Museum Tower’s ears must be burning, no pun intended. Last week a subtle article in the Dallas Morning News revealed that the Dallas Police & Fire Pension System has been investing in real estate assets for oh, about 30 years. Among those: Museum Tower, the Beat Lofts near Southside on Lamar, south of downtown Dallas, and even a bridge loan for the expansion of NorthPark Center. The Beat versus Museum Tower, now that’s diversification! DP&FPS bought The Beat Lofts from developer Jack Mathews, who also brought us the Convention Center Hotel. Remind me to check on sales over there. This weekend the Dallas Morning News ran a screaming editorial that calls the Tower “a rude surprise from a building developer that should have known better.” Next thing you know, we’ll see the ordeal on an episode of Dallas!
Meantime, is anyone worried as I am that no matter whose fight it is, or whose fault it is, we still need to sell these units or risk bringing down the whole District? It’s in everybody’s best interest to settle this and maybe even show the world how civilized people resolve differences. I reached out to my Arts District Sales guru, Scott Deakins, for the on-the-street low-down:
CD: Scott — you know real estate in the Arts District better than almost anyone in this town, you’ve sold the lion’s share down there. Let’s talk straight about this deal with Museum Tower. There is so much, honestly, B.S. out there, a leak here that turns out not to be a leak. What gives?
SD: Well, the Police and Fire guys are learning the high end high rise market the hard way.
CD: It’s not unusual for funds like this to invest in real estate, is it, especially when the stock market is so sucky?
SD: The Police and Fire Pension Fund has over 3 billion dollars invested in all kinds of venues, many of which are commercial and residential developments. None of which are as high profile as Museum Tower.
Everyone expects it to end up in court but I’ve known Tom Luce (the mediator) for thirty years. I’ve also known John Shugrue for several years. These guys always do (or try to) the right thing.
CD: What do you think they need to do?
SD: Museum Tower needs to QUICKLY turn this PR disaster around and swallow their medicine. Its not too late to fix the problem and until they resurface the tower, sales just won’t happen.
SD: For a residential development to be successful, pre sales are vital, for a variety of reasons. First, early buyers usually scoop up the prime units. These buyers aren’t particularly concerned in percentage of units sold. They are wildly successful business people used to taking risks (These guys aren’t big fish-they are whales!) They are also used to creating their own living environment. They are used to having their own designers create a custom home, which usually means combining units. In a high rise, that becomes more and more difficult as construction on the project proceeds. Your not just building at that point, your tearing down. That’s why MT needs to hurry up and resolve this.
CD: Who do you see as the Museum Tower buyer? I mean, if they are the big whale hunter risk-takers, why would this stop them?
SD: In my experience, every building has a certain demographic: The Ritz has an international brand that appeals to to a wealthy, conservative buyer — say The Mansion on Turtle Creek but 30 years later. The W, quite frankly, was geared to a single 35 year old guy driving a Ferrari. Arts District buyers want to be there because they are emotionally invested in the culture. Most are either going to live in the Arts District or stay put. Any development that puts the district in harms way will not attract these buyers. Also, a building in litigation will be a huge red flag to buyers.
If, however, tomorrow the powers that be at Museum Tower announce they are going to voluntarily fix the problem, they are suddenly the good neighbors they need to be.
CD: At what cost?
SD: It may cost several million dollars to fix but it will put the two hundred million dollar development back on track.
CD: The negativity rabbits say there is no market for high end, high rise condos in Dallas. I know values at the W continue to plummet, and there’s the House -SIGH, but we are talking the Arts District. And I am seeing more studies indicating people are moving in to the core, they want urban like never before. One Arts is practically sold out, right?
SD: Yes. There is a strong market for very high end condos in the Arts District, but until they do the right thing and fix the problem, its the elephant in the middle of the (Pritzker award- winning) room!
CD: I’ve heard that they’ll move the Nasher — have you heard this?
SD: Anyone who thinks the Nasher should or will bear the responsibility of this fix is not living in the real world. In five years this will be forgotten, but they need to act immediately!
— Daily Local Real Estate Dish By Dallas Real Estate Insider — Candy Evans at CandysDirt.com