Dallas-Fort Worth Real Estate Review - Fall 2014 by DALLAS NEXT

CYPRESS WATERS

ANATOMY OF A DEAL SCORECARD:

TOP OFFICE, INDUSTRIAL, AND RETAIL LEASES

THE CRANE REPORT: PROJECTS UNDERWAY ACROSS DFW

ROUNDTABLE:

INDUSTRIAL MARKET OUTLOOK FOR 2015

20 FA L L

HIGH-QUALITY PROPERTIES. SUPERIOR LOCATIONS.

At Duke Realty, we know the importance of having a well-placed building that projects the right image for your company. That’s why we’ve delivered more than 15 million square feet of strategically located, state-of-the-art industrial and office buildings in the Dallas metro area. And we keep on growing. Right now we are building a 315,000-square-foot industrial project for BMSC/Naterra and a 270,500-square-foot speculative warehouse (with 143,309 square feet available for lease) at Point West, our flagship industrial development in the Dallas/Fort Worth Airport submarket. Plus we own 236 acres of land in the market’s top office and industrial submarkets ready for up to 4.4 million square feet of new development. Locate your operations into a well-placed, first-class Duke Realty property or let us deliver a build-to-suit facility for you. Call us at 972.361.6700 or visit dukerealty.com/dallas for more information about our industrial and office space capabilities.

14241 N. Dallas Parkway, Suite 1000 Dallas, TX 75254 | 972.361.6700 dukerealty.com/dallas

UNRIVALED TALENT. UNRIVALED UNMATCHED TALENT. RESULTS. UNMATCHED RESULTS.

Serving as trusted advisers to Dallas’ most notable companies is a role we take seriously. Our professionals share Serving as trusted advisers to Dallas’ an unwavering commitment to being a most notable companies is a role we world-class real estate services company. take seriously. Our professionals share A client-first culture and focused an unwavering commitment to being a dedication to professional excellence are world-class real estate services company. what make CBRE the leading provider A client-first culture and focused of commercial property management, dedication to professional excellence are leasing services and investment sales in what make CBRE the leading provider one of the country’s most vibrant real of commercial property management, estate markets. leasing services and investment sales in one of the country’s most vibrant real estate markets. For more information on how CBRE can assist you with your real estate needs in the Dallas market please contact: For moreCaffey information on how CBRE can assist Michael you 214 with 979 your 6511 real estate needs in the Dallas +1 market please contact: Michael Caffey +1 214 979 6511

cbre.com/dallas

Bright Realty Presents The Bridges

1.5 million square foot North Dallas mixed-use development The Bridges provides the perfect live, work and play environment. This planned mixeduse development is a premier living, retail, dining and entertainment destination, all

When you partner with Bright Realty, you gain access to a team of experienced professionals who combine industry knowledge with business acumen to provide real-world solutions for your real estate needs. We are driven to understand your unique goals so we can recommend operational efficiencies and provide strategic direction to maximize your return on investment.

surrounded by a pedestrian-friendly outdoor plaza and entertainment area. Located on the south side of State Highway 121 in the growing suburb of Lewisville, Texas, The Bridges provides easy access to north Dallas residents. To learn more about The Bridgesâ&#x20AC;&#x2122; plans, demographics and architectural character contact Bright Realty today.

ON THE COVER: 610 Uptown Class A Office

THIS

FALL 2014

is Cedar Hill

LAND OF OPPOR T U N IT IE S Cedar Hill is booming with new development and has become a prime location for industrial, commercial, residential, retail and recreational opportunities. Located in the beautiful hill country environment of Joe Pool

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

Build-to-suit Sites Available

° Pro-business environment with a skilled workforce of over 1 million within a 30-minute drive time

° Low taxes, low cost of living, quality education,

CYPRESS WATERS

ANATOMY OF A DEAL

over 3 million sf of retail, and Class A office space

° To facilitate and energize relocation and

expansion, Cedar Hill offers aggressive economic development incentives

Lake and the Cedar Hill State Park, Cedar Hill is the natural choice for those who want

SCORECARD:

big-city amenities with a small-town ambience.

20 FA L L

“HERO’S HORSE,” A 25-FOOT-TALL PEGASUS SCULPTURE BY KEVIN BOX, MARKS THE ENTRANCE TO CYPRESS WATERS. PHOTO BY MICHAEL SAMPLES.

TOP OFFICE, INDUSTRIAL, AND RETAIL LEASES

° 20 minutes from Downtown Dallas ° US 67/Rail-served Business Park 285 Uptown Boulevard • Bldg 100 • Cedar Hill, Texas 75104

THE CRANE REPORT:

Allison J. H. Thompson, CEcD, EDFP - Director ° allison.thompson@cedarhilltx.com ° 972.291.5132 ext.3 ° cedarhilledc.com

PROJECTS UNDERWAY ACROSS DFW

Rolling Hills and Panoramic Vistas

ROUNDTABLE:

INDUSTRIAL MARKET OUTLOOK FOR 2015

DFW

635

114 LOVE FIELD

183

190

30 80

DALLAS

30 360

Uptown Village at Cedar Hill

161

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121

Visit our website

LOOP 12

20 408

175

DALLAS EXECUTIVE

DUNCANVILLE

JOE POOL LAKE FM 1382

CEDAR HILL

D E SOTO

BELT LINE

UNION PACIFIC INTERMODAL LANCASTER

LANCASTER FUTURE LOOP 9

14989_CommRealEstate_Fall2014_B.indd 1

CONTENTS

9/18/14 3:57 PM

28 ROUNDTABLE

Welcome Letter . . . . . . . . . . . . . . . . . . . . . . . . . .6 Publisher’s Note . . . . . . . . . . . . . . . . . . . . . . . . .8

FOUNDATIONS DFW market statistics, economic indicators, and commercial real estate news . . . . . . .10-13

BLUEPRINT FOR PROSPERITY Incentives can be a real game-changer . . . . . . . . . . . . . . . . . . 15

17 THE CRANE REPORT

THE CRANE REPORT Who’s building what, where. . . . . . . . . . . 19

SCORECARD The region’s top office, industrial, and retail leases. . . . . . . . . . . . 27

ROUNDTABLE An insider’s view on DFW industrial leasing and development . . . . . . . . . . . . . 34

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E XC L USI V E LY P UB L ISHE D B Y D CUSTOM, A DIVISION OF D MAGAZINE PARTNERS

48 ANATOMY OF A DEAL WWW.DFWREALESTATEREVIEW.COM

SPECIAL REPORT: ANATOMY OF A DEAL—CYPRESS WATERS Creating a lakeside legacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 7-Eleven’s new heaven The home of the Slurpee has a brand-new home of its own. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Nation building About 1,000 employees will move to Nationstar Mortgage’s new headquarters before the end of the year. . . . . . . . . . . . . . . . . . . . 56

Workplace of the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 A new multifamily paradigm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 The 25-year vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Educating for the future

An elementary school unlike any other in the nation. . . . . . . . . . . . . 64

PUBLISHER Quincy Curé Preston 214.523.5215 quincy.preston@dcustom.com EDITOR-IN-CHIEF Christine Perez ART / PRODUCTION MANAGER Michael Samples COPY EDITOR Allison Hatfield CONTRIBUTING WRITERS Hilary Lau Karen Nielsen DIRECTOR OF SALES Kyle Moss 214.523.5247 kyle.moss@dcustom.com ACCOUNT EXECUTIVE Ben Skidmore ben.skidmore@dcustom.com INTERNS Crystal Hough Haley Rogers

Embracing the great outdoors . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 A time to be bold

Lucy Billingsley, the driving force behind Billingsley Co.. . . . . . . . . . 68

PRESIDENT & GENERAL MANAGER Gordon Locke

TOOLBOX Incentives: The great differentiator . . . . . . . . . . . . . . . . . . . . . . 70

SPECIAL ADVERTISING SECTION: ECONOMIC DEVELOPMENT DIRECTORY . . . . . . . . . 76

CREATIVE DIRECTOR Kyle Phelps EDITORIAL DIRECTOR Amy Robinson MANAGING EDITORS Casey Casteel Jonathan Ball DIRECTOR OF PRODUCTION Diane Testa

COMMUNITY Calendar of Real Estate Events. . . . . . . . . . . . . . . 84

The Real Estate Council, Impact Investors . . . . . . . . . . . . . . . . 80

Dallas Regional Chamber, Leadership Dallas . . . . . . . . . . . . . . . 84

The Real Estate Council, Chairman’s Reception . . . . . . . . . . . 83

Dallas Regional Chamber, Top-Level Members . . . . . . . . . . . . . 78

The Real Estate Council, Associate Leadership Council . . . . 82

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B E T T E R C O N T E N T. B E T T E R M A R K E T I N G .

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 5

PRODUCTION MANAGER Pedro Armstrong GRAPHIC DESIGNER Emily Slack MARKETING MANAGER Jessica Fritsche Dallas-Fort Worth Real Estate Review® is published for The Dallas Regional Chamber and The Real Estate Council by D Custom, a division of D Magazine Partners, 750 N. St. Paul St., Ste. 2100, Dallas, TX 75201; www.dcustom.com, 214.523.0300. ©2014 All rights reserved. No part of ths publication may be reproduced or reprinted without written permission. Neither the Dallas Regional Chamber nor The Real Estate Council nor D Custom is a sponsor of, or committed to, the views expressed in these articles. The publisher is not responsible for unsolicited contributions.

WELCOME

A letter from the Dallas Regional Chamber and The Real Estate Council

2014 CHAIRMAN OF THE BOARD Stephen L. Mansfield, Ph. D, FACHE President & CEO, Methodist Health System PRESIDENT & CEO

Proposition 1 isn’t just good for drivers; it’s good for the economy.

DALE PETROSKEY President and Chief Executive Officer Dallas Regional Chamber

The Dallas-Fort Worth region offers a wealth of opportunities for growth, expansion, economic development, and job creation. That’s why North Texas welcomes hundreds of new residents every day. In fact, our population is expected to double by 2060. This population growth puts tremendous pressure on the region’s infrastructure. On average, North Texans already spend 59 hours sitting in LINDA McMAHON traffic every year and nearly $1,000 annually on President and Chief car maintenance costs related to wear and tear Executive Officer The Real Estate Council caused by bad roads. We must keep up with our infrastructure needs to support the anticipated growth. The Dallas Regional Chamber and The Real Estate Council are staunch supporters of Proposition 1, the referendum to increase transportation funding. This statewide ballot proposition will provide an estimated $1.7 billion annually in reliable transportation funding without adding new taxes, fees, or debt. Proposition 1 isn’t just good for drivers; it’s good for the economy. Every $1 billion spent on infrastructure creates 30,000 jobs, and every $1 spent on transportation spurs $6 in economic benefit. Passage of Proposition 1 means the state will be in a better position to ensure safer and more reliable roads for Texans and reduce car repair bills. With updated and new infrastructure, North Texas will remain one of the favorite locations for organizations considering a corporate move or expansion. As business leaders, we hope you will join our efforts to support Proposition 1. This legislation not only puts a dent in the financial need for infrastructure, but it is a critical first step in addressing our transportation needs. You can learn more about Proposition 1 at movetexasforward.com— and support the referendum by voting “yes” on Nov. 4. Thank you for the active role you play in supporting the Dallas region as we continue to invest in the business community and the great quality of life here.

Dale Petroskey CHIEF OPERATING OFFICER & CHIEF FINANCIAL OFFICER Pat Priest COMMUNICATIONS, VICE PRESIDENT Amy Ramos BUSINESS INFORMATION & RESEARCH, VICE PRESIDENT Duane Dankesreiter RESEARCH DIRECTOR Ryan Tharp DIRECTOR OF COMMUNICATIONS Meredith Turner

2014 CHAIRMAN OF THE BOARD Paul Rowsey Compatriot Capital VICE CHAIRMAN Sue Ansel Gables Residential PRESIDENT & CEO Linda McMahon VICE PRESIDENT MARKETING & EVENTS Debby Hanson VICE PRESIDENT FOUNDATION Robin Minick DIRECTOR OF FINANCE Susan Sellers

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UPFRONT QUINCY CURÉ PRESTON Publisher Dallas-Fort Worth Real Estate Review

A letter from the Publisher

Welcome to the second edition of the all-new Dallas-Fort Worth Real Estate Review. The response to our debut issue in July has been remarkable, and we’ve been inspired by the feedback we’ve received. One of the features you’ve told us you like most is our signature Crane Report, a guide to construction projects underway and planned across North Texas. We show you what’s being built where, and provide snapshots of some of the area’s most compelling developments. This time around, we’ve made the Crane Report even better by adding the white-hot multifamily sector. According to Axiometrics Inc., which joins Xceligent as our data partner, more than 12,500 new apartments will come online this year, with nearly 14,000 already planned for 2015. As you’ll see on the maps on pages 20-25, most office and industrial development is focused on key submarkets. Apartment projects, though, blanket the region. Multifamily is a big part of Cypress Waters, the star of our 24-page Anatomy of a Deal package. Billingsley Co. had to overcome a lot of challenges to get the project off the ground, but since the dirt started flying, the velocity has been quite stunning. With big deals from 7-Eleven Inc., Nationstar Mortgage, Meritage Homes, and Cheddar’s Casual Café, nearly 900,000 square feet of office construction is underway. The 1,000-acre, lakeside development is quite unlike any other, says Lucy Billingsley, who considers it her responsibility to do something “big” with the land. “I feel like I’m at the stage in my life now when it’s important to make some bold gestures and bold moves,” she says. Read more in our profile of Billingsley on page 68. In this issue we also tackle the hot topic of economic incentives. Our Toolbox feature on pages 70-75 breaks down the different programs available in Texas and spotlights some of the big award recipients in the region. The Dallas Regional Chamber’s senior vice president of economic development, Mike Rosa, shares his perspectives on the topic in a column that starts on page 15. Be looking for our third issue of the Real Estate Review, which will come out in December, and be sure to visit www.dfwrealestatereview.com to check out our digital flipbook, online bonus content, and interactive maps. (If you missed the July issue, which features CityLine, you’ll find it on the site, too.) I’d love to hear your thoughts on the publication—and how we can better serve you. And don’t forget to let us know about your projects and transactions. We’d love to help you share your news.

Quincy Curé Preston Publisher

A PARTNER YOU CAN BUILD WITH, FROM CONCEPT THROUGH COMPLETION.

THERE’S

› › › ›

TO THE STORY

General Contracting Construction Management Design/Build Preconstruction

EVEN MORE ADDITIONAL CONTENT ONLINE AT DFWREALESTATEREVIEW.COM

mccarthy.com | 972.991.5500

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Discover how cost-saving incentives can make DeSoto, Texas the best place for your business.

Crossroads Trade Center 948,392 SF Third Quarter of 2015

Southfield Park 1.1 Million SF First Quarter of 2015

DeSoto Heliport 35,000 SF Opened August 2014

Interchange Distribution Centers 675,000 SF and 874,500 SF Third Quarter of 2015

3 3 3 3

Strategic Location Industrial Strength Quality Defined All-America City 速

For More Information, contact Jeremiah Quarles at 972-230-9611

www.dedc.org

FOUNDATIONS FOUNTAIN PLACE

INVESTMENT SALES ACTIVITY HEATS UP The surging population and demand for office space has translated into increased investor interest in Dallas-Fort Worth properties, according to statistics from Cushman & Wakefield. For sales that closed during the second quarter of 2014, the price per square foot averaged $174, with an average cap rate of 7.1 percent. What’s compelling about the activity is that it is not concentrated in a single submarket. Investors are actively looking for—and acquiring—office space across all of the region’s submarkets, from downtown Dallas to the northern suburbs. With lease rates on the rise, buyers are hoping to capitalize on renewals and growth from new companies coming into the market. Here’s a look at notable secondquarter office property trades: FOUNTAIN PLACE 1.2 million square feet Downtown Dallas 3500 MAPLE 398,000 square feet Uptown GALLERIA NORTH I 375,000 square feet North Dallas CRESTVIEW TOWER 263,000 square feet Las Colinas Source: Cushman & Wakefield

A baseline for the region’s future

BREAKING DOWN INDUSTRIAL DEMAND Commercial real estate fundamentals across North Texas are at the strongest they’ve been in years, according to statistics from JLL. That includes the industrial sector, which ended the first half of 2014 with an overall vacancy rate of 5.9 percent (compared to 7.3 percent at the same time last year). Midyear net absorption came in at more than 6 million square feet, compared to 5.3 million square feet for the first six months of 2013. So where is the demand coming from? The good news for North Texas is that it comes from a diverse group of industries. Beyond undisclosed uses, the largest group of users are companies in consumer non-durables (21 percent), food and beverage (16 percent), and retailer e-commerce (13 percent). Here’s a look at other sectors that keep North Texas one of the strongest industrial markets in the nation.

5.4%

4.9%

5.3%

Paper & Automotive Packaging

3.5%

Retailer, E-Commerce

Computing & Tech

5.8%

Consumer Durables

17.9%

Miscellaneous

7.1%

Consumer Non-Durables

MIDYEAR NET ABSORPTION 2013: 5.3 million s.f. 2014: 6 million s.f.

7.2%

Retailer, Traditional

11.5%

Third Party Logistics

9.6%

Manufacturing

10.9%

SOURCE: JLL Dallas Research

Logistics & Distribution

Food & Beverage

CLASS A LEASE RATES JUMP 5.4 PERCENT Asking full-service office lease rates ticked up to $21.19 per square foot during the second quarter, an increase of 3.9 percent compared to the same period in 2013—and the highest rates on record. Rates for Class A space climbed 5.4 percent to $26.22 per square foot. This is just seven cents below the record high set 114 in 35W the third quarter of 2009. Tenants in Uptown and Preston Center are shelling out the most for office space—an average of $36.50 and $36.43 per 35Wrespectively. Other square foot, top performers include Legacy/ 820 Frisco, Mid-Cities, and Far North Dallas. Here’s a look at averages for Class A space in select North Texas submarkets. The trend of accelerating office rents is expected to continue throughout 2014 and 2015.

35E

AREA AVERAGES

121

AVERAGE LEASE RATES

LEGACY/ FRISCO

$31.36

(direct weighted averages, gross rental rates)

FAR NORTH CENTRAL EXPRESSWAY

$23.45

FAR NORTH DALLAS

121

$26.84

NORTH CENTRAL EXPRESSWAY

LBJ FREEWAY

$24.27

$24.28

LAS COLINAS

$24.32

MID-CITIES

$28.84 161

183

35E

635

PRESTON CENTER

$36.43

STEMMONS FREEWAY

$21.20

UPTOWN/ TURTLE CREEK

$36.50

ARLINGTON

$20.83

360

SOURCE: Cushman & Wakefield

Downtown Dallas $26.13 Suburban Dallas $22.96 Dallas Total $26.00 Downtown Fort Worth $29.45 30 Suburban Fort Worth $24.20 80 Fort Worth Total $28.38 Dallas-Fort Worth Total $26.22 175

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MULTIFAMILY MARKET:

OCCUPANCY TIGHTENING, RENTS RISING North Texas has been one of the nation’s top-performing apartment markets during the past couple of years. Dallas has consistently performed well, but in August, it was the Cowtown side of the region that really came on strong. In Fact, the Fort WorthArlington metropolitan district was the hottest market in Texas in August, according to Axiometrics, a Dallas-based apartment data research and analysis company. The average rent for an apartment in Fort Worth (minus concessions, such as cash back or a free month’s rent) was $891.28 last month, compared to $844.04 in August 2013. That effective rent growth of 5.6 percent was the 11th highest among the top 50 apartment markets in the nation—higher than the Houston and Austin areas, which were top 10 growth markets not so long ago, and a full percentage point higher than the

AVERAGE MULTIFAMILY LEASE RATES

FORT WORTHARLINGTON

DALLASPLANO-IRVING

AUGUST 2013: $844.04 AUGUST 2014: $891.28

AUGUST 2013: $954.24 AUGUST 2014: $998.29

‘MARKET DYNAMISM’ LURES TECH COMPANIES TO DALLAS

SOURCE: Axiometrics. Note: Comparative rates reflect “same store” units and do not include properties that have been opened or closed during the period.

Dallas-Plano-Irving metropolitan district’s 4.6 percent. Don’t cry for Big D, though. The city’s multifamily market is still in the top 20 among the top metros and is well above the national rent growth of 4.1 percent, Axiometrics reports. Average rents for August come in

at $998.29, versus $954.24 for the same month in 2013. One reason landlords can keep raising rent: High occupancy. Some 95 percent of apartments in DFW are occupied, which is surprising, given that so many new apartments have recently become available.

DFW RETAIL CONSTRUCTION:

TRYING TO KEEP PACE WITH DEMAND The North Texas economy shows no signs of weakness, which is fueling high occupancy and limited supply for retail real estate product. Retailers remain aggressive, with occupancy rates hitting a record high of 92.1 percent. The market has been defined by low availability caused by strong demand for space and a slow recovery in development activity since the end of the recession. The lack of speculative construction has led retailers

to opt for build-to-suits and renovations of older properties. New space is on the way, but much of it has already been preleased by users like Whole Foods, WinCo, Kroger, Sprouts, and Trader Joe’s, all of which are eager to expand in North Texas. Speculative projects are dominated by the demand of suburban mixed-use lifestyle centers and masterplanned communities, catering to consumers looking for that “livework-play” lifestyle.

RETAIL CONSTRUCTION DELIVERED 2Q14: 340,532 square feet UNDERWAY: 4.7 million square feet

SOURCE: CBRE Research

INDUSTRIAL PROPERTY SALES ACTIVITY REMAINS BRISK With user demand outstripping supply and rents on the rise, investors continue to target North Texas industrial properties. According to Colliers International, buyers may step up their purchasing pace, especially if interest rates show signs of rising. Here are some of the top trades for the second quarter of 2104. PROPERTY

SUBMARKET

SALES PRICE

SIZE

PER S.F.

TYPE

Plano Business Park

North U.S. 75

$23.4 million

283,559

$83

Flex

Dallas Cowboys Distribution Center

DFW Airport

$22.3 million

400,123

$56

Industrial

5800 West Kiest Blvd.

South Dallas

$11.6 million

343,617

$34

Industrial

1203 Crestwood Drive

DFW Airport

$3.4 million

46,364

$73

Flex

Great Southwest

$3.2 million

141,644

$23

Industrial

3500 E Avenue

SOURCE: Colliers International

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High-tech companies are seeking reasonably priced labor and real estate near their customers in new frontiers, giving smaller cities and suburban areas a second economic wind. JLL’s latest High-Technology Office Outlook reveals that some markets, like Silicon Valley and suburban Dallas, are enjoying economic recovery and expansion far ahead of others as a result of unique attributes and amenities that appeal to both employees and employers. “Tech companies are looking for new locations for many reasons, not just for intellectual capital or venture capital funding, but also for other factors such as standard of living,” says Julia Georgules, co-lead of JLL’s technology research group. “In our research, we call this ‘market dynamism.’ Lifestyle factors include proximity to transport and walkable amenities.” As rents escalate and space becomes scarce in mainstay markets, the lure of more affordable prices have high-tech companies seeking talent and real estate elsewhere. The savings potential is huge: downtown Palo Alto, considered the heart of Silicon Valley, is just 3.6 percent vacant, with average asking rents of $86 per square foot. Meanwhile, rents in other markets can be less than half that—a clear savings opportunity. The average asking office rent in Dallas, for example, is $23 per square foot. Walter Bialas, JLL’s local research guru, says DFW’s high-tech history goes back to the 1951 founding of Texas Instruments, which produced the world’s first commercial microchip. TI continues to be an important anchor in the region, an area that’s also home Microsoft’s Technology Center and AT&T’s world headquarters. Dallas has a robust start-up community and is one of the top fi ve patent originators in the United States.

TOP THREE HIGH-TECH LEASES 2ND QUARTER 2014

Amazon 88,600 s.f. Two Galleria Tower, Dallas JDA Software Group 53,300 s.f. 500 E. John Carpenter Freeway, Irving Myth Innovations 26,000 s.f. 3 Park Central, Dallas SOURCE: JLL Dallas Research

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F FOUNDATIONS THANKSGIVING TOWER BANK OF AMERICA PLAZA FOUNTAIN PLACE

BRINGING ITTO BACK THE CORE Investors are flocking to downtown Dallas, where an unprecedented number of redevelopment projects are underway. BY CHRISTINE PEREZ

Huge corporate campuses are being built in the northern suburbs, and Uptown office buildings are securing record-breaking rental rates. But the biggest commercial real estate story in Dallas may be the redevelopment of

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ONE MAIN PLACE

the city’s urban core. Activity is focused on the city’s center, between Pacific Avenue and Main, Commerce, and Elm streets—an area that hasn’t gotten a lot of attention in the past. The timing couldn’t be better for revitalization, as more than 5 million square feet in office leases will come up for renewal in downtown buildings during the next four years or so. Here’s a breakdown of ownership changes and redevelopment projects in the works: 1600 PACIFIC: After languishing for a number of years, the 32-story former LTV Building, which also fronts Elm Street, will soon become a mixed-use complex with 186 residential units and a 171-room Hilton Garden Inn Hotel. Built in 1964, the nearly 500,000-square-foot building was acquired in April by New Orleansbased HRI Properties, which is giving it an $80 million renovation. Residents will have access to the 206 self-park spaces in the building on floors two through four; the hotel will use the 150 valet parking spaces in the building’s basement. Construction is expected to wrap up by the third quarter of 2015. 1700 PACIFIC: A block away, Olymbec Group of Canada has just acquired the 49-story, 1.3 million-square-foot 1700 Pacific building. Property upgrades reportedly are planned, although specifics were not available by press time. ALTO 211: Built in the late 1950s by Dallas developer Leo Corrigan, this 18-story

1700 PACIFIC

aquamarine tower at 211 North Ervay is finally getting some love. It has a new owner—Alterra International Holdings—and its first new tenants in nearly 20 years (Tech Wildcatters, Health Wildcatters, and Linking the World). Alterra has made a number of significant upgrades and has even more in the works. BANK OF AMERICA PLAZA: On the west side of the core, Bank of America Plaza is getting a major overhaul courtesy of its owner, Chicagobased Metropolis Investment Holdings Inc. The 1.8 million-square-foot, 72-story tower (the tallest in Dallas) sits at 901 Main Street. A new exterior lighting system was introduced earlier this year, with more than 2 miles of LED lights installed. At the building’s base, a large outdoor sculpture was removed, making way for a new valet entrance off Main Street. Ongoing work includes an outdoor gateway to Belo Garden and improvements to the lobby, building entrances, and elevator cabs. All told, renovations are expected to cost about $15 million and wrap up in October. THE OLYMPIC: The largest redevelopment underway in the core is the former First National Bank Building at 1401 Elm Street. It’s a joint venture between BDRC and Olympic Property Partners, which acquired the 1.5 million-square-foot property in February. The $170 million conversion will transform the historic 52-story skyscraper into a mixed-use complex that takes up an entire city block, bounded by Elm, Field, Pacific, and

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Akard streets. When complete, The Olympic will include 500 luxury apartments, 70,000 square feet of retail space, 100,000 square feet of office space, 950 parking spots, a ninth-floor terrace with an infinity pool, and an observation deck on the 50th floor. The owners are targeting a 2016 reopening. FOUNTAIN PLACE: Just north of the core on Ross Avenue and North Field Street is Fountain Place, one of the more recognizable buildings in Dallas. The 58-story tower, designed by I.M. Pei, was acquired in June by Goddard Investment Group. The new owner plans to make a number of improvements to Fountain Place, including a new parking garage and upgrades to the lobby, elevators, exterior fountains, and landscaping. KPMG CENTRE: Since acquiring this 34-story tower at 717 North Harwood Street in March, World Class Capital Group of Austin has already won two big relocations from California companies: Omnitracs and Active Network LLC. Combined, the deals will bring about 1,450 new jobs to the downtown core. The leases are expected to spark significant renovations to the 844,000-square-foot building, which was built in 1980. KPMG Centre also likely will get a new name, as its lead tenant has signed a deal to move to the Arts District when Craig Hall’s new tower opens in early 2015. MID ELM LOFTS: Last fall, Brytar Cos., in partnership with RREAF Holdings LLC, announced plans to convert three historic properties at 1516, 1514, and 1512 Elm Street

ALTO 211

into live-work-play loft units. The buildings, which total 55,000 square feet, are all more than 100 years old. ONE DALLAS CENTER: Todd Interests and partners have wrapped up work on phase I of their renovation of One Dallas Center at 350 North Saint Paul Street, a project that had HKS Inc. joining Greyhound as lead tenants in the building. Now work has begun on phase II, a renovation that will transform floors 15 to 30 of the I.M. Pei-designed tower to 276 luxury apartments and 13,000 square feet of amenities space. The residences are expected to be ready for occupancy this September. ONE MAIN PLACE: Built in the late 1960s, this 1 million-square-foot fortress got a savior when KFK Group of New Orleans bought the half-empty building this past spring. The 32-story project takes up a full city block, bounded by Main, Field, Elm, and Griffin streets. KFK Group has yet to announce specific plans for its new buy, but brokers speculate that the company will redevelop the top floors into residential or hotel space. One Main Place also includes 65,000 square feet of retail space and a 20,000-squarefoot recessed plaza that connects to Dallas’ underground pedestrian tunnel system. STATLER HILTON: Centurion American Development Group purchased this historic property at 1914 Commerce Street in May, after winning $46.5 million in TIF financing from the city of Dallas. Mehrdad Moayedi, Centurion’s president, said plans for the $175 million renovation include apartments, a flagship hotel, restaurants, office space, and a movie theater. THANKSGIVING TOWER: This 1.4 millionsquare-foot, 50-story icon at 1601 Elm Street was acquired last summer by Woods Capital, led by Jonas Woods. In short order, the building won a huge lease from Santander Consumer USA, which now occupies 14 full floors in Thanksgiving Tower. A $100 million renovation is in the works—one that will add 16,000 square feet of ground-floor retail space. Woods selected Gensler and New York architect James Carpenter to oversee the redesign. In an interview with D CEO magazine, he said his goal is to have most of the work done by the end of 2014. TOWER PETROLEUM, CORRIGAN TOWER: In the summer of 2012, Kirtland Realty Group announced plans to renovate these adjacent buildings at 1907 Elm Street and 1900 Pacific Avenue into residential towers—a $45 million redevelopment project. Now, according to Downtown Dallas Inc., the latest plans call for a hotel instead. The art deco Tower Petroleum was built in the early 1930s. Developer Leo Corrigan acquired the building and added Corrigan Tower in the early 1950s. A version of this story originally appeared in the September 2014 issue of D CEO magazine.

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B BLUEPRINT FOR PROSPERITY

INCENTIVES

CAN BE A REAL GAME - CHANGER

Texas leads the way in the use of this powerful economic development tool—and gets a big return on its investment. BY MIKE ROSA

Incentives to lure major corporate locations are a hot topic right now in Texas, and big projects that receive significant incentives, like Toyota, draw focus to the issue. Texas will soon have a new governor and many new members of the legislature, and a select committee of the Texas House of Representatives, chaired by Rep. Angie Chen Button, is conducting hearings and will report on Texas incentives in advance of the 2015 legislative session. Companies and location consultants around the nation are paying very close attention to Texas and asking pointed questions about the state’s future disposition toward corporate recruitment and incentives. The big question is, basically, “Will Texas drop the ball?” Texas should not. Other states are also watching to see if Texas will maintain its leading edge—or pull aside and wave those states on in the pursuit of great opportunities. Our rear- and sideview mirrors are already full of metropolitan areas and states very capable of becoming home for projects we would love to win—projects that would be a substantial net gain for our economy even after incentives are applied. When considered and applied properly, incentives are tools that build, not erode, our state and local economies. The Dallas Regional Chamber staff is in a trusted and unique position of frequently “being in the room” when companies or advisors are requesting local and state incentives; or when local communities and the State of Texas propose incentives. We witness firsthand the competition among

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states, among DFW and other metro areas, and among our local cities. One comment often heard in opposition to incentives is, “They will come anyway.” If true, then Nissan USA would not have moved its headquarters to the Nashville area nearly 10 years ago, the NCAA would today be based near DFW International Airport, and Boeing and Miller Coors would not be in Chicago. Facilities for Pepperidge Farm, Harley Davidson, Google, Genentech, Chiron, and others would also be here, paying millions in taxes and creating tens of thousands of jobs. DFW was a finalist for each of these examples that clearly did not “come anyway.” Another aspect of the incentives process that I believe is unappreciated or unrecognized by most of those with opinions against incentives is that “no” is more often the answer to incentives requests than “yes.” The image that our state and local economic development leaders are running all over the country handing out blank checks is simply not the case.

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 1 5

B BLUEPRINT FOR PROSPERITY “WHEN CONSIDERED AND APPLIED PROPERLY, INCENTIVES ARE TOOLS THAT BUILD, NOT ERODE, OUR STATE AND LOCAL ECONOMIES.” —MIKE ROSA

Economic development leaders working on behalf of the state and our area cities and taxpayers are very thoughtful and rigorous when considering incentive requests. They all consider, utilize, and offer incentives a bit differently, but are consistent when evaluating whether incentives are necessary and, if so, whether the return on the incentive is a good deal for the taxpayers. We are fortunate to have some of the best economic developers in the nation representing us and guiding the sensible use of the incentive tools available. Rare is the occasion that, as is being debated right now regarding Nevada’s Tesla incentive package, Texas or a local community is viewed as paying too much in incentives relative to the deal’s long-term benefits. Multiple factors trigger a “no” answer to incentives requests. Companies that are predisposed to locate in our state or in a particular city are unlikely to be awarded incentives. In fact, one of the requirements a company must meet in order to be eligible for the Texas Enterprise Fund, the state’s much publicized and utilized cash grant program, is to clearly demonstrate that other states are not only suitable but also in consideration and bidding for the project. Companies that do not intend to invest substantially in taxable property, create jobs, or pay above average wages are also unlikely to be favorably reviewed for incentives. Texas and our area cities expect when awarding an incentive that dollars are granted or foregone, and any public outlay for services to the company and its employees will be returned in multiples in the near future by the net new taxes generated by the company’s investment, spending, and paychecks it issues. I have observed cities in our region decline incentives for many other reasons. One said no because the project was not able to commit to using “minority and women-owned” business contractors. Another said no because the project would have placed too much stress on the city’s infrastructure. A third said no because the project was moving from an adjacent city and not really creating any net new tax base or jobs to warrant an incentive. In each of these very different situations,

the city’s economic development team determined that awarding incentives was not smart business. I remember discussing incentives a couple of years ago with a friend outside of my economic development circle and trying to explain why it can make sense for a city or state to give an incentive in a competitive situation. In the end, I pulled out a $20 bill and told him, “I am either going to locate this $20 in your hand or in the hand of the guy over there in the white shirt. But if I locate it in your hand, it will cost you five bucks in incentives to me.” For a while he felt like he was losing $5. In the end, and especially once the $20 was headed for the guy across the room, he realized he was going from an empty hand to being up $15. Three-fourths of a loaf is better, he figured. The competition for companies is keen. Many states and regions have stepped up their games to compete with Texas and the success of DFW and the state’s other major metro areas. Keeping our incentive tools at the ready makes sense for Texas and for our region’s communities. We don’t always have to use them—and we often don’t. But when used, each deal ought to make a lot of sense and yield a proven return on investment. I have observed, on more occasions than I can count, a high level of stewardship and common sense by local and state leaders when considering incentives for projects. For more on incentives, see the Toolbox section starting on page 70.

WANT TO LEARN MORE ABOUT HOW TO GET INVOLVED IN BLUEPRINT FOR PROSPERITY? Contact Mike Rosa, Senior Vice President, Economic Development, Dallas Regional Chamber 214.746.6735 | mrosa@ dallaschamber.org

BLUEPRINT FOR P R O S P E R I T Y,

BLUEPRINT FOR PROSPERITY

OUR NEXT STEPS FORWARD

region’s success. This additional investment made by more than 130 organizations in addition to annual

The Dallas Regional Chamber’s economic development program, Blueprint for Prosperity, provides organizations in Dallas-Fort Worth with an accelerated investment opportunity that helps advance our chamber membership dues allows organizations to increase their support of our efforts to further economic prosperity throughout the region. This initiative funds efforts related to direct contact with corporations and location consultants examining the DFW Region.

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DOING BUSINESS DOWNTOWN?

Your #1 source for doing business Downtown downtowndallas.com/business downtowndallas.com/business

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KPMG PLAZA AT HALL ARTS / PHOTO: MICHAEL SAMPLES

THE CRANE REPORT

Fall 2014

Buoyed by demand, brisk development activity continues across Dallas-Fort Worth—and spans all sectors. In each issue, we tell you who’s building what, where. This time, using data from Axiometrics, we’ve added multifamily—one of the hottest segments in North Texas, due to the region’s surging population. Data for the office and industrial sectors was provided by Xceligent Inc. BY CHRISTINE PEREZ

ON-THE-GRO U N D I N S I G H TS

OFFICE

INDUSTRIAL

MULTIFAMILY

TERRY QUINN

THAD ELLIS

CHRIS TEESDALE

STEPHANIE MCCLESKEY

The office market remains white hot and robust by any historical measure. In some submarkets, tenants are paying rates well into the $30s and $40s—record rents. Traditionally, the depth of tenants willing to pay $30+ rents was shallow; it’s now much deeper.

“Most of the new projects have seen substantial preleasing at favorable rates. Supply is manageable and not excessive at this time. The last quarter was favorable due to continued job growth that is leading the nation— and there will be more to follow.”

The market seems to have hit a lull in large-tenant activity (500,000+ square feet), although there are still several users floating around. The sentiment from developers seems to be more focused on accommodating tenants in the 50,000- to 200,000-square-foot range.

“Apartment performance will continue to perform above the long-term average across the Dallas-Fort Worth region, as supply and renter demand are projected to remain in balance. Watch for the suburbs to have strong rent growth.”

Principal Avison Young

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Senior Vice President Cousins Properties

Executive Vice President Colliers International

Vice President of Research, Axiometrics

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 1 9

THE CRANE REPORT:

OFFICE

35E

ANNOUNCED + UNDER CONSTRUCTION

ANNOUNCED DEVELOPMENTS

35E

9 FM 2499 AND GERAULT RD

114

Tollway Center

121

35W CARILLON COURT BLDGS 1, 2, & 3

SIZE: 200,000 s.f. DEVELOPER: Cawley Partners LED BY: Bill Cawley

FAA CORPORATE CAMPUS

TENANTS ARE VERY INTERESTED IN SPACE SOUTH OF STATE HIGHWAY 190 AND NORTH OF LBJ FREEWAY. IT MADE ME REALIZE THAT THE MARKET COULD USE ANOTHER —BILL CAWLEY BUILDING.

GRAPEVINE STATION

CYPRESS WATERS

USAA BUILDING HILLWOOD COMMONS I

WILCOX PLAZA AT LAS COLINAS

35W 183

820

FORT WORTH NE OF W 7TH ST AND ARCH ADAMS ST

161

THE CASSIDY

OVERTON TOWER III

360

WESTBEND CLEARFORK OFFICE WATERSIDE

35W

Sanyo Energy Headquarters

SIZE: 30,000 s.f. ARCHITECT: Good, Fulton & Farrell DEVELOPER: Billingsley Co. DETAILS: Located off Plano Parkway near State Highway 121 in The Colony, the project is scheduled for completion in July 2015.

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OFFICE UNDER CONSTRUCTION 3

Legacy Towers

SIZE: 342,066 s.f. ARCHITECT: HKS Inc. DEVELOPER: Trammell Crow Co. LEASING AGENTS: Dennis Barnes, Celeste Fowden, and Hunter Lee with CBRE

Frisco Square

SIZE: 166,051 s.f. ARCHITECT: O’Brien Architects DEVELOPERS: Encore Enterprises Inc. and Wolverine Interests LEASING AGENTS: Jeff Eckert and James Esquivel with JLL DETAILS: Gearbox Software leased 63,000 s.f. for its headquarters.

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According to Xceligent, 46 office projects totaling 10.2 million s.f. are under construction across North Texas. Another 65 projects totaling 12.4 million s.f. are planned or proposed. All are represented on this map; a sampling are labeled.

THE FORUM AT PROSPER WEST

FRISCO SQUARE BLDG C2 STEWART CREEK OFFICE CENTER I

ONE FOUNTAIN COURT

121

COWBOY ALLEY STONEBRIAR COMMONS ON LEGACY BLDG 9

MCKINNEY CORPORATE CENTER I

TOYOTA HEADQUARTERS LINCOLN LEGACY TWO

WINDHAVEN PLACE ONE FRISCO BRIDGES PLACE PRESTON BEND ONE LEGACY CENTER

4120 MIDWAY RD

ALLEN CENTRAL PARK I

WHAT’S NOT TO LOVE ABOUT UPTOWN?

LINCOLN R&D IN LEGACY PHASE VII CITYLINE STATE FARM BLDGS 1-4 CITYLINE RAYTHEON US HIGHWAY 75 @ RENNER ROAD

KNOLL TRAIL PLAZA

1 SW OF QUORUM DR AND DALLAS NORTH TOLLWAY

635 75 PARK CITIES PLAZA

PARKLAND HALL FROST TOWER VICTORY CENTER

Crescent Real Estate Crow Holdings 30 Harwood International Hines Miyama Family KDC-Invesco 80 RED Development Trammell Crow Co.-Metropolitan Life

8020 PARK LN

8111 WESTCHESTER AVE

RICHARDS GROUP TOWER TWO ARTS PLAZA

2301 TWO ROSS AVE VICTORY PARK KPMG PLAZA AT HALL ARTS

For an office submarket that didn’t come into being until The Crescent opened its doors in 1986, Uptown today shines bright as one of the region’s stars. With demand trumping supply, developers are breaking out the cranes and building on every patch of dirt to be found. Trammell Crow is readying a 495,000-s.f. project on a high-profile tract it acquired at 2101 Pearl Street, and the Miyama family is expected to soon announce plans for its land fronting Klyde Warren Park. Investors and developers betting on Uptown include

Toyota Motor Corp. Headquarters

SIZE: 1.5 million s.f. ARCHITECT: Corgan DEVELOPER: KDC LED BY: Steve Van Amburgh

IT’S A REAL HONOR TO PLAY A ROLE IN THIS IMPORTANT MILESTONE FOR TOYOTA AND HISTORIC CORPORATE RELOCATION FOR NORTH TEXAS. —STEVE VAN AMBURGH

8111 Westchester

SIZE: 197,000 s.f. ARCHITECT: BOKA Powell DEVELOPER: Bandera Ventures

DALLAS 175 20

● ANNOUNCED ● UNDER CONSTRUCTION

ONLINE EXTRA

35E

THE CRANE REPORT: INTERACTIVE VERSION

online at dfwrealestatereview.com DATA SOURCE: XCELIGENT INC., A COMMERCIAL REAL ESTATE RESEARCH FIRM IN PARTNERSHIP WITH NTCAR

1920 McKinney

SIZE: 150,000 s.f. ARCHITECT: BOKA Powell DEVELOPERS: KDC and Invesco LEASING AGENTS: Daryl Mullin, James Esquivel, and Ashley Curry with JLL

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Granite Park V

SIZE: 306,000 s.f. ARCHITECT: BOKA Powell DEVELOPER: Granite Properties LED BY: Michael Dardick DETAILS: The fifth office building in Granite Park will join a just-opened, 300-room Hilton Dallas/Plano Granite Park hotel.

9 Hillwood Commons I SIZE: 154,063 s.f. DEVELOPER: Hillwood LEASING AGENT: Steve Aldrich, Hillwood

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THE CRANE REPORT:

INDUSTRIAL

35E

ANNOUNCED + UNDER CONSTRUCTION

35E

SPEEDWAY DISTRIBUTION CENTER BLDG A ALLIANCE GATEWAY 57

ALLIANCE CENTER NORTH 2

BAG 10 HERITAGE HEADQUARTERS

ANNOUNCED DEVELOPMENTS 1

TRAMMELL CROW COMPANY @ 35-EAGLE

35W

WAL-MART

DFW AIRPORT NORTH DISTRIBUTION CENTER MAJESTIC LAKESIDE AIRPORT CENTER COMMERCE DFW BLDG 7 CENTER BLDG C LAKESIDE COMMERCE CENTER BLDG G SE OF LAKESIDE PKWY COPPELL AND SILVERON BLVD TRADE 114 330 S CENTER III ROYAL LN LOGISTICS PARK WEST CENTER CROSSING BLDG D

DFW SOUTHGATE

POINT WEST INDUSTRIAL ROYAL TECH 18

SIZE: 520,326 s.f. DEVELOPER: Oakmont Industrial Group LEASING AGENT: Dave Anderson, CBRE

CRAWFORD ELECTRIC SUPPLY DFW/161 DISTRIBUTION CENTER

35W

183

820

RIVERPARK BLDG 100 RIVERPARK RIVERPARK BLDG 400 1000 3000 ROY ORR BLVD - BLDG B REGENCY 1

MEACHAM CROSSING

101 JIM WRIGHT FWY

FORT WORTH

360

CROSSROADS TRADE CENTER

WILDLIFE COMMERCE PARK

161

SOUTH ARLINGTON DISTRIBUTION CENTER

CARTER DISTRIBUTION CENTER BLDG B

SIZE: 948,392 s.f. DEVELOPER: Hillwood Investment Properties LEASING AGENT: Craig Jones, NAI Robert Lynn

● ANNOUNCED ● UNDER CONSTRUCTION

35W

ONLINE EXTRA

THE CRANE REPORT: INTERACTIVE VERSION

online at dfwrealestatereview.com

OFFICE UNDER CONSTRUCTION 3

HERITAGE BUSINESS PARK

SIZE: 335,000 s.f. (in two buildings) DEVELOPER: KTR Capital Partners GENERAL CONTRACTOR: MYCON General Contractors Inc.

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NEBRASKA FURNITURE MART

SIZE: 1.3 million s.f. DEVELOPER: Nebraska Furniture Mart DETAILS: The retailer’s massive warehouse and 560,000-s.f. retail showroom in The Colony will be the largest home furnishings store in North America. Slated to open in the spring of 2015, it anchors Grandscape, a 433-acre, $1.5 billion mixed-use development.

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Xceligent reports that 49 DFW industrial projects totaling 17.3 million s.f. are underway; another 107 projects totaling 49 million s.f. are planned or proposed.

COBB BUSINESS PARK

121 NEBRASKA FURNITURE MART WAREHOUSE

121

PLANO TECH CENTER

ADVOCARE INTERNATIONAL 1644 W CROSBY RD CROSBY TRADE CENTER II MERCER PARK MONITRONICS MERCER BUSINESS PARK

635 75

DALLAS

I-30 BUSINESS CENTER BLDG 3 FIRST PINNACLE PARK

SOUTHWEST DISTRIBUTION CENTER PLANNED POINTSOUTH LOGISTICS & 175 COMMERCE CENTRE BLD PROLOGIS PARK 20/35 COMMERCE 20 TRANS TEXAS 20 NW OF BECKLEYMEADE GATEWAY I BLDG 2 AVE AND S POLK ST NE OF E WINTERGREEN RD AND S IH 45 501 W DANIELDALE RD SOUTHPORT GROCERS BLDG 1 LOGISTICS PARK SUPPLY CROSSROADS DISTRIBUTION CENTER STONERIDGE TRADE BLDG III BUSINESS PARK

SOUTHPORT TRADE CENTER

MAJESTIC AIRPORT CENTER

SIZE: 1,022,446 s.f. DEVELOPER: Majestic Realty Co. LEASING AGENT: Al Sorrels with Majestic

FLYING HIGH It comes as no surprise that one of the hottest industrial markets in North Texas is the area surrounding Dallas-Fort Worth International Airport, especially to the north. Along with airport proximity, the area also provides easy access to major roadways like Interstates 635 and 35-E, State Highways 121 and 114, and the President George Bush Turnpike. Here are some of the developers with projects underway 30or planned in the submarket:

Avera Crow Holdings Duke Realty Exeter80 Property Group Holt Lunsford Commercial Huntington Industrial IDI Majestic Realty Co. Oakmont Industrial Group Perot Development Co. Seefried Industrial Properties Trammell Crow Co.

SW OF BELT LINE RD AND IH 45 - BLDG 3 DALPORT TRADE CENTER BLDG 5

DFW AIRPORT NORTH DISTRIBUTION CENTER

SIZE: 401,600 s.f. DEVELOPER: Huntington Industrial LEASING AGENTS: Cannon Green with Stream Realty and Steve Meyer with Huntington Industrial DETAILS: This bulk distribution center is being developed on Lakeside Parkway in Flower Mound. It sits 5 miles from DFW International Airport.

MEACHAM CROSSING

SIZE: 502,230 s.f. DEVELOPER: KTR Capital Partners LEASING AGENTS: Jim Brice, Matt Carthey, and Donnie Rohde of Holt Lunsford Commercial DETAILS: KTR Capital Partners of New York acquired this partially built distribution center at 4601 Gold Spike Drive in Fort Worth this past February. It had been leased by ConAgra Foods before construction was halted in 2007.

35E

10 HERITAGE BAG CO. 45

DATA SOURCE: XCELIGENT INC., A COMMERCIAL REAL ESTATE RESEARCH FIRM IN PARTNERSHIP WITH NTCAR

WILDLIFE COMMERCE PARK

SIZE: 315,000 s.f. DEVELOPER: Crow Holdings LEASING AGENTS: Will Mundinger and John Bateman with Crow Holdings ARCHITECTS: O’Brien Architects

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COMMERCE 20

SIZE: 488,565 and 1.1 million s.f. DEVELOPER: Hillwood LEASING AGENT: Dave Anderson, CBRE DETAILS: Amenities at this two-building complex on Langdon Road near Interstate 20 in Dallas include tax abatements, triple Freeport exemption, and Foreign Trade Zone status.

SIZE: 330,000 s.f. DEVELOPER: Hillwood LED BY: Ross Perot Jr. DETAILS: Heritage Bag Co. announced in March that it would move its headquarters and Southwest Division facility to AllianceTexas. Hillwood is developing the company’s new home at 501 Gateway Parkway in Roanoke.

ROSS PEROT JR.

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WOODLANDS APARTMENTS

THE CRANE REPORT:

MULTIFAMILY

URBAN SQUARE AT UNICORN LAKE I

ANNOUNCED + UNDER CONSTRUCTION

DISTRICT OF HIGHLAND VILLAGE

ANNOUNCED DEVELOPMENTS 1

KEEPING UP WITH DEMAND Axiometrics reports that 7,738 new units have been delivered to market in Dallas as of the end of September, with another 3,216 coming in the fourth quarter of 2014—and 12,067 more in 2015. The smaller Fort Worth market has delivered 1,585 new units so far in 2014, with 1,864 more to come by the end of 2015. Projects under construction and planned are represented on this map; a sampling are labeled.

TRINITY VILLAGE

UNITS: 300 DEVELOPERS: StreetLights Residential and Stonelake Capital Partners DETAILS: This development on Singleton Boulevard near Sylvan Avenue will be the first phase of Trinity Village, a 25-acre urban residential district in West Dallas. The community will be in walking distance to the popular Trinity Groves restaurant and entertainment complex.

DRY CREEK RANCH II ELAN LAKESIDE

35W 114 MANSIONS AT TIMBERLAND

THE SOVEREIGN

FORT WORTH

35W

DOLCE LIVING HOME TOWN PH 1

820

RIVERWALK APARTMENTS

STONE VILLAS AT LAKE WORTH II

ELAN WEST 7TH HULEN PLACE DEV

360

RESIDENCES AT EDWARDS RANCH CLEARFORK

● ANNOUNCED ● UNDER CONSTRUCTION

ONLINE EXTRA

THE CRANE REPORT: INTERACTIVE VERSION

THE OLYMPIC

UNITS: 500 DEVELOPERS: Olympic Property Partners and BDRC DETAILS: This 52-story, 1.5-million-s.f. tower at 1401 Elm Street in downtown Dallas is being redeveloped into a mixeduse complex. Along with 500 luxury apartments, initial plans call for 150,000 s.f. of retail space.

35W

online at dfwrealestatereview.com

REGALIA AT MANSFIELD

UNDER CONSTRUCTION 3

4 CANTABRIA AT TURTLE CREEK

UNITS: 249 DEVELOPER: Associated Estates PRICE RANGE: $1,400-$4,500

JEFFERSON TOWER

UNITS: 17 DEVELOPER: Jim Lake Jr. PRICE RANGE: $995-$1,465

THIS PROJECT IS GOING TO LINK THE BISHOP ARTS DISTRICT TO JEFFERSON BOULEVARD AND SPARK INCREASED DEVELOPMENT IN THE AREA. —JIM LAKE JR.

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ST. PAUL SQUARE

SORREL PHILLIPS CREEK RANCH THE TOWERS BY THE PARK

EMERSON AT FRISCO MARKET CENTER I

PARKSIDE AT CRAIG RANCH I VILLAS AT CHAPEL CREEK

THE BOAT HOUSE AT AUSTIN RANCH

35E

TWIN CREEKS CROSSING

121

AMLI AT THE BALLPARK II

AMALFI AT STONEBRIAR COMMONS

THE AVENUES AT CARROLLTON

BROADSTONE OVATION

CITYSCAPE AT MARKET CENTER II

HEBRON 121 STATION II

JEFFERSON CENTER

121

AURA PRESTONWOOD I THE NEIGHBORHOODS OF CYPRESS WATERS

Just North of Dallas. Far from Ordinary. Close to Perfect.

CREEKSIDE SOUTH

AMLI WEST PLANO VILLAGE

JUNCTION 15 THE LOFTS AT CITYLINE I GATEWAY PLANO II THE STANDARD AT CITYLINE I

MANSIONS AT WOODBRIDGE

GREENVUE APARTMENTS

VV&M

MUSTANG STATION

PARK CENTRAL APARTMENTS I

635 75

JEFFERSON LAS COLINAS

HAVEN LAKE HIGHLANDS WHITE ROCK TRAILS REDEVELOPMENT

AMLI URBAN CENTER

THE JLB HUDNALL ST PROJECT AMESBURY PH 1 LINCOLN KNOX

183

ODYSSEY RESIDENTIAL DEVELOPMENT

161

ECHO

ALEXAN SKYLINE LOFTS AT SYLVAN THIRTY

ALTA WEST COMMERCE

ONE DALLAS CENTER

GLENCOE APARTMENTS AVENUE H STILLWATER PEAK TOWNHOMES AND FLATS JLB CEDAR SPRINGS ELAN CITY LIGHTS

12 GATEWAY CEDARS

DALLAS 175 20

35E MIDTOWN CEDAR HILL

ROGERS HOTEL OFFICE PROJECT (WAXAHACHIE: 7.5 MILES SOUTH)

DATA SOURCE: AXIOMETRICS INC.

5 THE BOAT HOUSE

6 PARKSIDE AT CRAIG RANCH

UNITS: 526 DEVELOPER: Billingsley Co. PRICING: $795-$2,495

UNITS: 418 DEVELOPER: Columbus Realty Partners PRICING: $720-$1,770

McKINNEY ECONOMIC DEVELOPMENT CORPORATION

McKinneyEDC.com FA L L 2 0 1 4

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 2 5

industry. Discover the power of Integra.” - Charles Bissell, Executive Director

Integra Realty Resources - DFW Why IRR for Valuation and Consulting?

Local Expertise...Nationally

• Knowledgable and Experienced • Independent and Unbiased • Timely and Responsive Mark Lamb, MAI, FRICS, CPA Senior Managing Director MLamb@irr.com 972.960.1222 700 E. Campbell Road, Suite 265 Richardson, Tx 75081 www.irr.com/Dallas

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S SCORECARD

THE NEWLY-RENAMED PIER 1 IMPORTS BUILDING IN FORT WORTH, FORMERLY CHESAPEAKE PLAZA.

SCORECARD

Fall 2014

With strong demand across all sectors, Dallas-Fort Worth commercial real estate brokers are busier than ever. The pendulum has shifted in the landlord’s favor, and rent growth has become real. Developers are working to provide relief, but lenders are keeping things in check and preventing an oversupply. Here we look at the top five office, industrial, and retail leases, with data provided by Xceligent Inc. BY CHRISTINE PEREZ

ON-THE-GRO U N D I N S I G H TS

OFFICE

JEFF STAUBACH

PHIL PUCKETT

“It’s a very active market. We are seeing a lot of growth within existing companies, as well as new businesses looking at Dallas-Fort Worth for their headquarters or regional offices. One trend we’re seeing is a desire for denser space. This will continue, with corporations trying to keep their overhead low.”

“One interesting trend I’m seeing is the increase in office rental rates. DallasFort Worth has historically always been a flat growth rental market. Never in my career could I have predicted some of the rental rate escalations that we are seeing in most of the DFW submarkets.”

Managing director, JLL

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Executive vice president, CBRE

INDUSTRIAL

RETAIL

MICHELLE HUDSON

JACK GOSNELL

“Activity is strong in the 50,000- to 100,000-s.f. range for industrial. For the larger buildings, they built it—now let’s hope they come. I don’t want to think about the next downturn, because it can become a self-fulfilling prophecy. It’s a good market; I think we should live in the moment.”

“Market activity is frenetic. Competition between tenants clawing for space is whipping up the existing market, causing rents to jump and credit to tighten. Dallas-Fort Worth has turned into a landlord’s market in the last six months. New developments reaching completion in early 2015 will help ease demand.”

principal, Hudson Peters Commercial

Partner, UCR Urban

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S SCORE CARD

1,000 6,593 SF 6,594 18,000 SF

121

OFFICE LEASES

18,001 41,419 SF

75 35E

41,420 88,615 SF

114

88,616 409,000 SF

121 35W 75

5 4 3

635 35W

FORT WORTH

183

820

161

DALLAS

360 175

20 20

1 35E 35W

LARGEST OFFICE LEASES

PIER 1 IMPORTS

DEAL: 409,000 s.f. in the former Chesapeake Plaza in Fort Worth

OCCUPANCY: Renewal and expansion PROPERTY OWNER: Hines TENANT REPS: Todd Burnette and Pat McDowell, JLL TODD BURNETTE (left) AND PAT MCDOWELL >>

ACTIVE NETWORK LLC AND OMNITRACS LLC

DEAL: A combined 232,788 s.f. at KMPG Centre in Dallas

OCCUPANCY: November 2014 and December 2014 LEASING AGENTS: Duane Henley and Nathan Durham with Transwestern DETAILS: The companies, subsidiaries of Vista Equity Partners, are relocating to Dallas from Southern California. Active Network LLC has leased 123,240 s.f., and Omnitracs has leased 109,548 s.f. The deals will bring nearly 1,500 jobs to downtown Dallas.

EXCO RESOURCES INC.

DEAL: 155,092 s.f. in Lakeside Square in North Dallas

OCCUPANCY: Renewal TENANT REPS: Kacy Jones and Celeste Fowden with CBRE and Steve Thelen and Jeff Staubach with JLL LEASING AGENTS: Burson Holman and Ben Davis of CBRE OWNERSHIP: The 18-story, 403,120-s.f. Lakeside Square is owned by YPI Park Central Properties LP.

STATE FARM

DEAL: 135,200 s.f. at 9222 N. Belt Line Road in Irving

OCCUPANCY: Renewal TENANT REPS: Randy Cooper and Craig Wilson with Cassidy Turley LEASING AGENTS: Eric Rutledge and Abbey Rowsey of Cushman & Wakefield.

CAPITAL ONE

DEAL: 123,740 s.f. at Royal Ridge Business Park in Irving

OCCUPANCY: Renewal TENANT REPS: Mike Wyatt and Bill McClung, Cushman & Wakefield LEASING AGENTS: Chris Taylor and Ward Eastman with Cassidy Turley represented the property owner, Beacon Investment properties.

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DETAILS: Along with its 2 million-square-foot office campus thatâ&#x20AC;&#x2122;s under construction in Richardson, State Farm maintains a catastrophic operations center in Irving.

CHRIS TAYLOR

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S SCORE CARD

INDUSTRIAL LEASES

121 35E

114

35W

635 75

35W

183

820

4 80

FORT WORTH

37,253 135,000 SF

DALLAS

161 175

20 20

1,000 37,252 SF

135,001 360,000 SF 360,001 821,502 SF

360 35E

821,503 1,564,800 SF

35W

DATA SOURCE: XCELIGENT INC., A COMMERCIAL45 REAL ESTATE RESEARCH FIRM IN PARTNERSHIP WITH NTCAR

LARGEST INDUSTRIAL LEASES

1 2 3 4 5

FIRST PINNACLE INDUSTRIAL CENTER

DEAL: 376,601 s.f. lease at 1241 Cockrell Hill Road in Dallas

OCCUPANCY: Second quarter of 2015 DEVELOPER: First Industrial Realty Trust LEASING AGENTS: Terry Darrow and Nathan Orbin of JLL TENANT REP: Seth Kelly of CBRE

PIER 1 IMPORTS

DEAL: 310,000 s.f. in Trinity Distribution Center at 14900 Trinity Boulevard in Fort Worth

LANDLORD: IDI Gazeley LEASING AGENT: John Leinbaugh, IDI Gazeley DETAILS: Along with this industrial transaction, Fort Worth-based Pier 1 also had the No. 1 office lease for the quarter, expanding its headquarters to 409,000 s.f.

UPS

DEAL: 215,000 s.f. at 3000 Redbud Blvd. in McKinney

OCCUPANCY: November 2014 TENANT REP: Sharon Morrison with E Smith Realty Partners DETAILS: This lease follows on a 499,797-s.f. lease UPS signed with Hillwood at Alliance Gateway 1. In McKinney, the company is taking space in large center formerly occupied by Blockbuster.

AMCOR

DEAL: 211,850 s.f. in Great Southwest 47 at 610 West Trinity Boulevard in Grand Prairie

LANDLORD: Prologis LEASING AGENT: Jeff Folkmann, Prologis TENANT REPS: Blake Anderson and David Eseke of Cassidy Turley and Greg Kloiber of Top Gun Advisors

HOYA VISION CARE

DEAL: 101,817 s.f. at Trade Center IX at 755 Regent Boulevard in Dallas

OCCUPANCY: October 2015 LANDLORD: A partnership between Trammell Crow Co., Clarion Partners, and Rosewood and Property Co. LEASING AGENT: Steve Trese with CBRE TENANT REPS: Mark Miller and Tyson Erwin with NAI Robert Lynn

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DETAILS: First Industrial Realty Trust announced in September that it signed a long-term lease with a “leading company in the food and beverage industry” at its First Pinnacle Industrial Center development in Dallas.

DETAILS: Whirlpool, a former occupant of the building, re-leased this state-of-theart distribution center because, among other things, it provides a strategic central location to distribute goods manufactured in Monterrey, Mexico, to U.S. markets.

BLAKE ANDERSON

DETAILS: Plano-based JC Penney did a lease renewal for its South Dallas distribution hub in early 2014.

THE PROCESS LEADING TO A DEAL REQUIRED AN INCREDIBLE AMOUNT OF COOPERATION AND COORDINATION FROM ALL INVOLVED. —STEVE TRESE

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S SCORE CARD

1,000 3,760 SF

RETAIL LEASES

3,761 11,000 SF

2 3

35E

121

11,001 24,031 SF

24,032 52,688 SF

35E

52,689 123,000 SF

121 114

35W

635

35W

FORT WORTH

183

820

161 80

12 30

360

DALLAS 175

20 20 35E

35W

LARGEST RETAIL LEASES

1 2

RICHARDSON MERCANTILE

IPIC THEATERS

DATA SOURCE: XCELIGENT INC., A COMMERCIAL REAL ESTATE RESEARCH FIRM IN PARTNERSHIP WITH NTCAR

DEAL: 50,031 s.f. in Dal-Rich Towne Square at Coit Road and Belt Line Road

DEAL: 45,000 s.f. at Wade Park in Frisco OCCUPANCY: Spring 2016

PINSTRIPES

RICHARDSON 45 MERCANTILE

LEASING AGENTS: Michelle Caplan and Joey Keffler with The Weitzman Group TENANT REP: Ryan Shafer with North Central Texas Realty

DEVELOPER: Thomas Land & Development LEASING AGENTS: Beth Bradford with b2 and co., and Michael Nagy and Ashley O’Malley with UCR TENANT REP: Tim Hughes with Falcon Cos.

IPIC THEATERS

DEAL: 32,000 s.f. in AMY NOTT

The Forum at Wade Park in Frisco DEVELOPER: Thomas Land & Development LEASING AGENTS: Michael Nagy and Ashley O’Malley with UCR DETAILS: Pinstripes Inc. will join iPic Theaters as a tenant at the 175-acre Wade Park development that’s underway in Frisco. The project will be anchored by a 45,000-s.f. Whole Foods store, which signed on for space earlier this year.

PINSTRIPES BOWLING, BOCCE, BISTRO

BED, BATH AND BEYOND

DEAL: 29,967 s.f. in The Highlands of Flower Mound at 6101 Long Prairie Road in Flower Mound LEASING AGENTS: Dan Shoevlin and Ashley O’Malley with UCR TENANT REPS: Steve Lieberman and David Fazio with The Retail Connection

YOUFIT HEALTH CLUBS

DEAL: 20,105 s.f. in the Shops at Vista Ridge at McArthur Boulevard and FM 3040 in Lewisville LANDLORD: Kimko Realty LEASING AGENTS: Michael Meaden Zach Ballenger of CBRE TENANT REP: David Levinson of The Retail Connection

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Spotlight on Haltom Road and IH 820

HalTom CITy, TEXaS

In the Heart of Tarrant County

• Commercial lots now available for new development at Haltom Road, south of IH 820 • Great highway frontage and close approximation to Interstate 35W, downtown Fort Worth and adjacent to residential growth • Tax Increment Finance Zones • Backage roads under construction will provide ample access

Haltom City Economic Development 5024 Broadway Avenue Haltom City, TX 76117 817-222-7723 EconDev@HaltomCityTX.com FA L L 2 0 1 4

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R ROUNDTABLE

INDUSTRIAL REVOLUTION DALLAS-FORT WORTH HAS EARNED ITS REPUTATION FOR BEING ONE OF THE TOP WAREHOUSE AND DISTRIBUTION MARKETS IN THE COUNTRY. IN A ROUNDTABLE DISCUSSION, OUR PANEL OF EXPERTS SHARE THEIR PERSPECTIVES ON THE TRENDS DRIVING CURRENT ACTIVITY— AND WHAT TO EXPECT IN 2015. BY CH R IST I N E P E RE Z PHOTO G R A P H Y BY M ICH AEL SA MPLES

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With industrial vacancy at near-record lows, North Texas developers are kicking off new projects and wagering that brisk demand will continue.

DFW REAL ESTATE REVIEW: Let’s start by talking about industrial activity so far this year.

It’s a solid bet. With its central location, robust transportation infrastructure, and the most talented real estate developers in the nation, Dallas-Fort Worth continues to demonstrate its significance as a major warehouse and distribution hub. So what’s driving activity? Where do the greatest opportunities lie? And what barriers stand in the way? To find out, we gathered eight industrial market leaders to get their on-the-ground insights. Here’s what they had to say.

JON NAPPER: And who’s making all the deals. DAVE ANDERSON: We came off a very good 2013, with 18.6 million square feet in positive absorption, which was really the strongest we’ve had since 2000. It’s tough to repeat that. We’re up to about 6.7 million square feet so far this year, so we’re not on pace to do 18.6. But if we end up somewhere in the 13 million-to-15 million-square-foot range, I think we’d all be very happy. NAPPER: That’s about average. A little more. ANDERSON: The average over the past 30 years is … NAPPER: 10.5. ANDERSON: 10.7. TOM PEARSON: I would agree with Dave on the forecast for absorption by the end of the year. We experienced a little bit of a lull in the summer. MICHELE WHEELER: We’re now seeing tenants making decisions much more quickly than they were in the past. TERRY DARROW: We’ve got several deals that are ready for move-in now that are pretty goodsize deals that actually happened last year, so that will really make for a robust second half. We’re thinking that, like Dave, 13.5 million is good, especially in light of the absorption last

MEET THE EXPERTS

DAVE ANDERSON

JIM BRICE

BILL BURTON

TERRY DARROW

An executive vice president at CBRE, Dave Anderson specializes in industrial tenant representation, project leasing, and property sales. He has completed more than 800 transactions totaling 65 million square feet of space.

As partner at Holt Lunsford Commercial, Jim Brice heads up the firm’s industrial division in Texas. He oversees day-to-day operation of the group, focusing on business growth, project leasing, and development. He first joined the company in 1994.

Bill Burton, senior vice president of Hillwood Properties, has played a key role in the transformation of AllianceTexas from raw ranch land to an 18,000-acre, masterplanned development that is home to more than 370 major companies.

The head of the Dallas industrial group for JLL, Terry Darrow oversees the division and execution of industrial and office-tech transactions. He also is a member of JLL’s industrial council and supply chain and logistics team, and leads JLL’s railroad task force.

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year. If you look at it, a lot of that happened in the fourth quarter, but you’re not going to follow quarter after quarter with that heavy of absorption. So we had a big fourth quarter last year, and we should have good third and fourth quarters this year. JIM BRICE: I would agree. From our company’s standpoint, we did over 600 deals and at least 10 million feet last year; and through June this year, we’ve done 255 deals and at least 4 million feet, so I think we’re on pace. We’ve got several large deals that we’re about to make, so I think from a company standpoint, we’re going to be very similar to where we were last year. And as Terry mentioned, last year, from the absorption standpoint, you can take 10 deals and get to 12 million feet pretty quickly. NAPPER: It reminds me of 1992. Nothing had been built for three or four years and all of a sudden Alliance popped out of the ground and started making deals, and it was a little pent-up demand. The pent-up demand has been solved, and now we’re leveling off a little bit just for some regular growth that we’ll see in 2014-2015.

Where is demand coming from? Are we seeing demand from big users, midsize, small, or all—or does it just depend? BRICE: From our company’s standpoint, we’re seeing it from 25,000 feet all the way to 300,000. The 100 to 250 has been very, very active. Last year, the larger deals were more active than they are to date, and it was the 100s to 300s that were kind of slow. This year, that activity has taken off. If you have 200,000 to 300,000 feet on the ground, you’re seeing a lot of it getting preleased, so that sector has really picked up. We currently have a development in Coppell that we’re just finishing that’s 280,000 feet and we’ve got three deals looking at it. NAPPER: We have had many million-dollar and million-square-foot deals come out this year. We’re starting to see a lot more 50,000-square-foot or 25,000-square-foot products on the market right now. BILL BURTON: I think it’s a little bit indicative of the strength of the market. Summer was a little bit of a lull. Some summers are slower than others, and I think this was one when people were taking vacations. But I think the fact that you’re seeing the

smaller deals—in the 250,000-to-300,000square-foot range—shows a broader base. BRAD STRUCK: As we’re talking to tenants, we’re finding many are growing within Dallas. You’ve got a guy that’s in 50 that’s going to 100, or 50 to 75, or he’s in 100 and needs an extra 50. So it’s kind of nice to feel the growth from within Dallas. WHEELER: I agree. We do a lot of shallow-bay product, and many of our tenants are expanding. We’ve got tenants who are on their second and third expansions right now. We’re seeing that across the board in a lot of our spaces. DARROW: I remember when 200,000 was a big deal and 350,000 was a really big deal. The way we look at deals has changed, and we’re fortunate to have all the growth we’re having in this market. We’re also very fortunate to have a couple of buildings going up in Pinnacle Park that are going to be 87 percent leased out of the ground. That’s a 140,000-foot deal and a 372,000-foot deal; so one pretty good-size deal and one fairly small deal for the market today. But that size tenant—it’s healthy. ANDERSON: I was looking at some stats, and I broke down the size of tenants in 25,000-square-foot increments—25 and 50 and so on. If you look at every segment of the market, the vacancy rates are all falling in the 6.1 to 6.9 range, so every segment of the market is pretty healthy today. Now, if you flash back a year ago, it was the big bulk—buildings at least

JON NAPPER

TOM PEARSON

BRAD STRUCK

MICHELE WHEELER

As managing partner of Courtland Development LC, Jon Napper is responsible for the company’s development operations. Current projects include DFW Inland Port (121 acres in Wilmer) and Mountain Creek Business Park on Interstate 20 in Dallas.

Tom Pearson is an executive vice president in the industrial division and a member of the supply chain real estate advisors team in the Dallas-Fort Worth office of Colliers International. His industrial specialization includes land and building sales, leasing, and investment sales.

The president of industrial services at E Smith Realty Partners, Brad Struck specializes in tenant representation, investment sales, and agency leasing. He focuses on the total cost of occupancy, and specializes in e-commerce fulfillment, food storage, and rail-served real estate.

As president and chief operating officer for Jackson-Shaw, Michele Wheeler oversees all development, acquisition, and financing activities for the company, as well as corporate operations, including regional offices. She has been with the firm since 2005.

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R ROUNDTABLE 200,000 square feet in size—that was tightest. Vacancy was down to the 5.5 range and lower. Right now, what you see is a tremendous amount of absorption in the under-200,000square-foot range. And the big bulk is starting to creep up as we bring on this new supply, and it will continue to increase throughout the year. BURTON: Would you say there are 15 million feet or 18 million feet under construction? I bet if you took the top 15 buildings, that’s probably around 13 million or 15 million square feet. I don’t know that people have been as focused on the smaller buildings. But it’s harder for the individual—a private investor—to build, just because of the equity requirements. So I think that’s been slower. You see more of the institutional investors or the large private investors building the big boxes. I think if you look at the buildings that are under construction, the bulk of them are in the large space. And you still have all this activity in the smaller space. You’re going to see some continued tightness in the smaller user inventory. BRICE: Oh, no question. That’s why you’re seeing rent growth. But you can’t find good shallow-base sites. If you do, you’re pioneering. We ran out of land. If you go up I-35 or to the lake, if you go to Coppell, most of those sites are gone. ANDERSON: But where you want to build the smaller bays for smaller-tenant product is around established markets, such as the airport. There are some sites that are developer-controlled currently being developed. But if you fast forward a couple years from now, those markets will be completely built out. PEARSON: I think part of the issue is that many small buildings haven’t been built, and consequently, when you look at the economies of scale of building smaller buildings, you’ve got to structure a rent that you feel like will be accepted by the market. The DCT piece in Coppell is a good example. I believe the price point is $5.75 or $5.50 with an $8 finish. DARROW: But we’ll make a deal. PEARSON: Yeah. They had to get as much coverage as they could get. NAPPER: It’s even more difficult in South Dallas because we don’t have the comps to show that you can get $3.65 or $4.50 rent rates for a smaller product type. So you’re really selling to your financing partner. WHEELER: But with the smaller tenants, even if you’re paying $4 for dirt and they want to be in an infill location because of their employment base, that’s where they want to be. The trouble

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BRAD STRUCK

right now is construction costs are starting to creep up. We’re seeing the institutional equity, while they were focused on the monster boxes, and now all of a sudden they’re moving a little bit farther to the left on trying to figure out if they need to do something more in the shallow-bay space because they just can’t find the opportunities. DARROW: That’s really a place for a maturing market, too. PEARSON: It’s interesting how we tend to get a myopic vision. Because we’ve been working in this market for so long, we’re predisposed to think in terms of rents having to be at a certain point. But when you get outside of Dallas you find markets that don’t have nearly what we have to offer with people paying higher rents than we are. It’s not that they can’t pay it; I think part of it’s been a mindset. We were flat on rents for so many years up until the last 12 or 18 months, and now we’re starting to see that come up. Other markets, such as California, have been doing [annual escalators] for quite a while.

What role does e-commerce play going forward and what other industries are growing and driving activity? STRUCK: Dallas is good for e-commerce. It’s ranked as probably one of the five or six top places in the country because of two intermodals that feed it, and then [we have] the local outbound of FedEx and UPS. ANDERSON: E-commerce in general accounts for about 8 percent of total retail sales. And I think we’re just on the tip of the iceberg as far as what we’re going to see in industrial growth in e-commerce—bigger buildings and so forth. By 2020 its projected e-commerce will be up to 20 percent of retail sales, which will be distributed from warehouses. We’ve already seen quite a few e-commerce deals here in town, but we’re going to see tremendous growth in that area. I think that’s why you’re seeing some of the bigger buildings already being built spec. But e-commerce is going

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JON NAPPER

to require a different type of facility, and that’s probably going to be the biggest challenge for developers: Can they build a spec building to accommodate an e-commerce user? PEARSON: I think one of the other things driving e-commerce for Dallas is the fact that e-commerce facilities like to be in growth centers. As everybody knows, Dallas has led the country in population growth since the early ’90s, and it doesn’t look like that’s going to change any time soon. I think we’ll continue to see an influx of those kinds of facilities. Some of the facilities that we’ve seen, like Williams-Sonoma, are only partly devoted to e-commerce. We may see straight fulfillment or just light assembly and distribution associated with e-commerce, depending on the tenant. STRUCK: Along Tom’s point, the biggest key for e-commerce is seasonal employment. It really amps up between October and December, so [these businesses] have to be in an area where they can multiply their employees by three for that surge. They’ve got to be in an area where there are colleges and universities, and lots of highways. DARROW: All kinds of things happen in e-commerce. It’s also direct-to-store, so a lot of the ordering is done on the Internet but shipped to a store for pickup, so the multichannel side of it is really growing. You’re going to see all kinds of things. BURTON: Yeah, e-commerce is kind of a big word. What does that mean? WilliamsSonoma, Amazon, Walmart—they all have full e-commerce strategies. So it’s going to grow; it’s going to have impact. UPS just leased a new hub at Alliance, and FedEx is also expanding its ground operations in Alliance. A lot of that has to do with the growth we’ve seen in north Fort Worth and southern Denton County, but it also has to do with e-commerce, since both Amazon and Walmart are there. I think that’s all indicative of continued growth in that marketplace. ANDERSON: I think the amount of investment that they’re going to have in those facilities is what’s causing some pause for these big users. They’re trying to figure out what’s going to go inside the box. I think all of them are sitting back and trying

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to figure this out. Once they figure it out, I think we’re going to see a really big boom. BURTON: That’s a great point. Michele, you were talking about deals happening faster. In certain segments and sizes, it’s happening faster, but in the large size, it’s not, because there are the other factors. WHEELER: Such as automation, technical ... BURTON: Yes, the labor and the automation. DARROW: The other thing that’s critical is transportation. I believe that BNSF will tell you that one of its very largest customers is FedEx Ground. Because they’re taking the 53-foot trailers, putting them over flatbeds, bringing them to your intermodal, putting them on the ground, and pulling them away with tractors. It’s cheaper to do that. They’re figuring out the transportation side of this, and FedEx is on the biting edge. STRUCK: I think they don’t know what size they need [because of the growth of e-commerce]. They’re thinking, “Do we take 500,000 down? Do we take 700,000? Do we take a million?” And if they try to run something out 10 years, those numbers are worthless. They just can’t do that. So I think that’s another reason they hesitate. If they can find a land site where they can build 500,000 and maybe build later on another 200,000 or 300,000, but a developer is not going to hold that for them, so it’s kind of hard for them to find something.

Are there other industries or factors driving demand? BURTON: We are seeing manufacturing have an impact. GE’s locomotive manufacturing is spinning off some activity. Lockheed is in Fort Worth. It’s only going to grow because they’re still in a low rate of production. They haven’t even ramped up. PEARSON: We’re also seeing activity in consumer products—any kind of consumer products— from household items to automotive. DARROW: Plus food and beverage. NAPPER: Especially the southern sector, you’ve got a lot of labor involved. Of the 2.5 million square feet of buildings down there, only about 600,000 of it is distribution. The rest of it is manufacturing: making plastic bottles, water, American Leather, and now Cummings. DARROW: Let’s don’t short our proximity to Mexico either. I know Mexico has had its challenges, but a lot of the bulk product is being made in Mexico and assembled in Texas. I think that bodes very well for manufacturing in Texas. PEARSON: When it comes to fulfillment centers,

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TERRY DARROW

DAVE ANDERSON

security is another factor, in terms of what they require, and having enough land there where they can fence it off and have the necessary security. I think that’s another factor that goes into building coverage and site coverage. ANDERSON: Yes. We took a look at the cost of a fulfillment-type, e-commerce building. You need extra parking, more trailer storage, fencing, security, circulation lanes, and so on. It ended up that the additional land, concrete, paving, lighting, and fencing added about $10 a foot to the building cost. That’s a dilemma that developers have today. Do they build an e-commerce spec building for a potential user? If they’re competing for non-e-commerce users, they’re just not going to win. They’re going to have a rate that they can’t achieve. WHEELER: The majority of the build-to-suit proposals have the maximum parking, trailer storage, fencing, etc. Though they all want it, how many of them want to pay for it? ANDERSON: The last couple of build-to-suits—Kimberly Clark and Georgia Pacific— both were looking at 850,000 to 1.5 million square feet. I think it’s a real dilemma, because the investors then look at it and say, “Wait a minute. What about the second generation?”

Let’s talk a little bit about southern Dallas. It seems it’s really exploding. I’m curious to know why the time is finally right for activity in the southern sector. NAPPER: The southern sector has been there for 20 years. But we’re just now experiencing and enjoying it. The reasons are that labor is now there, transportation is there, and you have the availability of sites. We’ve run out of development sites in North Dallas; there are virtually no sites around the airport. Ten years ago, we started looking to where the next sites would be, and then DISD was going for a triple Freeport exemption, and that started a whole subculture down there and a whole different market. You can develop a building at $3.50 rent rates, which everybody wants to do.

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HOW LUCKY ARE WE? THERE’S MAYBE 9,000 ACRES OF POTENTIAL INDUSTRIAL LAND SITTING 10 TO 12 MILES FROM DOWNTOWN. —DAVE ANDERSON

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* *195,000 SF Industrial Space Coming Soon* 20 Acres Retail on

55 Acres of Multi Family Sites

TOM PEARSON

440 Acres Mixed Use Land

PEARSON: I’ll tell you another thing I experienced. Seven or eight years ago, Chris Teesdale and I took a listing from the Allen Group, and we had 300 acres or so that they wanted to sell. We made all the rounds to every developer, sent it out to the brokerage community, and the big negative we heard is that there’s “no history.” At that time, there was very little history of absorption in that market, so getting a lender on board was almost impossible. Now, eight years later, you have a history of buildto-suits down there. I think it was a big thing when companies came and had these big requirements. Developers started to see the other areas where sites were available, and all of a sudden, people and money come flooding into the marketplace. ANDERSON: But how lucky are we? There’s maybe 9,000 acres of potential industrial land sitting 10 to 12 miles from downtown Dallas. It’s at the confluence of I-35 and I-45, which can hit major markets in Houston, San Antonio, and Austin. Plus, you’re right there at I-20 going east and west. Then there’s the FedEx Ground hub, which is the second-largest ground hub in the country. Everything is aligned. DARROW: I think it’s a mental block. If you think about LBJ and the Tollway, how far is that? You can get out of the parking garage and be up there in 15 minutes. Well, you can do the same thing to I-20 to South Dallas. So mentally there has been some sort of wall—and we don’t go over that wall—but it has changed. BRICE: I think you have the amenities and the labor pool now. If you look at all the communities—DeSoto, Cedar Hill, Duncanville—the growth that has taken place in the southern sector is from a labor standpoint. NAPPER: Niagara had a job fair for 250 employees, and they had 1,600 people [show up]. All they did was advertise in the local papers. DARROW: And they were qualified workers, too. That’s what they were excited about: They were qualified laborers. WHEELER: Originally a lack of infrastructure in South Dallas was the issue. NAPPER: You’ve got to give credit to the City of Dallas and the infrastructure improvements they’ve made. And they have really helped not just Dallas but Wilmer and Hutchins. They brought water and sewers to those areas, plus tax incentives

110 Acre Master Planned Industrial Development Frontage on

--202,280 SF Industrial Space Coming Soon---

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R ROUNDTABLE

BILL BURTON

to corporations that come into the southern sectors, and that’s been a positive. Mountain Creek throws out $320 million a year in tax base and employs 1,600 people in just that little 400-acre development.

Where are some of the next hot spots around North Texas? NAPPER: Right down I-45. ANDERSON: Alliance has plenty of land to go for some time; I think the South Dallas corridor has plenty of land to go for some time. It’s going to take a little bit of a sales job to go farther south, but I think there are some e-commerce people that will be looking for temporary labor. For them, maybe it’s better to be in Midlothian, Waxahachie, Ennis, or Corsicana. Maybe they’re going to go be a big fish in a small pond and tap that labor base. NAPPER: That’s always been, as you look at the history of industrial of Dallas, where the next land sites are. It went out to Alliance, and now it’s down on I-20, and that’s great. There’s some mental block right now about getting south of I-20. PEARSON: I like to remind [Hillwood President] Mike Berry of this: 20 years ago when you started Alliance, they used to come to our office and make a presentation to us on Alliance, and we scratched our heads a little bit wondering where the labor was going to come from. It was just like South Dallas at the time. And I kid Mike and say, “Well, now you’ve got to call them for an appointment to come out there to see them about Alliance.” The biggest criticism of that area right now is just the fact that there’s not many restaurants or amenities. Although, there certainly are up in the I-20 corridor, which is part of what’s attractive about that area, besides being off the Interstate. NAPPER: Infrastructure in the I-20 corridor is still going to be critical. The lack of infrastructure is going to be a continued consideration [in South Dallas] for sites, just because so few of them have water and sewer. STRUCK: Is there a concern about the drought and water restrictions? I heard somebody turned down a food manufacturer because the city didn’t want that much water going toward a manufacturing operation. Are you hearing that as a concern? NAPPER: Mountain Creek has a 24-inch waterline that runs through the middle of it, which is why we have Nestlé Waters on one end of the project and Niagara Bottling on the other end. They’re putting a million gallons a day back in the sewer system out in Mountain Creek. Dallas’ water and infrastructure is fine, but I think when you get down to Wilmer, those buildings are running off an 8-inch waterline. DARROW: I don’t know how many of you ever heard John Stemmons say that our Achilles’ heel is going to be water. It’s all reservoir based, there are no wells and so forth. I still think that’s a challenge for us. I think we’ve got to be farsighted on that, on reservoirs and how to get the water for the manufacturers and for the population, too. We’ve got to pay attention to that. BURTON: We have less rain but more people. DARROW: That’s right. BURTON: So water is an issue. We’ve actually started a water company, and we’re putting a purple pipe system into Alliance in hopes that we can develop agreements with TRA and others to use the effluent for irrigation long term. All our new buildings have purple pipe going in so that we can ultimately do that.

How would you put the balance of supply and demand right now, and how do you expect that to evolve? DARROW: I think we’re pretty well balanced, and we’re going to absorb what we’re building. There’s going to be some overage. We’re going to have some vacancy. Vacancy is about 5.6 percent. It’s got to increase, but that may be healthy. Five

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percent vacancy, that’s just something for pro forma, right? ANDERSON: You’re going to see it start to tick back up. We have a lot of construction going on right now, and we’re probably not going to keep pace with that development. Although the last quarter, we had just maybe $2 million of starts, and this quarter we’ll probably be about the same. So we’re sort of pulling back a little on the construction. But we’re 25 million square feet below our equilibrium, so we have room to move up. Our equilibrium over 30 years is about 9 percent. BURTON: Around 65 or 70 percent of the construction right now is in the big boxes, where we really didn’t have the space. Well, now we’re going to have the space, so we’re going to have to work our way through some of that. But as far as the mid- to smaller size, it feels pretty good. NAPPER: And that million-square-foot market is being driven by institutional investors. You’ve got the insurance companies coming in and going hard on this stuff, whereas the developer is basically just providing the service of the development, construction, etc. BURTON: Yeah. They were the takeout originally. Now they’re part of the development, the ownership side. NAPPER: Right. They’re in the middle of the

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MICHELE WHEELER

THERE’S SO MUCH CAPITAL RIGHT NOW THAT’S TRYING TO FIND A HOME THAT THEY’RE JUST SAYING, “... WE’LL TAKE THE RISK PREMIUM RIGHT NOW ON THE LEASING SIDE.” —MICHELE WHEELER

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ownership, they’re making decisions on lease rates. Developers are getting beaten up on the returns as the build-to-suits come through, because the institutional investors say, “I’ll take it at that. I’ll go that low.” And the rent rates accordingly go down as well. So it doesn’t show a real accuracy of the supply-and-demand market. It shows the institutional investment. And it’s not only the insurance companies. It’s the big wigs. Prologis is right in the middle of them—and Duke and these other guys. And smaller guys like myself are sitting there going, “OK, how do we get these deals financed now?” It’s more and more difficult. It’s private equity. DARROW: We keep track of what’s build-to-suit and what is spec building, and we’ve always been about ... 80/20. It would be 80 percent spec and 20 percent build-to-suit, and that had flip-flopped in the last year to 20 percent spec and 80 percent build-to-suit. Well, what we’re showing right now ... we’re back to about 80 percent spec and 20 percent build-to-suit. WHEELER: What’s interesting is on the capital market side, you’re actually starting to get paid for taking that risk. So now spec buildings, when you look at what a takeout is on the flip side, you’re almost getting the cap rate compression on speculative basis— almost as if you were getting paid for having it leased. You’re starting to see that. And I think that’s because there’s so much capital right now that’s trying to find a home, that they’re just saying, “OK, we believe in population and job growth and it will continue, so we’ll take the risk premium right now on the leasing side.” BRICE: You’re exactly right. You hit it on the head. WHEELER: So you can deliver an empty building right now and still be able to have somebody flip out of it and still have your basis point spread between your return on cost and your exit. DARROW: Well, that would be prime for overbuilding. WHEELER: But you’re starting to see some of that. ANDERSON: We have had good, strong, positive absorption here in Dallas. I think people believe that this is going to go on for several more years—and I’m one of those. And when

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throw out cap rate and low, but it’s ... not just, “Oh, here’s a cap rate.” BRICE: I agree. But when you see shallow-bay stuff trading at $82 a foot pretty consistently, that’s a big number. DARROW: I’m seeing more demand for users to own their own buildings. We’re making deals, especially in the 200,000- to 300,000-foot range. They’re saying, “Well, the developer is running away with this.” The rates are running up, and they’re taking some risks. STRUCK: It’s hard to find though. I have all kinds of people who ask me to go find them a building to buy because interest rates are so low.

We talked about water; we talked about infrastructure in South Dallas. What are some other challenges facing the North Texas industrial market?

JIM BRICE

you look at the job numbers in Texas, and I think this year we’re on pace to do almost half a million in job growth. BRICE: And a lot of that is submarket based. If you look at some of the shell buildings that are completed in Coppell and Flower Mound, you see a lot of those owners getting offers of people taking them out at shell construction. That’s the market that they all want to be in and they don’t have a presence and don’t want to own and don’t want to go to South Dallas, so they’re willing to take that risk. WHEELER: And it’s built; it’s there. BRICE: That’s right. It’s built. They’re just coming in, buying the shell, and they’ll take the risk. BURTON: What do you think the reason for some of the change in the institutional philosophy is? Do you think people are basically looking for payout? NAPPER: I just think it’s a lack of being able to put their money anyplace else. You can’t put it in the stock market, you can’t put it in the bank. They’ve got to invest it. It’s huge. WHEELER: I think real estate, too, is an inflation protector in terms of interest rate risks. They look at it right now and they can go ahead and lock in, and they’ll take a leasing risk. And they think if interest rates are going to continue to rise, what is that going to do for new development? DARROW: If we can get 1.75 to 2 percent rent growth assured on a five-year deal or seven-year deal, so you’ve got that positive rent growth, and the cap rate may be lower on the front end, but they’re not selling on an average rental rate. They’re selling on a going-in rental rate, but the cap rate is lower because of that rent growth. BRICE: Take a shallow-bay 20-year-old product, where it’s trading on the cap rate basis, and look at the credit that’s involved in there, some of it is just absolutely mind-boggling. That’s why from a development standpoint, if you can get that spread, why buy a 20-year-old product at a 6 to a 6.25 cap rate when I could go build for between a 7 to 8 for that type of product? It’s more about buying a quality site. BURTON: But it varies, right? It’s going to vary by deal, by building, by people. We

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BURTON: Costs are going up. WHEELER: Construction costs. And labor. It’s mostly labor. STRUCK: Well, I’m sure some people sat in on those talks from the transportation department. As the population continues to grow in Dallas, new roads will get built, and tollways, but that deters some people. Five or 10 years from now, they don’t want trucks going down tollways to move product around. PEARSON: The transportation guys will always tell you that we’re way behind in what we should be doing for transportation. I think we have 15 compelling reasons you should locate your business in DFW or North Texas. One of the stats that I came across was that North Texas has the largest infrastructure program underway of any place in the country, which is close to $15 billion. When you stack everything up that we have, which is so much more than what many of our competitors and fellow states have to offer, I think we still have a compelling story. And I think that’s what investors are buying as well. So many want to believe that they have a place to hang their flag in Dallas because we do have big job growth going on and population increases that continue—150,000 people a year. You look at the complexion of the companies and virtually everyone is redesigning their supply chains and distribution networks. Dallas continues to come up on their radar, so I think there is a great story for the future. We’re going to continue this growth for the next two or three or four years. ANDERSON: It’s amazing when you look at the projects even in the last five years. When you

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R ROUNDTABLE look north of Fort Worth on 820, 121, everything north of the airport that has been done, all of 161 connecting down to Grand Prairie and Arlington, and LBJ, as you mentioned—it’s unbelievable what’s happened over the years.

corner that needs to be developed. ... The opportunities come when you create these business centers. DARROW: And hospitals. BURTON: We now have four in Alliance. We have almost 37,000 employees a day at Alliance. As a result, we’re doing retail; we’re doing our fourth multifamily project.

Outside of smaller and midsize users, what other factors will drive your bets?

Are there any other topics anyone wanted to address?

ANDERSON: We’re quickly approaching our fourth-year anniversary of good, strong, positive absorption here, so a lot of the low-hanging fruit has already been plucked. Many developers have taken land positions; basically all the sites from Flower Mound, Coppell, and Lewisville to Arlington and Grand Prairie are spoken for. The opportunities are going to be with those developers there and in South Dallas and Alliance that develop the proper product and deliver it. I think we’re going to see a pretty good run here. There’s not just going to be a winner out there; there are going to be many, many winners. NAPPER: Industrial is such a driving force, but it does generate other opportunities. We have 1,600 employees working in Mountain Creek right now. And all of a sudden, we’ve got a site that’s a multifamily site. We’ve got a retail

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STRUCK: I’ve always heard [industrial rental] rates in this city were, let’s say randomly, $3 to $3.25 for many years. Now I think it’s $3.75 or $4. Do you think that’s sustainable? ANDERSON: I think it’s definitely sustainable. I think we’ve been really fortunate that cap rates have come down over the last couple of years. I mean, if we were building with cap rates where they were eight or nine years ago, our rental rates would be, for that same building, $4.75. And though I do think the cap rates will stay at this level, at some point rents are going to inch up. NAPPER: Construction costs are driving it up as well. ANDERSON: For sure. You’re going to have a double whammy. You’re going to have construction costs and then you’re going to have cap rates come up. NAPPER: So a $3.25 [rental] rate is not going to last forever, but you’ve still got this perception in the marketplace that if you’re in an unproven market, if you’re not around the airport, you’re going to have to at least be close. If it can’t be $4, it’s going to be $3.65. BURTON: To me it makes sense, but history says it’s going to be $3.25. NAPPER: Of course, you’ve got the institutional guys who are going to say, “You know what, XYZ developer, I don’t care what you want, we want to get this money out, so we’ll take it at this,” and that rent rate will be low. ANDERSON: And it all depends on the cycles. In the down cycle, people start to lower

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R ROUNDTABLE

their rates and try to get occupancy. But I do think that those owners of property—of good, class A property around the airport—you fast forward two, three years when there’s no more development going on … NAPPER: Rent is going up. ANDERSON: When you have a vacancy occur in a 200,000, 32-foot clear building by the airport, and you’re the only game in town, you’re going to be able to name your price. That’s because companies are going to want to keep their employees within 15 miles or a 15-minute drive, and they’re not going to want to go to Alliance—or South Dallas for that matter. BRICE: Or more importantly, they’re not a commodity-based tenant. They’re servicing someone in that area or it’s their employees—there’s a reason they’re there. It’s not all about occupancy cost. It’s about location, too. DARROW: Your facility cost is typically 4 percent, 4.25 percent of your total spin as a company. Your transportation cost is 40, so figure it out. That’s why we’re calling on the supply chain, the logistics guys. We can still call on the real estate guys, but these supply chain/logistics guys are the ones who are making a lot of decisions [and they] are coaching the real estate people. But I think we’re fortunate to be here and fortunate to have the [rental] rates as low as they are ... and I think we can sustain it. WHEELER: I do think, though, urban industrial is what we classify it—close to the airports, et cetera. There’s still a premium to be urban industrial. I don’t think that changes because that’s where the people are. DARROW: And we did a study on being close to the intermodal, too. We think there’s as much as a 15 to 25 percent premium that can be charged to be closer to

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intermodal. That’s for land, and that’s for rents. That’s going to continue to be very critical, I think, in South Dallas as well as Alliance.

Can you share your outlook toward the industrial market in this year and next? PEARSON: I’m as bullish as I’ve ever been about our market and our city and our region. I think Dallas is going to continue to prosper, and I think industrial business is going to continue to flourish here. WHEELER: I’m very optimistic. I think our state has enjoyed huge job and population growth, and I think that will continue. The capital markets have kept us balanced, and I think that we’ll continue to enjoy a very robust market. BRICE: I agree. It’s going to sound like a big echo in here, but I think we’re going to finish 2014 strong, and I see 2015 continuing on that same level. ANDERSON: Looking back at the last three or four cycles, if you look not at the last one, which ran about four years, the two previous ones ran

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I THINK WHAT’S ENCOURAGING IS THAT ... DALLAS HAS CONTINUED TO GROW. IT’S COMFORTING TO KNOW THAT EVEN IN DOWN TIMES IN THE COUNTRY, WE’LL STILL BE DOING OK. —BRAD STRUCK

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for seven to eight years, so I’m a big fan of that type of vision. I think we still have three or four good years here. The only thing that could curtail that is something that we can’t even think of. NAPPER: We’ve started to see a lot of new product come out of the ground. I think there’s pent-up demand associated with that. I think as a result, you’ll see these big million-square-foot buildings. I think for the next 18 months to two years, you’ll see diversified product, more 200,000-square-foot and smaller buildings, and support systems around that, which is the retail and multifamily that will come because these industrial parks are happy. BURTON: I’m cautiously optimistic. We’ve got some things we’ve got to work on: rising costs, labor, the infrastructure. We’ve got to work on our schools and our training. But we’re a big consumer market; people are moving here. As we continue to consume, there’s going to be more need for distribution. I think one of the opportunities will be in export ... because of much lower transportation costs. DARROW: I think commercial construction is going to continue, residential construction is going to continue. It has to do with our population increase, and the jobs are going to be available here. This is a huge consumption zone and one of the numbers that I like to echo is that 85 percent of the product that comes into the intermodal in South Dallas is consumed within 100 miles of that intermodal. That just says how huge our consumption capacity is here. So I think our outlook is really strong. STRUCK: I think what’s encouraging is that even though the national economy is not where people want it to be, Dallas has continued to grow. It’s comforting to know that even in down times in the country, we’ll still be doing OK.

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CREATING A LAKESIDE LEGACY

BY KAREN NIELSEN

Billingsley Co. has overcome huge hurdles in making Cypress Waters a realityâ&#x20AC;&#x201D;from dealing with multiple jurisdictions to a lack of infrastructure to lawsuits. Now, after 10 years, all that hard work is finally paying off.

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A ANATOMY OF A DEAL

GOOD FULTON & FARRELL ARCHITECTS

eveloper Lucy Billingsley and her husband, Henry, first began eyeing land around North Lake in the 1990s. The large suburban tract had a terrific location—just minutes from Dallas-Fort Worth International Airport, nestled between Irving and Coppell. “We always said this is a great property if there ever was a moment we might be able to get involved with it,” says Lucy Billingsley. “Finally, that moment came.” The Billingsley Co. partners began assembling land in the area in 2003, eventually amassing 1,000 acres along a 362-acre lake. It’s

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here that they’re developing Cypress Waters. The vision is to create a “really great place to live, starting today and going into the future, and a great place to work,” says Billingsley, who describes the community as sophisticated but casual, high-energy yet relaxed, and immersed in nature. At full buildout, she expects 26,000 people on-site during the day and nearly as many in the evening. It’s a place where people can work, live, and play, and have their children attend excellent schools. When all is said and done, Cypress Waters, which fronts LBJ Freeway and Belt Line Road, will include 4.5 million square feet of

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A ANATOMY OF A DEAL

IT’S AN OUTSTANDING PROJECT FOR DALLAS. IT’S A LONGER-TERM PROJECT IN THE SENSE THAT BENEFITS WILL BE REAPED OVER THE NEXT 25 TO 30 YEARS, BUT IT HAS VERY, VERY GOOD BENEFITS FOR US. —KARL ZAVITKOVSKY, CITY OF DALLAS

office and retail space, 10,000 multifamily residences, three schools, parks, trails, and a lakeside town center. With development well underway, most people are unaware of the major roadblocks the Billingsleys had to overcome. For one, the undeveloped property lacked basic infrastructure, such as roads and utilities. And although most of Cypress Waters is officially in the city of Dallas, it’s smack dab in the middle of Coppell Independent School District, with a southern strip situated in Irving. When word began leaking out about plans for Cypress Waters, the city of Coppell and the Coppell ISD filed lawsuits, concerned about the potential negative impact the project could have on city operations and schools. There was also the matter of hashing out who was going to pay for what—not an easy thing, with so many parties involved, says Karl Zavitkovsky, director of economic development for the city of Dallas. In 2009 and 2010, respectively, Dallas created two taxing districts for the development, including a municipal management district and a tax increment financing district. Both entities are designed to help pay for infrastructure development, while the MMD allows for bonds to be sold later. Dallas remains responsible for providing police, fire, and emergency services. Already the Cypress Waters TIF District’s assessed tax value has increased by a whopping 14,171 percent from 2010 to 2013, according to the Dallas Central Appraisal District. The goal is to create additional taxable value of $2.2 billion over the TIF’s 30-year life. “It’s an outstanding project for Dallas,” Zavitkovsky says. “It’s a longer-term project in the sense that benefits will be reaped over the next 25 to 30 years, but it has very, very good benefits for us.”

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KEY PLAYERS DEVELOPER: Billingsley Co. MASTERPLAN DESIGN: Loonie Ricks Kiss Architects, Space Between LANDSCAPE ARCHITECT: Studio Outside and SMR (Cheddar’s and 7-Eleven)

TENANT BROKERS: Avison Young, JLL, Swearingen Realty Group OFFICE LEASING AGENTS: Younger Partners RETAIL LEASING AGENTS: Venture Commercial

MULTIFAMILY ARCHITECT: WDG Architecture Dallas PLLC OFFICE ARCHITECTS: Omniplan, Corgan, and Good Fulton & Farrell RETAIL ARCHITECT: O’Brien Architects GENERAL CONTRACTORS: Westwood Residential, Alston Construction, and McFadden & Miller LEAD OFFICE TENANTS: 7-Eleven Inc., Cheddar’s Casual Café, Meritage Homes, and Nationstar Mortgage

LEGAL: Thompson & Knight, Carrington Coleman, Williams Anderson Ryan + Carroll LLP FINANCING FOR VARIOUS COMPONENTS ARRANGED FOR AND PROVIDED BY: HFF, JLL, Texas Capital Bank, Regions Bank, Wells Fargo, Synovus, Bank of America OTHER KEY PLAYERS: Pritchard & Associates, Kimley-Horn & Associates Inc., Binkley & Barfield, City of Dallas, Dallas County Commissioners Court, Dallas City Design Studio, City of Irving, City of Coppell, Coppell Independent School District

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AN ISLAND OF LAND

A ANATOMY OF A DEAL

FAR-REACHING DALLAS Most of Cypress Waters lies within the city limits of Dallas, which annexed the property in the 1950s. The island of land is surrounded by Irving and Coppell. COPPELL

PRESIDENT GEORGE BUSH TURNPIKE

DALLAS

IRVING

TOLL

Cypress Waters was one of the last remaining large chunks of undeveloped land in Dallas County, and it sat idle for many years. Dallas annexed the 3,000-acre piece of remote property in the 1950s, and North Lake was created to support a power plant, now owned by Luminant. Throughout the years, the property was used as a public lake and recreation facility, but its zoning remained agricultural until the Billingsleys came along. “It’s a very unique area,” says Rick Loessberg, director of planning and development for Dallas County. “We’ve got this ability to go in and do it right and have it be good for upscale housing and office and mixed use.” Short of Joe Pool and White Rock lakes, there aren’t many areas with water features like North Lake, he adds. Cypress Waters is “a huge development of land that most people didn’t even realize was in Dallas,” says Mary Poss, a member of both Cypress Waters’ TIF and MMD boards. “It is a whole new tax base, and any time you create a new tax base, money is available for all parts of the city,” says Poss, former acting Dallas mayor and City Council member. There’s no lingering animosity about Cypress Waters, says City Manager Clay Phillips, but questions remain about the development’s outcomes and long-term impact. Although it’s not Coppell’s obligation to provide services such as police and fire to other cities, there are concerns about how the influx of people will affect ancillary services such as libraries, recreation sports leagues, and roads.

At Alston Construction, we know that what you’re constructing is so much more than a building. It is the standing symbol of your company’s past success and its future endeavors. A symbol of your direction for growth and your outlook for the future. As a true partner, an honest advisor, and a responsible contractor, we understand the mindset it takes to build a solid foundation. We see things from a unique perspective...yours.

Proud General Contractor of the Cypress Waters Office Building Project At l A n t A | ChICAgo lAs VEgAs | nAshVIllE |

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www.alstonco.com

| DAllAs | EDIson | nEwport BEACh | rEno

houston | sACrAmEnto

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“It’s yet to be seen how it will be handled, but having said all that, we’re working well with the Billingsleys,” Phillips says. “We definitely want to be good neighbors to both Dallas and Irving, and at this point we’re managing to ensure we don’t absorb or inherit obligations that we should not on behalf of our taxpayers.” Phillips adds that in five to 10 years, Coppell and its residents will likely benefit from the additional retail options at Cypress Waters, as well as development that occurs near the project. This fall, a new CISD school, Richard J. Lee Elementary, opened within Cypress Waters. During the tenuous years with Coppell, Lucy Billingsley remembers then CISD Superintendent Jeff Turner saying one day they’d all be friends. “I thought, ‘Like hell we are. I’m mad,’” Billingsley says. “But he was right. The reason we all got over it is because everyone had something they cared deeply about. We resolved the conflict, and we all still have things we care deeply about—just now they’re in concert.”

TAKING SHAPE Development Milestones

A ANATOMY OF A DEAL

UPON COMPLETION, CYPRESS WATERS IS EXPECTED TO CONTAIN

4.5 MILLION S.F. OF OFFICE AND RETAIL SPACE 10,000 MULTIFAMILY RESIDENCES THREE SCHOOLS

MAY 2003: Southwestern parcels acquired

JANUARY 2006: Initial zoning approval (MMD/TIF)

JANUARY 2012: Begin Infrastructure and residential development

SEPTEMBER 2004: Southern parcels acquired

OCTOBER 2008: Northern parcels acquired

APRIL 2013: Work begins on the first spec office building

DECEMBER 2006: South shoreline parcels acquired

JUNE 2010: Zoning updated and finalized

JUNE 2013: Multifamily residents begin moving in

Billingsley Co. commissioned sculptor PETER BUSBY to create the iconic longhorns at the western entrance.

FEBRUARY 2014: Cheddar’s announces headquarters move to Cypress Waters

SEPTEMBER 2014: Nationstar Mortgage takes occupancy of its new headquarters; Meritage Homes signs lease in the development’s first spec building

APRIL 2014: 7-Eleven announces headquarters move to Cypress Waters

ARCHITECTURE

PLANNING

INTERIORS

www.obrienarch.com

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A ANATOMY OF A DEAL

7-Eleven’s new Cypress Waters headquarters was designed by Dallas-based CORGAN, the same architecture firm that designed its current home, One Arts Plaza.

7-Eleven’s relocation is expected to create as many as 1,250 jobs in IRVING and generate $10 million in tax revenue for the city.

7-ELEVEN’S NEW HEAVEN

The home of the Slurpee has a brand-new home of its own— in Cypress Waters. BY CHRISTINE PEREZ

long with the giant sculptures that mark the southern and western entrances, one of the first things visitors will see at Cypress Waters is a bold new headquarters for 7-Eleven Inc. Designed by Corgan—the same firm that designed the company’s current home at One Arts Plaza—the 300,000-square-foot campus will sit on the north side of Interstate 635 just east of Belt Line Road in Irving. 7-Eleven’s decision to move to the suburbs was big news when the story broke this past spring. After all, the world’s largest convenience store operator had been based in Dallas since the late 1920s. For years, it was the lead tenant in Cityplace along North Central Expressway. Then in 2005, it signed a 15-year lease for 240,000 square feet in One Arts Plaza. Developed by Billingsley Co., the 24-story tower was the first big office play in the Arts District and the first high-rise developed in downtown Dallas in nearly 20 years. It was an exciting move, but as the years went on, the company’s needs began to change. It required more space—and more parking—and expanding within One Arts Plaza was not an option. Fortunately, Billingsley Co. had other possibilities within its portfolio. The developer wanted to be able to accommodate its tenant’s expansion needs, and with strong demand for office space in the Arts District—and rapidly appreciating rental rates—it felt confident it could find another user to lease the space. Cypress Waters was an appealing alternative for 7-Eleven. It gave the company the opportunity to be in a single-tenant facility with plenty of parking and room for growth. The development’s central location within the region, making it a convenient commute for employees all over, was another key reason 7-Eleven decided to move, says Lucy Billingsley, partner at Billingsley Co. Although the deal was in the works for months, it stayed quiet in the market as

KEY PLAYERS FA L L 2 0 1 4

DEVELOPER: Billingsley Co.

ARCHITECT: Corgan

LANDSCAPE ARCHITECT: SMR

no brokers were involved. The transaction was negotiated directly by the landlord, the tenant, and the city of Irving. When 7-Eleven decided to move to One Arts, Dallas supported the company with an incentives package. For 7-Eleven to cut out early, Irving had to be willing to take over that commitment. In an 8-1 vote, the Irving City Council approved just that, agreeing to a $10 million package in tax breaks for both 7-Eleven and Billingsley. The prestige of securing a headquarters for a global brand like 7-Eleven showcases the city’s pro-business environment, says Beth Bowman, president and CEO of the Greater Irving-Las Colinas Chamber of Commerce. “It makes Irving a natural decision for other top executives looking to relocate their companies,” she says. “We also see this as a creation of job opportunities for our residents, which will help our city maintain its low unemployment rate.” 7-Eleven’s relocation is expected to create as many as 1,250 jobs in Irving and generate $10 million in tax revenue for the city and $15 million in annual taxable sales.

GENERAL CONTRACTOR: Alston Construction

INCENTIVES: City of Irving

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A ANATOMY OF A DEAL

NATION BUILDING

About 1,000 employees will move to Nationstar Mortgage’s new Cypress Waters headquarters before the end of the year.

DALLAS MIDTOWN

ARCHITECTURE PLANNING INTERIOR DESIGN GRAPHIC DESIGN

NORTHPARK CENTER

SAVOYA

CITYLINE

WWW.OMNIPLAN.COM | 214.826.7080

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CYPRESS WATERS

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BY CHRISTINE PEREZ

ne of the first companies to catch the vision for Cypress Waters was Nationstar Mortgage Holdings Inc., which will take occupancy of its new 175,585-squarefoot headquarters within the development before the end of the year. The move allows the company to trim its five North Texas locations to four—with the flexibility to consolidate even more in the future, says John Hoffman, Nationstar’s senior vice president of corporate communication. Initially, about 1,000 employees will move to Cypress Waters. “It’s definitely going to help us improve communication by bringing us together,” Hoffman says. The development’s central location within the region and environmentally friendly approach were other key considerations. Designed by Omniplan, the Cypress Waters office building provides an efficient environment, with an open-space layout and plenty of meeting and collaboration areas. When Nationstar’s predecessor company moved to Texas in 1997, it made its home in Dallas. “For the past decade or so, we’ve been in Lewisville, which has been a wonderful community for us,” Hoffman says. “Now, though, we are extremely excited about returning to Dallas with our move to Cypress Waters. As we move to this dynamic new campus, we’re going home—and we couldn’t be happier.”

HEADQUARTERS PARK Of the four big office deals inked so far at Cypress Waters, all are headquarters operations:

NATIONSTAR MORTGAGE HOLDINGS INC. 175,585 s.f. 7-ELEVEN INC. 300,000 s.f. CHEDDAR’S CASUAL CAFE 31,450 s.f. MERITAGE HOMES

(regional headquarters)

15,760 s.f.

MICHAEL SAMPLES

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KEY PLAYERS DEVELOPER: Billingsley Co.

ARCHITECT: Omniplan

LANDSCAPE ARCHITECT: StudioOutside

GENERAL CONTRACTOR: McFadden & Miller

TENANT REPRESENTATIVE: Avison Young

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A ANATOMY OF A DEAL

WORKPLACE OF THE FUTURE

Nearly 900,000 SQUARE FEET OF OFFICE SPACE has been built or is under construction at Cypress Waters.

BY CHRISTINE PEREZ

illingsley Co. was so confident the demand would be there for office space in Cypress Waters, the company decided to kick off construction on a speculative basis. The developer knew it had something few landlords could offer but many tenants want—new, efficient space, with a wealth of amenities, centrally located with close proximity to Dallas-Fort Worth International Airport, and, perhaps most important, plenty of parking. Oh, and then there’s the lake, a rare commodity around these parts. With a property this special, Billingsley Co. wanted to pay careful attention to design. It selected Omniplan as the architect for the multitenant park. “Our vision for the Cypress Waters office park was to use green space and street design to create a much higher quality environment than is typically found in suburban, value office projects,” says Tipton Housewright, principal at Omniplan. “The attention to the spaces be8951 CYPRESS WATERS tween the buildings, including the landscape design and BOULEVARD, DALLAS art, has made the overall project very unique.” The first speculative building to break ground The architect says Cypress Waters is a great example of how totals 188,440 s.f. place-making and integrated mixed-use can be created at relatively low densities. “It’s the kind of environment that will attract the corporations and the workers of the future,” he says. Moody Waters of Younger Partners is overseeing leasing of office space. He and his team were brought in at the beginning, when Billingsley Co. kicked off speculative development in the spring of 2013. Demand is strong for the space that remains available, he says. “We have a number of deals working that will fill them up,” he says. “I suspect that a new building will get started early next year, if activity continues at this pace.”

8840 CYPRESS WATERS BOULEVARD, DALLAS A second speculative building that got underway about two months later. Meritage Homes has leased 15,760 s.f. of the project’s 164,784 s.f.

KEY PLAYERS DEVELOPER: Billingsley Co. LANDSCAPE ARCHITECT: StudioOutside ARCHITECTS: Omniplan (multitenant buildings) , Corgan (7-Eleven Inc.) , Good, Fulton & Farrell (Cheddar’s Casual Café) GENERAL CONTRACTOR: Alston Construction (8951 Cypress Waters and 7-Eleven Inc.)

GENERAL CONTRACTOR: McFadden and Miller (8840 Cypress Waters, Nationstar Mortgage, Cheddar’s Casual Café)

MEP: Basharkah STRUCTURAL: Datum CIVIL: Binkley & Barfield- C&P Inc. OFFICE TENANTS: 7-Eleven Inc., Cheddars Casual Café, Nationstar Mortgage, Meritage Homes TENANT BROKERS: Avison Young, JLL, Swearingen Realty Group OFFICE LEASING AGENT: Younger Partners

2900 RANCH TRAIL, IRVING The first build-to-suit was a 31,450 s.f. headquarters for Cheddar’s Casual Café. 5 8 / D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

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A ANATOMY OF A DEAL

SCOTCH CREEK

POOL AND COMMUNITY LODGE, SCOTCH CREEK

A NEW MULTIFAMILY PARADIGM Cypress Waters’ varying neighborhoods attract by style and connect by strategy. BY HILARY LAU

fter Billingsley Co. pieced together the land acquisitions for Cypress Waters, and brought in utilities and other infrastructure to support the project, one of the first development targets was multifamily. And these weren’t just going to be any old apartments. The unique concept blends three distinct neighborhoods with individual personalities connected by shared amenities, says Lucy Billingsley, partner at Billingsley Co. and the driving force behind the unique multifamily approach.

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“The world today is a world of rental living,” she says. “As we think about multifamily, we need to come to it with a new paradigm, and the paradigm for us has been around creating neighborhoods where like-minded people are attracted.” For active couples with children and families, there’s Parson’s Green, Billingsley calls a “traditional Americana” community of townhomes that has playgrounds, whimsical walking trails, a music garden, and private front yards. For the younger set that seeks modern, metropolitan living, there’s Scotch Creek, whose contemporary limestone architecture and communal spaces encourage residents to socialize and enjoy the development’s amenities together. And for active young adults looking for a “romantic industrial” neighborhood reminiscent of Chicago or Brooklyn, there’s Sycamore Park, which also sits closest to Cypress Waters’ dog park. Community amenities are designed to have across-the-board appeal. “It’s taking the idea of a country club with tennis or racquetball or other sports and bringing it into the neighborhood,” Billingsley says. Along with various parks, pools, and club house and fitness center, the three communities are connected by a pedestrian walking trail—one that eventually will extend 6 miles around North Lake. The trail passes through the centers of some of the larger residential buildings, which designer WDG Architecture says

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Cypress Waters features interior design by ART & COMMERCE. PHOTOS COURTESY OF BILLINGSLEY CO.

NUMBER OF UNITS IN THE FIRST PHASE OF MULTIFAMILY DEVELOPMENT AT CYPRESS WATERS.

THE MASTER PLAN CALLS FOR AS MANY AS

10,000 UNITS contributes to the integrity and unity of the project as a whole. “The team designed the trail with the hope that it will encourage casual social interaction among all of the renters,” says WDG Design Principal Vincent Hunter, who worked on the project alongside WDG’s Principal Jaime Fernandez-Duran, Project Designer Will Duncan, and Project Architect Brian Till. “We think it encourages, despite your building of choice, the potential to meet anyone who lives in any of the three neighborhoods because they’re so well interstitched.” The development, which opened in June

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2013, has filled up fast. Ninety percent of finished units are currently rented. The three existing communities total 676 units. The master plan calls for as many as 10,000 residences. The timeline for development is completely dependent upon the market, Billingsley says. According to Jay Denton, senior vice president of research and analytics at Axiometrics Inc., Cypress Waters is well positioned for the future. “Long term, that submarket tends to absorb units very well and stay higher occupied than the metro average,” he says. Axiometrics projects that Dallas’ occupancy rate over the next five years will hover around 94.1 percent, with the submarket that includes Cypress Waters slightly outperforming Dallas at around 94.8 percent. “People get a little worried about all of the supply because we build a lot of properties here,” Denton says. “But the demand is currently strong. Over the next five years, we project that the Dallas-Fort Worth area will add about 350,000 jobs. Because of that, we’ll need more development—and more developments like Cypress Waters.” In meeting that demand, Billingsley is going all-out. “We think what is required of us is to be bold and to do things of significance,” she says. “The next multifamily building will be on the water, and will really have some height; my sense is five stories.”

KEY PLAYERS DEVELOPER: Billingsley Co. ARCHITECT: WDG Architecture Dallas PLLC LANDSCAPE ARCHITECT: StudioOutside MEP: Jordan & Skala Engineers Inc. STRUCTURAL: Barry Engineering Inc. CIVIL: Kimley-Horn and Associates Inc. GENERAL CONTRACTOR: Westwood Residential INTERIOR DESIGN: Art & Commerce (Tom Newbury & Tom Sanden) MP: Ramco Plumbing & Heat Relief ELECTRICAL: Pruitt Electrical FIRE PROTECTION: Central Fire Protection EARTHWORK: Mario Sinacola & Sons CONCRETE: Cook Concrete SITE UTILITIES: PCI STEEL: Southwest Ironworks

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A ANATOMY OF A DEAL

GOOD FULTON & FARRELL ARCHITECTS

THE 25-YEAR VISION

When all is said and done, Cypress Waters, Billingsley Co.’s 1,000-acre development surrounding North Lake, will include 4.5 million s.f. of office and retail space, 10,000 residential units, three schools, a 6-mile hike-and-bike trail, numerous parks and nature areas, and a lakeside gathering place called The Sound. Complete or under construction

Future development

7-Eleven Inc. headquarters

17 Salazar Park

Cheddar’s Restaurant Group headquarters

18 Central Park

The Dump

19 Northern office park

The Shops of Cypress Waters

Richard J. Lee Elementary

Future magnet high school

Future middle school

8840 Cypress Waters Boulevard

Nationstar Mortgage headquarters

(15,000 s.f.)

21 Multifamily phase 2

(CISD)

22 Cypress Point

(CISD)

23 The Wharf

(CISD)

10 8951 Cypress Waters Boulevard

20 Future retail

(165,000 s.f.) (175,585 s.f.)

(180,440 s.f.)

(multifamily)

24 Carraway Parks 25 Birchgrove

(500 units)

(multifamily)

26 Sagamore Hill

(multifamily)

11 9001 Cypress Waters Boulevard

27 Byron

12 Sycamore Park

28 Future urban center (transit oriented)

13 Scotch Creek

(multifamily)

14 Parson’s Green

(multifamily)

29 Single-family housing 30 Olympus Boulevard (four lanes, divided)

15 The Sound

31 Future Cotton Belt Line

16 Future office campus zones

32 Riparian environments / open spaces

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About 12,000 TRUCKLOADS OF CONCRETE have been poured for the three office buildings on Cypress Waters Boulevard.

KE -BI ND E-A HIK

26,000 PEOPLE are expected to populate Cypress Waters upon completion (residential and employees).

A 6-MILE HIKEAND-BIKE TRAIL will meander through Cypress Waters and along the shoreline of North Lake.

TR A IL

NORTH LAKE

362 acres

32 23 16

21 14 24

12 19

18 10

16 5

20 4 1

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3 Projections are for 27 MILES OF ROADWAY.

Nationally recognized urban designers LOONIE RICKS KISS ARCHITECTS master-planned the community.

The amount of dirt moved for the initial development is 2 MILLION CUBIC YARDS— enough to fill AT&T Stadium’s playing field 50 feet deep.

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HILARY LAU

A ANATOMY OF A DEAL

EDUCATING FOR THE FUTURE Coppell’s new Richard J. Lee Elementary is unlike any other in the nation. BY HILARY LAU

tudents at Coppell ISD’s newest school, Richard J. Lee Elementary, are guaranteed to get an education experience unlike any other in North Texas. That’s because the Gold LEED-certified, $21 million campus is the first net-zero-energy elementary school in the country. Built in just eight months on 70 acres at Ranch Trail and Olympus Boulevard within Cypress Waters, the school is officially in the city of Dallas but part of the Coppell ISD. (Dallas annexed the property in the 1950s for a power plant.) 1,096 solar panels top The net-zero designation means that the school Lee Elementary’s roof. will produce as much energy as it uses, mainly through ecofriendly processes and building features like solar panels (there are 1,096 on the school’s roof), wind energy generators, rainwater collection systems, geothermal units, and daylight-harvesting lighting. During the next year, the school’s energy usage will net out at zero, and when the building is generating more power than it needs, it will funnel that energy back into the community’s electricity grid. And once all of its internal monitoring systems are up and running, TVs stationed throughout the building will display data about the building’s consumption and production. “In a nutshell, the school itself is a tool for learning,” says Sid Grant, assistant superintendent for business and support services at CISD. “One of our rainwater collection tanks will be used to irrigate the lawn and feed into an ecopond. Students will be able to do studies on erosion and look at water under a microscope.” Named for a school that closed in the district to make way for Coppell’s New Tech High, Lee is a clear step away from eight “footprint” elementary schools built in the district during the 1980s and 1990s. The school opened in the fall of

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2014 with about 550 students; its enrollment capacity is 740. Besides its energy efficiency, the school stands out for following Apple Academy’s standards of challenge-based learning. In essence, children learn to problem-solve through the use of technology. The school itself, which is flexible in every sense of the word, features movable walls and communal facilities that are shared between both grades and classes. Lee Elementary marks a happy ending to a story that began with CISD suing Billingsley Co. over concerns that Cypress Waters would overwhelm the district’s already crowded facilities. A settlement that included the sale of 122 acres on North Lake from Billingsley to CISD in 2008 opened the door for CISD to build an elementary school, a high school, two middle schools, and/or an administrative building. “Going forward, we should have plenty of land to accommodate the needs for the growth,” Grant says. Lucy Billingsley says Lee Elementary is a model for schools in the future. “We’re being environmentally sensitive and working on how to refine anything that we might do to be environmentally smarter,” she says. “How fabulous it is that it’s a school system that sets the bar?”

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LOCATION MATTERS

DALLAS’ LARGEST MIXED-USE MASTER PLANNED COMMUNITY. EXPLORE URBAN MULTI-FAMILY, RETAIL, AND OFFICE HARMONIOUSLY INTEGRATED WITHIN NATURE. OFFICE AND BUILD TO SUIT

RETAIL

RESIDENTIAL

Marijke Lantz 214.270.0970 mlantz@billingsleyco.com

Clay Mote or Charlotte Cooper 214.378.1212 cmote@venturedfw.com or ccooper@venturedfw.com

Leasing Office 972.774.5800 live@cypresswaters.com

1,000 acres at the Northeast corner of 635 and Belt Line Road

CYPRESSWATERS.COM

A ANATOMY OF A DEAL

EMBRACING THE GREAT OUTDOORS Cypress Waters’ natural amenities extend beyond the scenic shores of North Lake. BY HILARY LAU

n the late 1970s, North Lake was a popular fishing spot. In the late ’80s and early ’90s, its southern shore served as a park. Today, it’s the centerpiece of Cypress Waters. A key goal for the development is to enhance the beauty of the lake and open it up for the enjoyment of residents, tenants, and visitors. “We’re restoring a good portion of shoreline that extends into three coves of the lake and two peninsulas,” says Mark Thomas, a landscape designer and project manager at Studio Outside, which is overseeing landscape design at Cypress Waters. Thomas designed three parks in Cypress Waters’ office development, as well as

a large bridge at The Sound, a lakeside “town square” that Lucy Billingsley calls “the heartthrob of the place.” The Sound will connect to the development’s 6-mile pedestrian trail system. The system in turn will connect to Irving’s Campíon Trail and, pending approval, a proposed extension of the Cotton Belt Trail. Billingsley and Studio Outside hope it will be comparable to the 12-mile pathway at Dallas’ White Rock Lake and that it will eventually stretch around North Lake. The trail is a key part of Cypress Waters’ focus on fitness. “We anticipate having a very bike-friendly environment in the future,” says Tary Arterburn, founding principal of Studio Outside. “The other fitness is going to be based in most of the multifamily projects. The corporate buildings have facilities, too, and people can use these wonderful outdoor facilities adjacent to the fitness centers.” Arterburn expects to see the development’s pedestrian trail built within the next four years, though there have been some challenges. “We’re having to create a completely new shoreline,” he says, noting that a huge amount

Architecture. Planning. Interiors.

Cypress Waters

Dallas, TX

www.wdgarch.com

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Lakeside fields of milkweed will attract monarch butterflies.

SHUTTERSTOCK

Landscape design is being overseen by Dallas-based STUDIO OUTSIDE.

Sculptures and other artistic design elements can be found throughout Cypress Waters.

of dirt has been hauled in from a nearby excavation site at LBJ Freeway. “We’re trying to look at the careful use of water for irrigation, using native plants and trees in many places, so it’s not super high-maintenance water use.” Part of this effort will include planting cypress trees to attract wildlife and waterfowl, as well as planting lakeside fields of milkweed to attract migrating monarch butterflies. The entrances to the development will feature rows of cloned cypress trees—each a perfect copy of the other. “We’ve installed some nice-size trees out there,” Thomas says. “In such a big space, you need big trees to make a statement.” The whole development features an impressive array of sculptures and other artistic design elements. “I don’t know much about art, but I do know that we’re all complimented when we pass a sculpture,’” says Billingsley. “The huMore than 1,400 trees have already manities are, in our adult lives, either lost or been planted. More than 18,000 trees will be planted over the 25-year plan. much less than when we were in school. This is just one small way of bringing them in.”

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Actual energy savings and performance of any home or any of its features may vary widely, and may be more or less than indicated savings and performance, depending on the personal energy consumption choices of the occupants and changes in energy provider rates and programs. Pictures and other promotional materials are representative and may depict or contain floor plans, square footages, elevations, options, upgrades, extra design features), landscaping, and other designer/decorator features and amenities that are not included as part of the home and/or may not be available in all communities. Home and community information is subject to change, and homes to prior sale, at any time without notice or obligation. Offers to sell real property may only be made and accepted at the sales center for individual Meritage Homes communities. See sales agent for details. Meritage Homes® is a registered trademark of Meritage Homes Corporation. ©2014 Meritage Homes Corporation. All rights reserved.

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A ANATOMY OF A DEAL

A TIME TO BE BOLD

Real estate legend Trammell Crow had a profound impact on North Texas. His daughter, Lucy Billingsley, is well on her way to doing the same. BY CHRISTINE PEREZ

MICHAEL SAMPLES

arlier this year, Crow Holdings chairman Harlan Crow held a party to mark what would have been the 100th birthday of his father, real estate legend Trammell Crow, who died in 2009 at the age of 94. One of the highlights of the evening was an uproarious video that began with a shot of Harlan, dressed in a hooded robe, wandering the darkened halls of Old Parkland (a signature Crow Holdings development north of Uptown). Harlan summoned “the great Crow in the sky” for real estate advice, and “Trammell” appeared in a green-lit crystal ball. The two began bantering and, in a scene that drew loud laughs from the crowd, Trammell tells his son: “Your biggest mistake is you don’t listen to Lucy!” Lucy Crow Billingsley, Trammell’s only daughter (she and Harlan have four brothers) is the driving force behind Dallas-based Billingsley Co., a real estate development firm she runs with her husband, Henry. She says it wasn’t until her children were grown and out of the house that she realized just how much real estate meant to her. “I thought about what I wanted to do with that free time, and what I really wanted to do was work,” she says. Billingsley Co. has had tremendous success in all product types, with developments such as Austin Ranch, International Business Park, and One Arts Plaza. Along the way, it has been a pioneer in creating places that focus on end-user perspectives. Billingsley’s goal, she says, is to give people things they don’t even realize they’re lacking, in both residential and commercial developments. She likens it to a quote from hockey great Wayne Gretzky: “I skate to where the puck is going to

be, not where it has been.” At Cypress Waters, this means putting an emphasis on nature, art, and incorporating “third place” elements. (In urban planning, third place refers to the social aspects of communities, separate from home and work.) These spaces will evolve organically, says Billingsley’s daughter, Lucy Burns, who oversees office and build-to-suit operations for the company. “The objective is to not have a manufactured feel or create a Disneyland for grown-ups, but for it to be serendipitous,” she says. “We want the trail system and the parks to be authentic areas that people really do use and that don’t feel forced.” Billingsley says it all comes down to creating great places. “It’s our responsibility to do this in a big way,” she says. “I feel like I’m at the stage in my life now when it’s important to make some bold gestures and bold moves. Fortunately, I have enough tenure and understanding where I think I can do bold that’s not unnecessary or risky. I hope and believe that we’re going to be able to make these environments really remarkable.”

A FAMILY TRADITION: REAL ESTATE IS A WAY OF LIFE FOR THE CROW-BILLINGSLEY CLAN. > Lucy Crow Billingsley is a partner with her husband Henry in Billingsley Co., which they founded in 1978. The company has significant holdings across all real estate sectors.

> Son Trammell Hancock specializes in retail brokerage as a vice president at Venture Commercial. His wife, Cheryl, is an associate at Venture.

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> Daughter Lucy Billingsley Burns is a partner at Billingsley Co., where she oversees office projects and build-to-suits. Her husband, Tom, is a vice president at Deutsche Bank, where he focuses on originating CMSB loans.

> Son George Billingsley is a partner at Billingsley Co., where he oversees the industrial portfolio. His wife, Lindsay, is a development director at Alliance Residential Co., specializing in multifamily and site selection work.

> Daughter Sumner Billingsley is joining the family business later this year to focus on the retail and multifamily portfolios, after working for CBRE in New York.

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IIPOD Union Pacific Intermodal

Baylor Sammons Cancer Center

Photo: Kimley-Horn & Associates Inc.

Photo: Baylor University Medical Center at Dallas

DART Mockingbird Station

Photo: DART

Photo: The Urban Fabric

Photo: Glenn James/NBAE/Getty Images

University of Texas Southwestern Medical Center

Photo: UTSW

Photo: The Urban Fabric

AT&T Performing Arts Center

Downtown Dallas Skyline

Dallas Mavericks

Dallas Love Field

Magnolia Pegasus

Photo: The Urban Fabric

DFW International Airport

Photo: DFW International Airport

Photo: Tim Hursley

Klyde Warren Park

Photo: Dillon Diers Photography

Dallas-EcoDev.org 214.670.1685

T TOOLBOX

INCENTIVES THE GREAT DIFFERENTIATOR BY KERRY CURRY

W hen it comes to making site selection decisions, the big drivers for business are labor availability and costs, logistics, regulatory environment, supplier demands, and real estate. But when all those things are essentially equal, economic incentives can often tip the scales in favor of one state or community over another. 7 0 / D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

he use of incentives harkens all the way back to the country’s founding, when the fledgling U.S. government was eager to encourage people to move west, says Jubal Smith, executive vice president at JLL. Smith leads the firm’s site selection, credit, and incentives practice. Land grants, he says, helped compel people to move to uninhabited areas—a program that was critically important in the early development of Texas. Since then, the state has flourished. It has worked hard to create a superior environment for business, and has gained a national reputation for effectively using incentives to lure corporate relocations. But some myths still exist, says Mike Rosa, senior vice president of economic development at the Dallas Regional Chamber. “When you say ‘incentives’ in the general public, people think of that as writing a check and losing taxpayer money,” he says. “But it is a much more thoughtful-minded approach. Our communities are interested in spending a dime to make a dollar, if it would work out that way. They are very conscious of whether or not an incentive offer is good for the bottom line of that community.” The city of Dallas, for example, performs a detailed cost-benefit analysis before ever offering incentives to a business to locate a facility within its borders. Companies, too, do their homework, and they first consider a variety of other factors, says Kelley Rendziperis, a principal with Site Selection Group, a global advisory and incentives firm based in Dallas. “Once you’ve determined various sites where there is an abundance of those various factors, incentives are used to bridge any gaps that may exist,” she says. Any community, no matter the size, has the ability to offer incentives. Chapter 380 agreements are among the most popular—and most common—business incentives offered by North Texas cities. Named for a chapter of the Local Government Code, these agreements offer a wide variety of options for cities to provide economic development incentives. They can involve grants, foregiveable loans, sales tax revenue sharing, property tax rebates, job creation and job retention grants, and other forms of incentives. Chapter 381 agreements are similar but pertain to counties, not cities. Smaller communities can also use Type A or Type B economic development corporations,

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SPREADING THE WEALTH ECONOMIC INCENTIVES HAVE HELPED SUPPORT OFFICE, INDUSTRIAL, AND MIXED-USE PROJECTS THROUGHOUT NORTH TEXAS.

GE TRANSPORTATION SIZE: Nearly 1 million s.f. PRODUCT TYPE: Industrial CITY: Fort Worth DETAILS: GE’s new locomotive manufacturing facility opened in 2013. JOBS: 550 INCENTIVES: $4.2 million from Texas Enterprise Fund, 85 percent city tax abatement, expected to be worth $5.4 million over 10 years; and a $744,845 worker training grant from the Texas Workforce Commission.

KOHL’S

SIZE: 230,000 s.f. PRODUCT TYPE: Office CITY: Dallas 35 DETAILS: New customer service contact center JOBS: 1,700 INCENTIVES: $500,000 city of Dallas economic development grant.

TOYOTA

USAA

SIZE: 1 million to 1.5 million s.f. PRODUCT TYPE: Office CITY: Plano DETAILS: Headquarters relocation from California JOBS: 4,000 INCENTIVES: $40 million from the Texas Enterprise Fund, $6.75 million grant from the city of Plano, 50 percent property 35E tax abatement for 2018-2027, and 50 percent tax rebate for 10 years after abatement.

SIZE: 238,000 s.f. PRODUCT TYPE: Office CITY: Plano DETAILS: The company expanded its IT operations into Plano. JOBS: 680 INCENTIVES: $5 million from the Texas Enterprise Fund. Additional incentives were offered by the city of Plano.

CITYLINE

SIZE: 186 acres PRODUCT TYPE: Mixed-use CITY: Richardson DETAILS: Mixed-use campus anchored by State Farm (2 million s.f.) and Raytheon (450,000 s.f.) JOBS: 8,000+ (State Farm) and 1,700 (Raytheon) INCENTIVES: A tax increment financing district set up by the city of Richardson reimburses KDC, CityLine’s developer, for public infrastructure, such as streets and sidewalks.

75 121 35E

AMAZON

SIZE: Two 1 million s.f. facilities PRODUCT TYPE: Industrial LOCATIONS: Coppell and Haslet

114

35W

DETAILS: Both centers opened in late 2013. JOBS: About 1,000 INCENTIVES: Amazon expanded in Texas to settle a sales tax dispute; it will create 2,500 jobs in the state and invest at least $200 million over four years.

635 75

DALLAS

183

820 35W

80 30

12 35E

360

RESTORATION HARDWARE

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161

FORT WORTH SIZE: 850,000 s.f. PRODUCT TYPE: Industrial CITY: Grand Prairie DETAILS: A new Southwest regional distribution hub for the company JOBS: 300 INCENTIVES: Workforce Solutions of Tarrant County 35W helped with an advertising campaign to attract job applicants. The city of Grand Prairie provided a nine-year, 75 percent partial tax abatement on combined business personal property, and real estate improvements, as well as a separate contract to provide a partial sales tax rebate on construction materials used to build the new 850,000-squarefoot distribution center. A Chapter 380 agreement rebate of 50 percent on the first $50 million of taxable Internet sales and 75 percent on taxable Internet sales over $50 million.

175

ACTIVE NETWORK, OMNITRACS

WILLIAMS SONOMA SIZE: 821,500 s.f. PRODUCT TYPE: Industrial CITY: Arlington DETAILS: The company wanted to open a new regional distribution center along the I-20 corridor. JOBS: 100-600 INCENTIVES: A tax abatement was offered to Exeter Property Group, developer of the speculative facility. Additionally, a grant of up to $100,000 was offered for hiring Arlington residents.

BMW OF NORTH AMERICA

SIZE: 282,000 s.f. PRODUCT TYPE: Industrial CITY: Lancaster DETAILS: The new center replaces a regional facility in Mississippi. JOBS: 65 INCENTIVES: 10-year, 50 percent business personal property tax grant from the city of Lancaster.

SIZE: 200,000 s.f.; 100,000 s.f. PRODUCT TYPE: Office LOCATION: Downtown Dallas DETAILS: Both companies, subsidiaries of Vista Equity Partners, are relocating to Dallas from Southern California. JOBS: 1,450 combined INCENTIVES: $8.6 million and $3.9 million from the Texas Enterprise Fund. The companies will also receive a combined package worth nearly $1.5 million from the city of Dallas.

L’OREAL SIZE: 513,000 s.f. PRODUCT TYPE: Industrial CITY: Dallas DETAILS: The new center, which opened in May 2014, is a distribution hub for goods45 produced at L’Oreal’s manufacturing facility in Mexico. JOBS: 100+ INCENTIVES: City of Dallas incentives, valued at about $4.5 million, include a tax abatement and a grant. The city also agreed to reimburse the company for road improvements.

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T TOOLBOX funded by a portion of a city’s sales tax, while larger cities may consider other options, such as property tax abatements.

CASE STUDIES, BIG AND SMALL

Voters in the northern Dallas suburb of Frisco approved a Type A Economic Development Corp. in 1991. Three years later, they approved a Type B tax for lifestyle improvements. The city has been very proactive in using various economic development tools to generate success, says Jim Gandy, president of the Frisco Economic Development Corp. Gandy began working for the FEDC in 1996, when the city had a population of about 10,000 and was generating about $600,000 in annual economic development sales tax revenue. For fiscal 2014, which ended Sept. 30, the city was expecting to bring in more than $16.5 million through its half-cent Type A tax. Gandy cites the development of Toyota Stadium, home of the FC Dallas soccer team, of one of its most successful economic incentive initiatives. In a public-private deal, the Frisco Independent School District invested in the stadium with Hunt Sports Group and uses it for school sporting activities. But the development of Stonebriar Centre was the real game-changer for the city. Announced in 1998, the deal with General Growth Properties called for the development of a 1.6 million-square-foot regional shopping mall. The center opened at 9 a.m. on Aug. 4, 2000—a date still clearly marked on Gandy’s calendar. “Prior to the mall opening, you couldn’t buy a pair of socks in Frisco,” he says. “Once that opened, people were coming to Frisco for the first time and therefore importing new money into the city.” Stonebriar Centre has since sparked the development of 4.5 million square feet of retail space within 1 square mile of the mall, Gandy says. Funds generated from the sales tax have allowed the city to support incentives packages for a wide range of businesses that now make Frisco their home. Among them is a new headquarters for Conifer Health Solutions, a 200,000-square-foot office that opened earlier this year. It was the largest build-to-suit in Frisco’s history and is expected to add up to 2,000 direct jobs. Larger cities have tapped other types of incentives. In downtown Dallas, tax increment financing has allowed for the redevelopment of several

7 2 / D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

aging skyscrapers, says John Crawford, president and CEO of Downtown Dallas Inc. TIFs were critical, for example, in the redevelopment of the old Mercantile buildings, he says. The payout is over a long period, sometimes as long as 10 to 12 years. “These are sizable grants—worth anywhere from $20 million to $60 million each,” Crawford says. “Without question, downtown Dallas would not be where it is today without the TIF capability that we have.”

BOTTOM-LINE IMPACT

Some state incentives are “built-in” and make the state an attractive place to do business, says Rosa at the Dallas Chamber. Texas has no income tax, for example. Others states might offer a huge incentive package that includes a discount on state income tax. “If I’m offering you something at no cost (in Texas), it’s hard for me to give you a discount on that,” Rosa says. “We encourage companies not to measure the value of the incentive package but to consider it in the context of ‘What does it mean for the bottom line?’ ” Texas also has plenty of tax exemptions for manufacturers that are essentially a “right” that they don’t have to negotiate, Rosa says. The state has a sales-and-use tax exemption for manufacturers that fabricate or process tangible property for sale, for example. Manufacturers are also exempt from paying taxes on utility costs incurred during the manufacturing process.

CHALLENGES AHEAD

Despite its strong success, Texas has some challenges ahead on the economic development front. It will need to tackle water shortages, transportation bottlenecks, and border security as it continues to grow. The Dallas Chamber and others are also watching hearings on the state’s Texas Enterprise Fund. The largest TEXAS “deal-closing” fund of its kind in the ENTERPRISE FUND nation, the TEF has paid out multimilProgram totals as of July 2014 lion-dollar grants over the years to woo CAPITAL INVESTMENT big corporate relocations. A legislative BY AWARDEES: $6.5 billion committee is currently reviewing the DIRECT JOBS CREATED: 29,245 fund. TOTAL JOBS CREATED: 101,751 Rosa says the state and its commuTEF AWARDS: $280 million nities must have the tools to help it win SOURCE: Texas Economic Development lucrative projects. It’s a myth, he says Division, Office of the Governor that the state is writing checks for corporations “left and right.” The Dallas Chamber has worked on a number of deals that failed to win TEF funding. “If there needs to be more rigor and more transparency and more rules to secure the ability to have incentives going forward, then that is fine,” Rosa says. “The corporate world and the consulting world don’t mind rigor. What they want is consistency and to understand the process, and whether a particular incentive is something they need to factor into their analysis.” Rosa, who will become chairman of the Texas Economic Development Council next year, will support a legislative platform that provides cities, counties, and the state with competitive tools to attract companies to Texas, he says. Site Selection Group’s Rendziperis says she believes corporate incentives have been essential in the business success of Dallas-Fort Worth and the state of Texas. “We can’t slow down,” she says. “I don’t think cutting back on incentive programs is the answer by any means. We can’t stop competing. We are not only competing within the United States. Global competition is increasing, too.”

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Frisco, Texas is one of the few places where the grass is actually greener. ■

16,000+ acres available for development

■

Skilled, highly-educated workforce of 68,000

■

25 minutes from DFW International Airport

■

Innovative city leadership

■

Competitive incentives for qualified projects

Get here as fast as you can and bring your dreams.

Frisco Economic Development Corporation | 6801 Gaylord Pkwy., Ste. 400 | Frisco, TX 75034 | 972.292.5150 | FriscoEDC.com

STRONG SUPPORT

T TOOLBOX

Here’s a rundown of incentives opportunities in Texas, through federal, state, and local programs. More information can be found at texaswideopenforbusiness.com and texasahead.org.

LOCAL INCENTIVES FREEPORT EXEMPTION: Property tax exemption offered by cities, school districts, and counties, or all three. It applies to various types of property detained in Texas for no more than 175 days, to be transported out of state. Goods must be in Texas for assembling, storing, manufacturing, repair, maintenance, processing, or fabricating purposes. POLLUTION CONTROL AND RENEWABLE ENERGY: A property tax exemption is available for property used for pollution control, and exemptions and deductions are available for renewable energy initiatives.

TAX INCREMENT FINANCING DISTRICT: A tool that local governments can use to publicly finance needed improvements to infrastructure and buildings within a designated area known as a reinvestment zone. The cost of improvements to the reinvestment zone is repaid by the future tax revenues of each taxing unit that levies taxes against the property. TAX ABATEMENTS: A local agreement between a taxpayer and a taxing unit that exempts all or part of the increase in the value of the real property and/or tangible personal property from taxation for a period not to exceed 10 years. More details can be found under the tax code, Chapter 312.

VALUE LIMITATION AND TAX CREDITS: An appraised value limitation may be extended to a taxpayer who agrees to build or install property and create jobs in exchange for an eight-year limitation on the taxable value of the property. The value limitation applies to the local school district maintenance and operations tax (M&O) portion of the property tax and a tax credit. Projects must be located in a reinvestment zone or enterprise zone.

TEXAS ENTERPRISE FUND: The largest “dealclosing” fund of its kind in the nation, the TEF is a cash grant used as a financial incentive tool for projects that offer significant projected job creation and capital investment, and where a single Texas site is competing with another viable out-of-state option. Approved projects apply for state salesand-use tax refunds on qualified expenditures. The refund is related to the capital investment and jobs created. A legislative committee currently is reviewing the future of the fund. TEXAS EMERGING TECHNOLOGY FUND: Created by the Texas Legislature to fund universities and emerging technologies. Categories of funding include commercialization, research, and acquisition of research talent to state universities.

TEXAS ENTERPRISE FUND

TYPE A AND B ECONOMIC DEVELOPMENT CORPORATIONS: Cities located within a county of fewer than 500,000 residents can form economic development corporations and institute a sales tax, if the new combined tax doesn’t exceed 2 percent. Some cities in more populated counties may also participate under certain conditions. Type A is generally for industrial and manufacturing, while Type B is for quality-of-life projects. Voters must approve the creation of a Type A or Type B tax.

ENTERPRISE ZONE PROGRAM GUIDELINES MAXIMUM JOBS CREATED

MAXIMUM POTENTIAL REFUND

MAXIMUM REFUND PER JOB

$40,000-$399,999

$25,000

$2,500

$400,000-$999,999

$62,000

$2,500

$1 million-$4.9 million

125

$312,500

$2,500

$5 million-$149.9 million

500

$1.25 million

$2,500

$150 million-$249.9 million

500

$2.5 million

$5,000

$250 million or more

500

$3.75 million

$7,500

CAPITAL INVESTMENT

ENTERPRISE ZONE: A state-local partnership that allows businesses to apply for state sales and use tax refunds on qualified expenditures. The tool is intended to promote job creation and private investment in economically distressed areas of the state. The level and amount of the refund is related to the capital investment and jobs created. A local community must nominate a project as an Enterprise project. Texas law limits the number of zones created in an area.

STATE INCENTIVES

CHAPTER 380/381 AGREEMENTS: Allow municipalities and counties to offer grants and loans for economic development, or a variety of other economic incentives.

MANUFACTURING EXEMPTIONS: Exemption from state sales-and-use tax for taxpayers who manufacture, fabricate, or process tangible property for sale. It generally applies to tangible personal property involved in the manufacturing process. NATURAL GAS AND ELECTRICITY: Manufacturing companies may be exempt from paying state sales-and-use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property. DATA CENTER INCENTIVES: This relatively new incentive allows data centers that meet certain conditions on or after Sept. 1, 2013, to qualify for an exemption on state sales-and-use tax on certain items necessary and essential to the data center operation.

RESEARCH AND DEVELOPMENT: Companies can choose a state sales tax exemption for property purchased, stored, or used by a person engaged in qualified research or a franchise tax credit. The R&D tax credit took effect on Jan. 1, 2014. Local communities can also consider providing a sales tax exemption for R&D using tools such as a Chapter 380 agreement.

FEDERAL INCENTIVES FOREIGN TRADE ZONES: A restricted-access site located in or near a U.S. Customs Service port of entry that provides users, such as importers, manufacturers, and distributors, with cost-saving benefits.

Local projects under contract for FY 2014-FY 2015 include

COMPANY

CITY

INDUSTRY

DIRECT JOBS

CAPITAL INVESTMENT

TEF AWARD

ESTIMATED TOTAL JOBS

USAA

Plano

Insurance

680

$31.4 million

$5 million

2,201

Toyota

Plano

Automotive HQ

3,650

$345 million

$40 million

6,438

Active Network LLC

Dallas

IT Services

1,000

$13 million

$8.6 million

3,815

Omnitracs LLC

Dallas

IT Services

450

$10 million

$3.9 million

1,717

5,780

$399.4 million

$57.5 million

14,171

TOTALS

SOURCE: texaswideopenforbusiness.com 74 / D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

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HOW TO APPLY FOR INCENTIVES Experts offer their advice on soliciting economic development support BY KERRY CURRY

When applying for incentives, three key factors are critical to success: jobs, investment, and preparation. Companies should show the financial impact their particular project is going to have in a particular jurisdiction—and any financial gaps that exist between Dallas-Fort Worth and competing sites. That’s the advice from Kelley Rendziperis, a principal with Site Selection Group, a global advisory and incentives firm based in Dallas. Sometimes, she says, companies aren’t really aware of what to ask for—or even what the impact of doing business in Texas could be. In Texas, there are a number of incentives opportunities available. Because it’s so complicated—and high impact—businesses often turn to consultants for help navigating the process. Jubal Smith, executive vice president at JLL, says companies must be prepared to come to the bargaining table with details about the impact they’ll have. “What kind of jobs? What is the wage of those jobs and the breakdown on the types of jobs?” he says. Secondly, businesses must be prepared to discuss the investment they’ll make—how much it will spend on real property and personal property. Kim Moore, managing director with Newmark Grubb Knight Frank, says the community will want to know that the company they are dealing with is financially sound. “And they’ll want to make sure it is a win-win,” she says. Most cities will run an economic impact analysis to see if it makes sense to provide incentives. That analysis will look at the direct and indirect impact of the project, including construction, potential home and retail sales, and other factors. Detail is important for providing an accurate analysis, says Moore, a former incentives expert with the city of Dallas. “We’ll ask things like, ‘How many visitors are you going to have a day? How many overnight visitors are you going to have a year? How many nights does the average visitor stay in a hotel?’ ” she says. “We try to look at every single way that the business is going to impact a community.” It’s also important to pay attention to the type of industry seeking incentives, says JLL’s Smith. Companies in specific industries should be prepared to show cities how they are importing new money into the community, not just recirculating money that already exists. As they prepare, corporations should have a clear understanding of how different communities tax businesses. If a company is coming from out of state and is used to a traditional income tax state, for example, they will be surprised—and likely confused—by Texas’ margins tax. Communities have different guidelines, and some have thresholds for job creation or investment that must be met before they will consider incentives. As they begin the incentives process, companies need to learn what the community provides or doesn’t provide.

TIMING IS KEY Incentives are less likely to be given if a location is already selected. Most companies will, at least initially, consider multiple locations. Where businesses sometimes falter, however, is when they determine where they likely will put a facility based on triggers such as labor cost and availability before they ever inform the community that they’re interested in obtaining incentives for their investment. Consultants like Site Selection Group try to let communities know early in the process when they’re being considered for a new project, even if they’re unable to identify the company until later in the process. That allows incentives discussions to begin. “When the press is out there saying the company is already going to make that move, it makes it politically difficult (for the community) to incentivize them to bridge any gaps,” Rendziperis says.

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BREAKING IT DOWN 1 GET EXPERT GUIDANCE 2 KNOW YOUR OPTIONS 3 DEMONSTRATE VALUE AND IMPACT 4 PROVE THAT YOU’RE FINANCIALLY SOUND 5 TIMING IS KEY 6 DON’T LET THE PRESS FIND OUT

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 7 5

SPECIAL ADVERTISING SECTION

ECONOMIC DEVELOPMENT DIRECTORY Looking for a new place for your company to call home? Consider this the start to your search. Dallas-Fort Worth is a great place to do business, and its vibrant and thriving communities offer myriad resources to help companies grow. With its high quality of life, strong state and regional economies, low cost of living, skilled labor force, and lack of corporate and personal income taxes, companies in DFW are well positioned to flourish in a market that ranks among the top three U.S. metropolitan areas for business expansions, relocations, and employment growth. The hardest part of your relocation search might just be choosing between DFW’s various communities, as they each provide unique qualities and impressive benefits. This guide to area economic development agencies at some of the best and most rapidly growing cities can help you get started.

Benbrook is in southwest Tarrant County. Benbrook retains its small-town appeal, while located only minutes from regional attractions such as Fort Worth’s cultural and historic districts, and Granbury’s shopping opportunities. Encompassing the northern shoreline of Benbrook Lake, Benbrook affords outstanding leisure and recreational amenities, acres of lush parkland, and familyfriendly festivals and events. Highly rated for its city services, Benbrook offers superb quality of life for residents, visitors, and businesses. DAVE GATTIS, deputy city manager BENBROOK ECONOMIC DEVELOPMENT CORPORATION / CITY OF BENBROOK 911 Winscott Rd. Benbrook, TX 76126 817.249.3000 dgattis@benbrook-tx.gov benbrook-tx.gov

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Opportunities grow naturally in Cedar Hill, with its vibrant businesses, natural beauty, and a familyfriendly quality of life. With a location just 20 minutes from downtown Dallas, 30 minutes from DFW Airport, and 40 minutes from downtown Fort Worth, Cedar Hill offers outstanding amenities for business growth and relocation. ALLISON J.H. THOMPSON, director CEDAR HILL ECONOMIC DEVELOPMENT 285 Uptown Blvd., Bldg. 100 Cedar Hill, TX 75104 972.291.5132 ext. 3 allisonthompson@ cedarhilltx.com cedarhilledc.com

The City of Dallas Office of Economic Development is a fullservice shop that offers business development and area redevelopment programs, small business assistance, and innovative programs such as the City of Dallas Regional Center and New Market Tax Credits. We can successfully usher a project from beginning to end. The Office of Economic Development offers a range of programs and services to assist developers, investors, and businesses looking to expand or relocate, and small businesses looking to grow. With innovative programs, a supportive business climate and a city full of opportunities, we are ready to make your project a success.

The DeSoto Economic Development Corporation’s experienced team is ready to assist businesses that want to relocate and grow in DeSoto. Our businessfriendly leadership is dedicated to making your site-selection search easy and your investment in DeSoto a success. JEREMIAH QUARLES, CEO DESOTO ECONOMIC DEVELOPMENT CORPORATION 211 E. Pleasant Run Rd. DeSoto, TX 75115 jquarles@dedc.org dedc.org

HAMMOND PEROT, assistant director, Business Services CITY OF DALLAS OFFICE OF ECONOMIC DEVELOPMENT 1500 Marilla St. Dallas, TX 75201 214.670.1685 joseph.perot@ dallascityhall.com dallas-ecodev.org

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SPECIAL ADVERTISING SECTION

Frisco is well-located in the northern suburbs of the thriving Dallas-Fort Worth metropolitan area. U.S. Census Bureau data shows Frisco is the second-fastest growing city in the United States, with a 307 percent population increase since 2000. A dynamic business climate and highly educated workforce have attracted many companies in the industry clusters of financial services, medical services, software development, and information technology. JAMES L. GANDY, president FRISCO ECONOMIC DEVELOPMENT CORPORATION 6801 Gaylord Pkwy., Ste. 400 Frisco, TX 75034 972.292.5150 jgandy@friscoedc.com JOHN M. BONNOT, director of economic development jbonnot@friscoedc.com 972.292.5143 friscoedc.com

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The Northeast Loop 820 widening project has opened up more than 300 acres of land for commercial and mixed-use development on both sides of the freeway in Haltom City. New residential will be added to the area as well. To further stimulate development, the corridor is designated a Tax Increment Finance Zone.

The McKinney Economic Development Corporation (MEDC) was created in 1993 to support the development, expansion, and relocation of new and existing companies. The MEDC is an organization with a mission to work to create an environment in which communityoriented businesses can thrive.

SUSAN WHITE, business development coordinator HALTOM CITY ECONOMIC DEVELOPMENT CORPORATION 5024 Broadway Ave. Haltom City, TX 76117 swhite@haltomcitytx.com econdev@haltomcitytx.com 817.222.7723 haltomcitytx.com

JIM WEHMEIER, president and CEO MCKINNEY ECONOMIC DEVELOPMENT CORPORATION / CITY OF MCKINNEY 5900 S. Lake Forest Dr., Ste. 110 McKinney, TX 75070 info@mckinneyedc.com 972.547.7651 mckinneyedc.com

Rockwall Economic Development Corporation assists new and existing companies, both large and small, in the development, modernization, and expansion of business in a booming global economy. We are dedicated to your company’s growth through incentive programs, financial assistance, comprehensive sites, and resource collaboration. While collaborating with city leaders, we have secured the necessary infrastructure, services, and hightech amenities to maintain thriving, profitable businesses. Rockwall has big-city conveniences yet maintains a small-town atmosphere. Rockwall offers quality of place and peace of mind.

The mission of the Sachse Economic Development Corporation is to act on behalf of the City of Sachse in promoting and developing authorized projects, while supporting economic development activities to retain, expand, and attract businesses for the purpose of diversifying the tax base and improving the quality of life of the citizens of Sachse. LESLYN BLAKE, CEO 3815 Sachse Rd., Bldg. B Sachse, TX 75048 469.429.4764 lblake@cityofsachse.com sachseedc.com

SHERI FRANZA, president and CEO ROCKWALL ECONOMIC DEVELOPMENT CORPORATION 2610 Observation Trl. Rockwall, TX 75032 972.772.0025 sfranza@rockwalledc.com rockwalledc.com

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C COMMUNITY The Dallas Regional Chamber recognizes the following companies and organizations for their membership investment at one of our top levels. Bold-faced companies are represented on the DRC Board of Directors. For more information about the benefits of membership at these levels, call 214.746.6600 .

STRATEGY BKD Chase Texas Instruments

CATALYST AT&T Baylor Scott & White Health Capital One Bank Chickasaw Nation Comerica Bank Dallas/Fort Worth Int’l Airport Hunt Consolidated, Inc. JC Penney Company, Inc. MV Transportation ONCOR Tom Thumb Food & Pharmacy Wells Fargo

ADVOCATE 7-Eleven, Inc. Akin Gump Strauss Hauer & Feld Amegy Bank of Texas Atmos Energy Corporation Axxess Baker Botts L.L.P. BB&T BBVA Compass CBRE Group, Inc. Children’s Medical Center Citi Copart Corrigan Investments, Inc. Dallas Morning News Dal-Tile Corporation Deloitte LLP Energy Future Holdings Exxon Mobil Corporation EY FedEx Office Fidelity Investments Fluor Corporation Frito-Lay North America Forest City Texas Inc. GE Capital Glazer’s

Golden Living Haynes and Boone, LLP Highland Capital Management LP HKS IBM Corporation Jones Day KPMG LLP Kroger Food Stores Littler Mendelson, P.C. Locke Lord LLP Lockheed Martin Luminant Medical City Dallas Hospital/ Medical City Children’s Hospital Methodist Health System Microsoft Corporation NEC Corporation of America Omni Dallas Hotel PwC Reliant Energy Rent-A-Center Sheraton – Dallas SunTrust Robinson Humphrey SWS Group, Inc. TDIndustries Tenet Healthcare Corp. Texas Central High-Speed Railway, LLC Texas Health Resources Texas Scottish Rite Hospital for Children Thomson Reuters, Tax & Accounting TM Advertising TXU Energy UT Southwestern Medical Center ViewPoint Bank Winstead PC

BOARD OF ADVISORS Abbott Labs Accenture Aetna AIG Airbus Helicopters, Inc.

7 8 / D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

Alcatel-Lucent Andrews Distributing Company Andrews Kurth LLP Army & Air Force Exchange Service Arthur J Gallagher & Co. Austin Industries Baker & McKenzie, LLP Bank of America Bank of Texas, N.A. BDO USA, LLP The Beck Group Blue Cross and Blue Shield of Texas Boy Scouts of America Bracewell & Giuliani LLP Brinker International, Inc. Brinkmann Corporation Bury C.C. Young Cassidy Turley CCS Medical CHRISTUS Health CIGNA Healthcare City Credit Union Civitas Capital Group ClubCorp Inc. Coca-Cola Refreshments Colgate Oral Pharmaceuticals Colliers International Composite Technology Inc. CompuCom Systems, Inc. Consolidated Communications Cook Children’s Healthcare Corgan Associates, Inc. CP&Y, Inc. Cresa Dallas LLC Cushman & Wakefield of Texas, Inc. Dallas County Community College District Dallas Cowboys Football Club Dallas HD Films Dallas Marriott City Center Dallas Stars Hockey Club Dean Foods Company Dell Services

Dialog Direct E Smith Realty Partners Ebby Halliday, Realtors Edelman Public Relations Worldwide Emerson Process Management EN Consulting, Inc. Eulen America The Fairmont Dallas Fisher & Phillips, LLP Flowserve Corporation Fossil Freeman Frost Bank Fujitsu Network Communications, Inc. Furniture Marketing Group Gardere Wynne Sewell LLP Generational Equity Gensler Global Power Equipment Goldman Sachs Grant Thornton LLP Greatbatch, Inc. Greenberg Traurig, LLP Gulfstream Aerospace Corp. Hall Financial Group Hill & Wilkinson Hilton Anatole Hilton Worldwide HNTB Corporation Holland & Knight LLP HollyFrontier Corporation Holman Boiler Works, Inc. HOLT CAT Humana Inc. InStaff Interceramic, Inc. International Leadership of Texas Jackson Walker L.L.P. Jacobs JE Dunn Construction JLL Johnson Controls Inc. LegacyTexas Bank LeTourneau University Lincoln Property Company FA L L 2 0 1 4

MHBT, Inc. Midway Press, LTD Minerva Real Estate Mission Foods Munck Wilson Mandala, LLP Munsch Hardt Kopf & Harr, P.C. Neiman Marcus Nestle Waters North America Norton Rose Fulbright The Novo Group NTT Data, Inc. NYLO Hotels, LLC ORIX USA Corporation Parker University Parkland Foundation PDS Technical Services People Performance Resources Pioneer Natural Resources, LLC PlainsCapital Bank Pollock Paper Distributors Publicis Dallas Rexel Holdings USA RIB U.S. Cost Rosewood Crescent Hotel Schneider Electric SimplexGrinnell Slalom Consulting Softlayer Technologies Inc. Southern Methodist University Southwest Airlines Southwest Office Systems, Inc. Squire Patton Boggs (US) LLP Staff elbach, Inc. State Farm Insurance Companies Strasburger & Price, LLP Strategic Staffing Solutions STRAVIS Consulting Symantec Corporation TDJ Enterprises Texas Oncology Texas Woman’s University Thompson & Knight LLP Time Warner Cable TopGolf Town of Addison Trane Commercial Systems TrustPoint Management Turner Construction Company UMB Bank N.A. UnitedHealthcare University of Texas at Arlington URS Corporation Verizon Wireless Village Green Holding, LLC Vinson & Elkins L.L.P. Weber Shandwick Southwest WFAA-TV Whitley Penn, LLP WinStar World Resorts Women’s Food Service Forum FA L L 2 0 1 4

LEAD AAA Texas, Inc. Ackerman McQueen Acme Brick Company Adolfson & Peterson Construction Adolphus Hotel Advocare International, L.P. Allegro Development Alliance Data AlliedBarton Security Services Alvarez & Marsal American Bank of Commerce APAC - Texas, Inc. Arise Virtual Solutions Ash Grove Cement Company Ashton Atkins of North America Automatic Data Processing Aviall, A Boeing Company Bain & Company, Inc. Balfour Beatty Construction BancTec, Inc. Belk Berger Engineering Co. Beshear Group Bethel University Boka Powell, LLC Boston Consulting Group Brunswick Group, LLP BullsEye Telecom Careington International Corporation Carrington, Coleman, Sloman & Blumenthal, L.L.P. Carter Financial Management Champion Partners Chandler Signs L.L.P. CityDoc Urgent Care Coldwell Banker Residential Brokerage Commercial Metals Company Community Trust Bank Concentra Consumer Credit Counseling Service of Greater Dallas, Inc. Crowe Horwath LLP CyrusOne Dallas Center for Rehabilitation Dallas Foundation Dallas Lighthouse for the Blind Dallas Mavericks Dalworth Restoration Databank, Ltd. DeGolyer and MacNaughton Denali Construction Services Duro-Last Roofing, Inc. ECS Refining, Recycling and Asset Management EnLink Midstream LLC Essilor of America, Inc. Estrada, Hinojosa & Company, Inc. Evergreen Life Services

Federal Reserve Bank of Dallas Fonality, Inc. FPL Fibernet, LLC Fresh Point Gables Residential Trust Guardian Mortgage Co. Gateway Canyons Resort LLC George W. Bush Foundation Gibson, Dunn & Crutcher LLP GLP & Associates Halff Associates, Inc. Hart Group, Inc. Hazel’s Hot Shot, Inc. Hill + Knowlton Strategies Holmes Murphy and Associates HRSmart Huawei Technologies Hunt Construction Group Hunton & Williams LLP Huselton, Morgan & Maultsby, PC Hyatt Regency Dallas Hyatt Regency DFW iFLY Dallas Indoor Skydiving Imagetek Office Systems Imaginuity Interactive, Inc. In-N-Out Burger JMP Engineering Joule, A Luxury Collection Hotel Kaplan College - Dallas Kimberly-Clark Corporation LBJ Infrastructure Group LLC Le Meridien Dallas, The Stoneleigh Linebarger Goggan Blair & Sampson, LLP Lucas Group Manhattan Construction Company Marsh USA, Inc. Mary Kay Inc. McAlister’s Deli – Dallas McKinsey & Company, Inc. Metl-Span, LLC Monitronics International, Inc. Monogram Apartment Collection MW Logistics, LLC MWH Americas, Inc. Networking Results, Inc. New York Life Regional Headquarters North Central Surgical Center Hospital North Highland Company Ocean Prime Restaurant Office Depot Business Solutions OHL Palm Restaurant Park Inn by Radisson Pegasus Community Credit Union Peter O’Donnell, Jr.

Polsinelli PC Post Properties, Inc. ProBuild Prudential Asset Resources Questcare Medical Services Ragan’s HOPE Foundation The Ritz-Carlton, Dallas River Ranch Educational Charities Russell Reynolds Associates, Inc. Schwan’s Home Services, Inc. Sewell Automotive Companies Shannon Gracey Ratliff & Miller, LLP Sleep Apnea Treatment Centers of America Smart Cookie Southwest International Trucks Sparks Agency Spine Physicians Institute Spring Hill Suites Dallas Downtown – West End State Fair of Texas Structure Tone Southwest Sun Holdings, LLC Supreme Lending TelePacific Communications Texas A&M University Commerce Texas Brand Bank Texas Institute for Surgery Texas Rangers Baseball Club Towers Watson TracyLocke Trinity Basin Preporatory Tuesday Morning Corp. TXI/Texas Industries, Inc. Union Bank Union Pacific Railroad United Surgical Partners International University of South Carolina Career Center University of Texas at Dallas USAA U.S. Memory Care Virgin America Airlines Vision33 VOX Global W Dallas – Victory Hotel Walnut Hill Medical Center Walton Development and Management Warrior Group, Inc. Weaver Westin Galleria Dallas Weston Solutions Winston School Woodbine Development Corporation Younger Partners Zale Corporation

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C COMMUNITY

IMPACT INVESTORS

Each year The Real Estate Council receives both financial and volunteer support from funding partners and member companies. Special thanks to each of you for contributing your time, talent, and resources to help us achieve our mission.

CHAMPION’S CIRCLE

PRESIDENT’S CIRCLE

Hillwood Investments

Bank of America Charitable Foundation, Inc.

BBVA Compass

Hudson Americas

Breitling Royalties

Jackson Walker LLP

Bank of Texas

Comerica Bank

BURY

Corinth Properties

Kane Russell Coleman & Logan PC

Chicago Title Company/ Fidelity National Financial (FNF)

Crow Holdings Capital Partners, LLC

Citigroup Foundation Compatriot Capital HFF Hunt Realty Investments, Inc

CHAIRMAN’S CIRCLE Bank of America Merrill Lynch Balfour Beatty Construction Behringer

Paul Rowsey, Chairman Sue Ansel, Vice Chairman

KDC

Gables Residential

Kimley-Horn and Associates, Inc.

Goldman Sachs

Lincoln Property Company

Grant Thornton

Locke Lord LLP

Invesco Real Estate

Lowery Property Advisors

KeyBank

Mavin F. Poer & Company

KPMG Regions Bank

Mill Creek Residential Trust LLC

ViewPoint Bank

PlainsCapital Bank

Wells Fargo

Rampart Construction Roger Staubach

Butler Burgher Group

BENEFACTOR’S CIRCLE

CBRE

Amegy Bank

Deloitte.

American National Bank of Texas

Stream Realty

EY Granite Properties

Sue Ansel

Texas Capital Bank

Holt Lunsford Commercial

Ares Management LLC

Thackeray Partners

Jackson-Shaw

Beck Group

Thompson & Knight

JLL

Diane Butler

Tonti Properties

Jones Day

Capital One Bank

Trinsic Residential Group

JP Morgan

Cassidy Turley

UBS Financial Services Inc.

Matthews Southwest/ Matthews Paradise Development

Chief Partners LP

UCS Group, LLC

Corgan E2M Partners, LLC

Venture Commercial Real Estate, LLC

Fischer & Company

Michele Wheeler

Frost

Winstead PC

Munsch Hardt Kopf & Harr PC NorthMarq Capital Republic Title of Texas, Inc. Schwob Companies Stewart National Title Services

Stockdale Investment Group, Inc. Streetlights Residential

Gaedeke Group LLC Gardere Wynne Sewell LLP GE Capital Real Estate

The Howard Hughes Corporation

Good Fulton & Farrell

US Bank

Haynes and Boone, LLP

Hart Advisors Group, LLC

8 0 / D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W

Learn more at recouncil.com or by calling 214.692.3600.

WHO WE ARE 1,500 commercial real estate professionals strengthening our industry and community by connecting members, developing leaders, advocating for business and investing financial and human resources in good works.

JOIN US AND BUILD THE CITY YOU’VE IMAGINED

The Real Estate Council is Texas’ largest and most influential organization of its kind representing more than 1,500 members and 500 companies. We strengthen our industry and community by connecting our members, developing leaders, advocating for business, and investing financial and human resources in good works. JOIN TODAY FOR 2015 AND ENJOY MEMBER BENEFITS FOR THE BALANCE OF 2014. Visit recouncil.com/join or call 214.692.3600 and become a member now so you won’t miss these upcoming events: October 2, 2014—Speaker Series: Gary Kelly, CEO Southwest Airlines October 9, 2014—Young Guns: View from the Top October 23, 2014—Giving Gala: Under the stars at the Hilton Anatole Sculpture Park December 4, 2014—Speaker Series: Capital Markets, moderated by JLL FA L L 2 0 1 4

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 8 1

L LEADERSHIP

THE PEOPLE DEVELOPER For PegasusAblon’s Mike Ablon, inspiration comes from helping shape the next generation of leaders BY JONATHAN BALL

For someone who has been a driving force in developing the Dallas Design District—a bustling area north of downtown, with more than 1,000 multifamily residences and a number of restaurant and retail establishments—Mike Ablon speaks rather humbly about his impact and success. “The only way they allow you to become a real estate developer is if you flunk out of three other professions,” he jokes. A graduate of The Real Estate Council’s 1997 Associate Leadership Council (ALC) program, Ablon credits his experience as an ALC fellow for helping him to see a bigger picture—one beyond his professional responsibilities. “Each of us in the program has a

moral responsibility to give back,” says Ablon, principal at PegasusAblon. “But you don’t want to run around trying to save the world; you want to focus on where your skills and natural inclinations will make the greatest impact.” Ablon says he felt his calling was to further develop the initiative for incoming fellows. Founded in the mid-1990s, the ALC is a leadership development program for commercial real estate professionals who are 27 to 37 years old. From teaching programs on public and private partnerships to leadership training, Ablon says his “passion is focused on exposing others to a range of issues and problems—and helping them to discover what resonates most.” MIKE ALBON

ASSOCIATE LEADERSHIP COUNCIL CLASS OF 2014-2015 The Real Estate Council is proud to announce the new Associate Leadership Council class of 2014-2015. Congratulations to all, and thanks to the ALC Steering Committee members for their work in selecting such a fantastic class. David Brock - Frost Clint Chaffin - Spire Realty Group Katie Cleaveland - Goldman Sachs Haley Collard - Rosewood Property Company Greg Collins - Berkshire Group Michael Collins - MedCore Partners Harlan Davis - CBRE Marti DuBuisson - Corgan Dustin Dulin - Jones Lang LaSalle Susie Elsener - Crow Holdings Capital Partners, L.L.C.

Cole Evans - Winstead PC Phill Geheb - Munsch Hardt Kopf & Harr P.C. Mack Haisten - Bank of Texas Emily Henry - TBG Partners Sarah Hipp - Compatriot Capital Kate Humphries - Balfour Beatty Construction Alex John - HKS Mitch Knicely - Hudson Advisors Dylan Leonoudakis - Realty Capital Jason McLaughlin - ARCO/Murray Design Build

ASSOCIATE LEADERSHIP COUNCIL

ALC STEERING COMMITTEE: 2014-2015 Class Chair Nathan Golik, Carter Validus 2014-2015 Vice Chair Jeff Montgomery, Republic Title of Texas, Inc. Evan L. Beattie, Good Fulton & Farrell Holden Heil, Chicago Title Company/ Fidelity National Financial (FNF) Sarah Hinkley, Peloton Commercial Real Estate

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Clayton Newman - Swingle, Collins & Associates Robin Offutt - Deloitte. Kasey Ratliff - Strasburger & Price LLP Campbell Roche - HFF Jared Rooker - Perkins + Will David Sibley - Cobalt Capital Partners Megan Smith - Trammell Crow Residential Miller Sylvan - JPI/TDI Companies Amber Thomas - KeyBank Marcus Walther - NorthMarq Capital

Jill Ibison, Corgan

The Real Estate Council’s Associate Lead-

Steve M. Modory, Champion Advisory Partners

ership Council is a 10-month leadership

Sam Peck, Crow Holdings Capital Partners, L.L.C.

development program for 27- to 37-year-

Rick Perdue, Mill Creek Residential Trust L.L.C.

old commercial real estate professionals

John Riggins, MYCON General Contractors

designed to inspire and educate our fu-

Ace Roman, Granite

ture leaders. For more information, visit

Deren Wilcox, Bury

recouncil.com.

FA L L 2 0 1 4

ASSOCIATE LEADERSHIP COUNCIL CHAIRMAN’S RECEPTION Paul Rowsey, chairman of The Real Estate Council, recently hosted a reception at the Dallas Country Club to welcome the ALC Class of 2014-2015. Also joining in the fun were members of the steering committee, which selected the class, and TREC officials. Nathan Golik with Carter Validus is the 2014-2015 ALC Class Chairman; Jeff Montgomery with Republic Title of Texas Inc. is Vice Chairman. Congratulations to all!

MEGAN SMITH, HALEY COLLARD, SARAH HINKLEY, JOHN RIGGINS, MICHAEL COLLINS

KATIE CLEAVELAND, SARAH HIPP, AMBER THOMAS

COLE EVANS, CLAYTON NEWMAN

FA L L 2 0 1 4

THE REAL ESTATE COUNCIL CHAIRMAN PAUL ROWSEY

EMILY HENRY, HALEY COLLARD, ROBIN OFFUTT, KATE HUMPHRIES

THE REAL ESTATE COUNCIL PRESIDENT LINDA MCMAHON, ALC CHAIR NATHAN GOLIK

JILL IBISON, ACE ROMAN

D A L L A S - F O R T W O R T H R E A L E S TAT E R E V I E W / 8 3

CALENDAR OF EVENTS Make plans now to attend these upcoming real estate and business events. For information on programs hosted by The Real Estate Council, visit www.recouncil.com. For details on events presented by the Dallas Regional Chamber, visit www.dallaschamber.org.

OCTOBER.. OCTOBER 2 Bank of Texas Speaker Series, featuring Gary Kelly, CEO of Southwest Airlines. 7:30-9:30 a.m., Belo Mansion. Southwest Airlines Chairman and CEO Gary Kelly will discuss the end of the Wright Amendment and why it’s a game-changer for Dallas-Fort Worth. (TREC)

OCTOBER 3 19th Annual Women’s Business Conference, featuring Robin Roberts of Good Morning America. 8 a.m.-2 p.m., Hilton Anatole. This half-day professional development event will also feature Marni Walden of Verizon Wireless, along with four breakout sessions on current topics of interest. (DRC)

OCTOBER 23 Giving Gala, 6-10:30 p.m., Hilton Anatole. This popular Westernthemed event features networking under the stars in the hotel’s sculpture garden. Along with entertainment by Roger Creager, the evening will feature a live auction of playhouses designed and built by members. The gala raises funds to help fulfill TREC’s mission of making a positive impact in Dallas’ neediest neighborhoods. (TREC)

OCTOBER 30 ALC Alumni Association networking event, 5:307:30 p.m., Akola Project in Deep Ellum, catered by Pecan Lodge. (TREC)

NOVEMBER.. NOVEMBER 6

OCTOBER 16

Economic Outlook Summit, featuring economist Dr. Ray Perryman, 7:30-10 a.m., Southern Methodist University. Along with Perryman, who will offer his economic outlook and discuss emerging trends in DFW, this event will feature Scott Nyquist, who will present recent research by the McKinsey Global Institute. (DRC)

PAC Reception, featuring Harvey Kronberg, 5:307 p.m., Park City Club. PAC members are invited to a special reception featuring Harvey Kronberg of Quorum Report. (TREC)

2014 Blueprint Awards, 11:30 a.m.-1:30 p.m., location TBD. The annual awards program celebrates companies that have made a positive impact in the local

OCTOBER 9 Young Guns View From the Top, 5:30-7:30 p.m., Tower Club. Industry leaders will participate in a roundtable discussion hosted by TREC’s Young Guns, where young Dallas professionals can ask questions and gain insights from the city’s movers and shakers. (TREC)

NOVEMBER 13

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economy through job growth and location and expansion activities, as well as those companies and organizations contributing to the vitality of the Dallas region. Categories range from workforce growth to innovation catalyst. (DRC)

DECEMBER.. DECEMBER 2 State of the City, featuring Dallas Mayor Mike Rawlings, noon1:30 p.m., location TBD. Mayor Rawlings is known for being a strong supporter of revitalization programs in Dallas and maintaining a vibrant, growing business community. In his annual address, he will update attendees on key projects around the region—and offer his insights and vision for the city in 2015. (DRC)

DECEMBER 4 Bank of Texas Speaker Series, featuring a capital markets panel moderated by JLL. 7:30-9 a.m., Belo Mansion. (TREC)

DECEMBER 11 Leadership Dallas Alumni Annual Leadership Lunch, noon-1:30 p.m., The Adolphus. This luncheon will feature Lucy Billingsley of Billingsley Co., who will discuss her career and leadership philosophies with Leadership Dallas alumni and DFW executives. (DRC)

L LEADERSHIP

ILLUMINATING LEADERSHIP For Oncor executive Debbie Dennis, Leadership Dallas helped unlock the power of public-private partnerships. BY JONATHAN BALL

If Debbie Dennis, senior vice president of human resources and corporate affairs at Oncor, had any doubts as to the power of personal relationships, she was certainly convinced after participating in the Dallas Regional Chamber’s Leadership Dallas program in 2009. At the time, Dennis was heading up customer service projects at Oncor, a residential and commerDEBBIE DENNIS cial electricity giant serving 10 million customers statewide. Leadership Dallas “entailed working closely with City Council members and officials, and shaped my ideas regarding community engagement, including the power of private and public partnerships,” she says. During Dennis’ tenure in the program, Oncor Chairman and CEO Bob Shapard, along with then major Tom Leppert and his successor, Mike Rawlings, developed MyFi Dallas, a program focused on making lasting improvements in the way Dallas children eat, play, and live. Dennis has stayed involved with the chamber program and now serves as chair-elect of its alumni board. “The Leadership Dallas experience, and people I met, had big impact on how we at Oncor interact and involve the community,” Dennis says. “And now, in my board role, I’m passionate about being able to guide the program to develop the next generation of leaders.” Leadership Dallas, the flagship program of the Dallas Regional Chamber for leadership development, is aimed at increasing the leadership pool for community activities in the Dallas area. Visit dallaschamber.org for more information.

FA L L 2 0 1 4

610 Uptown Class A Office

Build-to-suit Sites Available

THIS is Cedar Hill

L A N D OF OP P OR T U N I T I E S Cedar Hill is booming with new development and has become a prime location for industrial, commercial, residential, retail and recreational opportunities. Located in the beautiful hill country environment of Joe Pool

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over 3 million sf of retail, and Class A office space

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Lake and the Cedar Hill State Park, Cedar Hill is the natural choice for those who want big-city amenities with a small-town ambience.

° 20 minutes from Downtown Dallas ° US 67/Rail-served Business Park 285 Uptown Boulevard • Bldg 100 • Cedar Hill, Texas 75104

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