic.” I think one of the things the architects recognized is that Dallas is a city that works. People are out there doing things. We as residents here don’t always believe that, but it’s true. And sometimes it takes an outside voice to recognize all of the things that have been accomplished here in Dallas, primarily through the the infusion of private capital and the energy of the market. I think that’s a good place to start the conversation.

Mickey Ashmore: I have a history of working on new urbanization projects and know a lot about them, not because I’m an academic, but because I was forced to become one by the developers that hired us to work on their projects (Southlake Town Center, Mockingbird Station, Legacy Town Center, One Arts Plaza). At One Arts Plaza, Lucy wanted to add retail and create connectivity to the rest of the Arts District. Unfortunately, the Arts District has become a series of monolithic, beautiful, Pritzker-architect-designed buildings—with no connectivity. When my 24-year-old son decided to move to Seattle, the first thing he did was go to the website www.walkscore.com and look for the neighborhoods that had the best walkability. Dallas is rated 49. We have a 49 score. If we are going to do some strategies to sustain metropolitan growth, we need to be at about a 79 or 80. Go to the website and you’ll see our whole problem.

Paul Rowsey: We do some investing in downtown Chicago. Something that caught my eye as I was driving in from O’Hare one time was a huge billboard that talked about the cost of owning a car in Chicago, which has little parking. It was $11,298 a year. That’s an amazing statistic. It’s car payment, insurance, parking, gas, oil changes, maintenance, etc. Auto insurance is more expensive here. When you think about $11,298, that buys you a lot of rent. If you live in an area where you can walk to work, you can walk to places to go out to eat, that’s a tremendous benefit in terms of lifestyle. Growth is going to happen here. There will be more density. But is has to be planned; it can’t just happen haphazardly.

Lucy Billingsley: In think our area’s entrepreneurship is not just a business entrepreneurship, it’s also a governmental entrepreneurship. You see it in the pro-business attitudes that our many cities have. Jumping to density, I think we have an urban density movement and a suburban density movement. It’s right that we go from one story to three or four stories, and that we do it in nodes. It’s destination living. Today’s youth are seeking more of a communal lifestyle, and it doesn’t have to be directly related to where you work. Another thought I’ll toss out, not that this is a self-serving comment, but the south side of Ross in downtown Dallas needs huge attention. I don’t think we’ve got the political will or the economic will to deal with it. And it’s going to bite us if we don’t do something.

Rick Martin: Dallas is a destination city and I’m proud to be a part of it. Much of my work is on behalf of institutional investors. Dallas is a place they want to be; it’s a market interests them. Dallas is a regional logistics center. We have rail, roadways, a central location, central time zone, and intermodal systems. As a result, we have an ability to create jobs and interest in this city. I believe we will like what we end up with. I believe it will be a special place.

John Cullins: The biggest driver we see affecting all aspects of the business community is changing demographics—and its impact on the way you build, the way you recruit, and the way companies market themselves. At Ernst & Young, we view ourselves in absolute war for talent, for skill capacity to do the things we do, and we know other companies feel the same way. You have to think differently about where you located: How accessible will this be for my workforce? How much will they enjoy where they work? Certainly the green initiative is only going to get stronger. Someone said companies today need to be “lean, mean, and green.” I really believe that’s the case. I think it’s going to drive, certainly, real estate. But it’s also going to shape the auto industry, all the different industries, as well as municipalities.

David Leininger: Our demand has grown beyond our boundaries. One of our biggest challenges is  dealing with Frisco and McKinney and all of the areas north of our service area. Ten percent of all trips are generated at our end-of the-line stations;  55 percent of those end-of-line riders are “non-residents,” or people who live outside of DART, and that rate is growing. At the time that the plan was put together, 25 years ago, out-of-area ridership was probably 1 or 2 percent. We are spending, on light rail alone, in terms of subsidies to people who live outside our service area, roughly $20 million on the operating side. If you fold in the capital costs associated with it, it’s about $50 million a year in expense for riders who do not live in the service area and whose cities do not contribute to DART. That’s the big economic challenge that we’ve got to address. There is literally a discussion going on with our board now, to have non-resident and resident price differentiation. And it would be a big differentiation. It wouldn’t be 25 cents, I can tell you that.

Karen Walz: Our region had about 5.3 million people in 2000 and is expected to have 9.5 million in 2030 and about 12 million in 2050. … If we keep having all of that growth go further and further out at lower densities, we will no longer have the money to build the roads for it; we will have incredible congestion and time value lost in congestion. We’ll also lose 900,000 acres of agricultural land to urban sprawl, and we don’t have enough water to handle the demand, all of those things. What we found in visiting with stakeholders in the region that people want to do better than that. North Texas 2050 creates a vision and a set of action recommendations for how we can handle that growth, to do it in a way that is more successful in dealing with demographic changes, and makes this region place where people want to be in the future.

Don Powell: I never thought I would see urban living in Dallas, but it has happened, and it has happened successfully. … This market really has no barriers to entry. And every suburban city will offer tax abatements to get you to come in; but that just leads to continual sprawl. We have to look at quality of life. One of the things I heard recently that really made sense to me was a quote by Mike Ablon. He said, “People today are more interested in experience than ownership.” And I think that’s going to change the focus toward sustainability in our city.

Buckley: We are about to do a survey with The Real Estate Council, AIA, and the Urban Land Institute. One of the questions we’re trying to formulate is why isn’t there more experimentation at the design level to deal with the problem. We basically haven’t changed the form for high-density living in a long time. We haven’t done much for families, for example.

Zatopek: Part of the problem in attracting families has less to do with its presentation than it does with political will in funding schools and services that families want and need in proximity to urban living. You want to create the type of environments that attract thinkers, and you want to keep them there. They’re young, they’re vigorous, they’re hooking up with others and starting businesses, but then the family comes, and they look at the school system, and they move.  We have to create a situation that provides educational choices that are attractive for highly educated parents to stay. Experimentation should probably start with education, creating new models of delivering education and creating new models of the physical structure.

Mickey Ashmore and Lucy Billingsley

Ashmore: In terms of attracting retailers to urban areas, it’s happening in our city now. There are about 35,000 people living within 1 mile of Neiman Marcus; 10 years ago, it wasn’t even half that. And I know for a fact that there are four different grocers, concepts of 25,000 square feet or less, that want to be on McKinney Avenue right now. The city has finally caught on that structured parking won’t work for retail. That’s why they’re adjusting the size of the formats. A 120,000-square-foot store is not going to work. So they’re adjusting the formats down to 60,000 square feet, for example. The key is going to be finding the right locations. There’s a big problem: Our density is better, but it’s not so good that the prices people are asking for the land and the cost to build, when matched with the sales that retailers are projected to generate—the numbers don’t work yet. If we don’t get help from the city, a tax abatement or some other kind of public-private partnership, it’s not going to happen.

Linda McMahon: (With regard to education’s role in developing sustainable environments), the important key is that you have to have the right people on the school board to help drive innovation and drive reform. It all starts with leadership. There are wonderful things happening around the country. I know members of the DISD school board, as well as members of the Dallas Regional Chamber, recently led a trip to Los Angeles. There, the mayor of LA, basically through political maneuvering, has taken over the school district, and he has done some incredible things. He funded people to run for school board, and has gotten their ear. I have witnessed some tremendous progress at DISD in recent years, but there’s a long way to go. People want to live where their children can go to school. Families want to be by good schools. If you build high-performing schools, you will have residential development; and once residents are there, all of the retailers will come in.

Buckley: I just wonder why that isn’t a business model we could pay more attention to.

Rowsey: Young families are driven by educational opportunities in an environment where they’re comfortable. In the Highland Park Independent School District, we have a giant problem, and it’s because of demographic trends. We have a huge growth in student enrollment in the Park Cities, and we’re completely landlocked, there’s no room to build new schools. What has happened is there has been higher density development on the peripheral of the Park Cities, in Preston Center and along Abbott and Knox Street. What people thought when those projects were approved, whether it was a townhouse or condo, was that they’d be occupied by empty-nesters. But instead they’re attracting young families that all want to live there. … Families like the educational opportunities; they also like the parks. In the urban areas Dallas, we need better education, we also need more parks—where it’s free, where it’s safe, where families can take their kids to what would be their backyard.

Billingsley: One thing that could be significant in DISD and other school districts is online education. KhanAcademy.org is a great example.


Zatopek: I’d like to make a comment about innovation. There is a softer kind of innovation permeating our profession, and that’s the innovation of collaboration. The problems that we have to solve require deep collaboration, and deep attention to infrastructure and the connected tissue of our city.  We’re not going to get there through broad individual gestures; we have to get there together.

Ashmore: I feel compelled to address education. I was a teacher in the Dallas Independent School District for seven years in the 1970s, and the schools were great. Parents were involved; they cared. If people would just go to public schools, they’d be fine. But what we have now are two school systems. We have a school system for poor people and then we have private schools for the wealthy. I know I’m saying the obvious, but we have to get (involved parents) back into the public schools. It’s really not that difficult of a problem to solve. With regard to sustaining growth, there has to be a lot more thought to development. Many times a developer’s vision is driven by economic gain not thoughtfulness. We saw thoughtfulness at Southlake Town Square; it really works. You can have suburban neighborhoods that are more walkable, more dense. Cities can have something of quality. We have to think more about quality than solely about economic gain. I know it’s an oxymoron but it’s really the truth.

McMahon: What we need to do is work on the public sector and make sure that they understand that increasing density is not a scary thing. It’s a matter of education. I see a lot of things happening here that are very exciting. There is a tremendous amount of private-sector leadership here. The gap in terms of us getting into the urbanism of the future has a lot to do with education and creating an environment where people aren’t afraid of that.

Billingsley: For offices, we have ever-increasing demand for more cars per thousand. It’s intense pressure, and maybe because it’s we’re officing people more densely. But, except for transit locations and shared parking, I don’t see that changing. Jumping to rental living, our demographics have changed dramatically. The American dream is no longer a dream of home ownership, that bubble has burst. It’s a dream of experiences and living life rightly. The ability to go build these major rental communities is very important in a suburban context for this density to be right. Now we need to think together and ask, “How we do that so this community enhances over time? How do we do that so it’s not like a used car, or something that’s leased and damaged?” My sense is that a huge answer to those questions has to do with nature, parks, an integration of amenities. With all of the density, nature is a huge human requirement that has got to get integrated.

Cullins: To me, a lot of sustainable growth starts with nurturing a strong employment base. Particularly in real estate, you need jobs. Jobs lead to houses, which lead to retail, etc. Things are different now. If you really want to nurture the employment base, you have to have a corporate culture that emphasizes sustainability. It permeates things. If you go into our office, you won’t find any Styrofoam cups. Why? Because that’s what our young people want. That matters when they’re deciding where they go to work.

Leininger: With reference to DART, we’re really coming of age and building out now at a very opportune time. There is a coincidence of circumstance; there’s an interest in urban living as opposed to suburban living, an interest in lifestyle change, and the price of gasoline is another trend. We have 62 platforms, many of which offer substantial development opportunities running throughout the network. And now you can get around. You can get to both airports and into downtown Fort Worth as well as throughout the Dallas area. That’s really going to bode well for the areas served by the system. The challenge is how we’re going to address the balance of the system. It’s useful to remember it’s very unlikely that the system we’re now finishing out could be replicated anytime soon. It will be decades before anything like this is available to the western side of the region (Fort Worth). That presents significant positioning opportunities for Dallas for the next several decades, just because of that.

7 comments on “Panel: Grocers eyeing McKinney Ave., DART board mulling big rate hike for non-residents

  1. Can you elaborate on what Ms. Billingsley meant by this:

    “but the south side of Ross in downtown Dallas needs huge attention. I don’t think we’ve got the political will or the economic will to deal with it. And it’s going to bite us if we don’t do something.”

    Did she elaborate on what is wrong, or what she’d like to see done?

    Reply
  2. Pingback: DART Board Discussing Big Rate Hike For Nonresidents | FrontBurner

  3. If you can do “online education” (like Khan) in DISD and it improves DISD, then you could do it in a suburban school district (that’s better run) and make it even better…

    Reply
  4. More and more grocers are closing down small stores. I suspect he is wrong about that. They want and need big volume.

    On the French architects in Houston, I wonder if it is like the famous NY Times article in the 80s during the oil crash. They came down in July, said they walked around downtown at lunchtime and no one was there. They didn’t realize that no one walks on the streets in downtown Houston in the summer heat and humidity. They’re all in the tunnels.

    Reply
  5. Pingback: DART’s idea to hit outsiders with higher fares

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