One Arts Plaza. Dallas, Texas. Project Type: Mixed Use Three Uses or More. Volume 38 Number 09. April June Case Number: C PROJECT TYPE

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1 Click images to view full size One Arts Plaza Dallas, Texas Project Type: Mixed Use Three Uses or More Volume 38 Number 09 April June 2008 Case Number: C PROJECT TYPE When the 7-Eleven corporation announced it was leaving downtown Dallas for the suburbs, municipal leaders and the private development community moved to create a plan to keep it in the city. The result was One Arts Plaza, the first high rise constructed downtown in more than 18 years. The mixeduse structure contains 498,000 square feet (46,266 sq m) of office space, 61 luxury condominiums, 1,161 parking spaces, and a restaurant row for the neighborhood that features five local eateries. The Billingsley Company s $158 million, 24-story building is located in the city s Arts District, a masterplanned area comprising performance halls and museums. LOCATION Central Business District SITE SIZE 4.03 acres/1.63 hectares LAND USES Office Buildings, Condominiums, Restaurants, Retail KEYWORDS/SPECIAL FEATURES Central City Downtown Housing

2 Infill Development PROJECT COMMERCIAL ADDRESS 1722 Routh Street Dallas, Texas PROJECT RESIDENTIAL ADDRESS 1717 Arts Plaza Dallas, Texas WEB SITE DEVELOPER Billingsley Company Carrollton, Texas ARCHITECT Corgan Associates Dallas, Texas DESIGN ARCHITECT Morrison Seifert Murphy Dallas, Texas GENERAL CONTRACTOR Balfour Beatty Construction Dallas, Texas GENERAL DESCRIPTION One Arts Plaza (One Arts) is the first phase of a three-part mixed-use project that is intended to anchor the east end of downtown Dallas, Texas. It is located in the city s Arts District, a master-planned area that is home to several performance halls and museums. The 24-story structure contains 27,000 square feet (2,508 sq m) of

3 restaurants and other retail space on the ground floor, 498,000 square feet (46,266 sq m) of office space, 61 luxury condominiums on the top seven floors, and 1,161 parking spaces. One Arts was developed by Billingsley Company (Billingsley), an organization founded by former Trammell Crow employees Henry Billingsley and his wife, Lucy Billingsley, the daughter of Trammell Crow. A long-term hold developer, the firm develops and manages retail, office, multifamily, industrial, and townhouse products in the Dallas region. Billingsley Company is a land developer that buys land in anticipation of future growth. THE ARTS DISTRICT One Arts is located on a 4.03-acre (1.63-ha) site in the Arts District in downtown Dallas. The Dallas/Fort Worth Metropolitan Statistical Area (MSA) contains 12 counties and 6.1 million people, making it the fourth-largest MSA in the country. Downtown Dallas is bound by Interstates 35, 30, and 34 and the Woodall Rogers Freeway (Texas Route 366). The Arts District lies at the north end of downtown and is bordered by Route 366, St. Paul Street, Ross Avenue, and One Arts. Now home to Dallas s Arts District, the area once was an African American neighborhood, and its heritage is evident today. The district s Booker T. Washington School was originally a black high school, and St. Paul United Methodist Church, a historic African American church, has been there since The internationally acclaimed Black Dance Theater calls the neighborhood s YMCA building home. By the 1960s, the area had fallen into a state of disrepair, the African American community had left, and for the next several decades auto dealerships and empty lots occupied much of the land. In 1978, a report commissioned by the Dallas Museum of Art proposed creating an arts district by relocating the city s symphony, opera, and art museum to the area. The plan proposed locating the institutions along a 0.3-mile-long (0.18-km-long) stretch of Flora Street, less than one mile (1.6 km) from the heart of downtown. The report sparked a 25-year political and civic effort to execute the plan. Located at opposite ends of Flora Street, the Dallas Museum of Art and One Arts bracket the Arts District. Major arts institutions line the pedestrian-friendly boulevard between these two landmarks. They include the Meyerson Symphony Center, the Trammell & Margaret Crow Collection of Asian Art, the Nasher Sculpture Center, and the $338 million Dallas Center for the Performing Arts. As of July 2008, a new campus for the Booker T. Washington High School for the Performing and Visual Arts is under construction. It is a nationally recognized arts magnet school whose alumni include recording artists Norah Jones and Erykah Badu. Also under construction is the City Performance Hall, the final institutional facility planned for the Arts District. The Art District skyline is defined by buildings designed by four Pritzker Prize winners I.M. Pei, Renzo Piano, Norman Foster, and Rem Koolhaas. DEVELOPMENT PROCESS When it was purchased by Trammell Crow during the early 1980s, the site was mostly vacant except for a few minor buildings. Downtown office development has stopped short of the Arts District. The first high rise constructed in downtown in over 18 years, One Arts is situated on 4.03 acres (1.63 ha) of a ten-acre (4.05-ha) site controlled by Billingsley. Plans have been drafted for a Two Arts and Three Arts, but both of these additional phases are dependent on the market and anchor tenants. Since 1927, 7-Eleven s corporate offices have been located in Dallas. The company built its own headquarters for 900 employees at Cityplace Center in 1989, roughly three miles (4.8 km) north of downtown. In 2004, 7-Eleven sold the building and executed a three-year lease, planning to move to a suburban office location in Dallas s mayor at the time, Laura Miller, turned to Billingsley to help keep the company s headquarters within Dallas. While the city could offer tax benefits, it turned to Billingsley for a suitable headquarters location. Securing 7-Eleven s headquarters as a major office tenant made One Arts Plaza financially possible. Billingsley s site was sufficiently deep and wide to accommodate a building with 38,000-square-foot (3,530-sq-m) floor plates. The convenience store company sought large contiguous office space usually available only at suburban sites for

4 greater efficiency. One Arts custom design allows for suburban office efficiencies in an urban environment. A second important consideration for 7-Eleven was timing: with its lease due in 2007, on-time delivery of the building was critical. Since Billingsley already controlled the land and the city supported the project, the only major risk to timing would be the construction process. Planning for One Arts started in December 2004 and construction was underway six months later. As of July 2008, the project is complete except for three restaurants, which are leased and expect to open in six to eight months. FINANCING The total development cost for One Arts was approximately $159 million: $11 million for land, $4 million in site improvements, $114 million in hard costs, and $30 million in soft costs and additional fees. Guaranty Bank and Wachovia provided 80 percent of the construction financing, or $130 million at LIBOR (London Interbank Offered Rate) plus 135 basis points. The developer contributed $29 million in equity $18 million in cash and $11 million in land value because the site had significantly increased in value since the early 1980s, when it was purchased. The construction financing was segregated between funds for the office and commercial uses and the residential condos. Project financing was facilitated by the 7-Eleven office lease and the city contract to lease parking spaces. One Arts was financed without preselling any residential units. DESIGN Because of the project s location, the design was a challenge for the development team. The site sits at the head of the Arts District, home to bold institutional buildings designed by celebrity architects. One Arts design would have to fit in with that of these neighbors and follow a 1982 master plan for the area, all within a tight time frame. While most surrounding buildings were developed by nonprofit entities with donations or tax dollars, One Arts needed to make an architectural statement on a private sector budget. Billingsley tapped locally based Morrison Seifert Murphy the first Texas architecture firm to play a role in shaping the Arts District for the task. The team s solution proposed the creation of a white tower with clean lines, carefully articulated to break the mass. The double-height lobby and residential balconies are centered on Flora Street, the Arts District s major axis, although the entire building is located slightly off center from this street. The residential unit balconies form a sixstory cube punctuating the facade of the upper floors. Highlighted with white LED lights, the cube appears to be floating above downtown at night. The deep floor plates that the office tenants desired caused a problem for the condominiums on the upper levels. In order to avoid deep but narrow condo units, the facade was stepped back at the residential levels. The spaces created operate as outdoor rooms, complete with fireplaces. The interiors of the units follow the exterior s minimalist design. The ground floor contains a formal lobby for office users, retail and restaurant space, a public plaza, and a 7- Eleven flagship convenience store. The office entrance and residential entrance are on opposite sides of the building, but are connected through an internal corridor. The office lobby showcases a large, 20-foot-tall (6.1-mtall) sculpture and multimedia artwork displayed on a wall of digital screens. The goal of the lobby design was to create a timeless aesthetic for easy maintenance and to reduce the need for future renovation. As a long-term holder of real estate, Billingsley consulted with maintenance staff on the design to minimize costs. The residential lobby is also simple and features commissioned art. At the ground level of the building is the aforementioned 2,400-square-foot (223-sq-m) flagship 7-Eleven retail store. It is the only place in the Arts District where residents can buy a loaf of bread or a bottle of wine. The store is also frequented by students from the arts high school and construction workers from adjacent projects.

5 Two low-rise retail buildings radiate from the base of the tower, enclosing a central courtyard and public space fronting Flora Street. All the retail at the ground level is restaurant space with seating in the outdoor courtyard, which contains a fountain. This layout follows the guidance of the Sasaki Plan, the 1982 master plan that officially created the Arts District and spells out its design guidelines. Although only a limited portion of One Arts Plaza technically fell within the Sasaki guidelines, Billingsley applied them to the entire site. The plan specified that buildings should be pulled back from Flora Street, the primary thoroughfare, and limited structures surrounding pedestrian corridors to two stories. The city also requested the inclusion of a 20,000-square-foot (1,858-sq-m) public plaza at the entry of One Arts. The final design comprises a 35,000-square-foot (3,252-sq-m) plaza with a 20,000-square-foot (1,858-sq-m) easement dedicated to the city to guarantee public access. The city also required additional evening parking, and leases 600 spaces from One Arts for evening use for the City Performance Hall. There are three key parking areas: 200 spaces below grade for residents and commercial tenants, and approximately 1,000 spaces in structured parking on levels two through six. This parking arrangement provides 3.5 spaces per 1,000 square feet (92.9 sq m) of space. PERFORMANCE The city of Dallas achieved its goal of keeping the 7-Eleven headquarters within city limits, and the convenience store company has committed to a 15-year lease with three five-year extension options. The other anchor tenant for the office space is Thompson Knight, a Texas law firm. The aforementioned project architect, Morrison Seifert Murphy, also leases space in the building. Altogether, there are seven office users: four small users leasing less than 5,000 square feet (464.5 sq m), one organization occupying approximately 8,000 square feet (743 sq m), and the two anchor tenants. Office rental rates go from $27.50 to $39.50 per square foot ($296 to $425 per sq m), with leases ranging from five to 15 years. Priced at the top of the market for the Dallas area, the condominiums feature high ceilings, premium appliances, and spacious balconies. Amenities include a rooftop pool and community space with city views. The units measure from 1,090 to 4,840 square feet (101 to 450 sq m), and prices go from $500,000 to $3 million. As of June 2008, 42 (or 70 percent) of the 61 residential units have sold at prices ranging from $695,000 to $2.05 million. The prices reflect premiums for units with west or Arts District views. Larger condos also have appreciated in price. Because Billingsley did not require presales to finance the project, it did not start marketing the dwellings until the project was complete. This strategy allowed the developer to receive maximal value for the dwellings, because presold units generally sell at a discount. Informal customer feedback suggests that a majority of buyers to date have chosen to live at One Arts because of a connection to or an interest in the arts. One Arts courtyard is surrounded by five restaurants. They lease a total of 18,000 square feet (1,672 sq m) of retail space at average rental rates of $30 to $35 per square foot ($ to $ per sq m), for terms of five to ten years. All the restaurants are either locally based or headed by well-known local chefs. The eateries at One Arts will constitute the restaurant row for the Arts District. Tenants benefit from both the patrons of the nearby arts venues and a lunchtime rush from the office workers above. The tenant mix includes a nightclub, a wine bar, and Mexican, southern, and Asian restaurants. In addition to the ground-floor restaurants, 6,000 square feet (557 sq m) of retail space is occupied by two 3,000-square-foot (278-sq-m) bank tenants: Amegy Bank and Resource One Credit Union. As of July 2008, the City Performance Hall across the street was under construction and not scheduled to open until In order to provide support for the restaurant tenants, Billingsley offered them rent concessions. They pay only operating expenses for the first 1.5 years, before the base rents take effect. EXPERIENCE GAINED One Arts Plaza has made a significant impact on both the Arts District as well as downtown Dallas. Keeping a major corporate headquarters within city limits was a primary goal accomplished by One Arts. This goal was

6 achieved partly because of Billingsley s ability to effect suburban office efficiencies in a high rise. Also, the funding of the building relied on the office lease instead of the condos, an approach that could be employed elsewhere. Surrounded by landmark buildings designed by Pritzker Prize winning architects, the site posed a design challenge. The architecture team s solution responds to the environs by using a clean design to bracket (along with the Dallas Art Museum) the entire Arts District. The team respected the Sasaki master plan, and expanded on many of the ideas and themes contained therein. PROJECT DATA LAND USE INFORMATION Site area (acres/hectares): 4.03/1.63 GROSS BUILDING AREA Use Area (Square Feet/Square Meters) Office 498,000/46,266 Retail 27,000/2,508 Parking 402,000/37,440 Residential 132,000/12,263 Total 1,059,000/98,384 LEASABLE AREA Use Area (Square Feet/Square Meters) Office net rentable area 481,143/44,700 Retail gross leasable area 27,000/2,508 Residential 127,000/11,799 Parking 381,000/35,396 Total 1,016,000/94,389 LAND USE PLAN Use Area (Acres/Hectares) Percentage of Site Buildings 2.73/ Streets/surface parking 0.50/ Landscaping/open space 0.80/ Total 4.03/ RESIDENTIAL INFORMATION Number of residential units: 61 Number sold (as of June 2008): 42 (70%) Unit sizes (square feet/square meters): 1,090 4,840/ Sale prices: $695,000 $2,050,000 OFFICE INFORMATION Percentage of net rentable area occupied (as of June 2008): 96 Number of tenants: 7 Annual rents (per square foot/square meter): approximately $27.50 $39.50/$ $ Average length of lease: 5 to 15 years Office Tenant Size Under 5,000 square feet/464.5 square meters 4 Number of Tenants

7 Between 5,000 and 10,000 square feet/464.5 and 929 square meters 1 More than 10,000 square feet/929 square meters 2 Total 7 RETAIL INFORMATION Tenant Classification Number General merchandise 1 2,400/223 Food service 5 18,000/1,672 Personal services 1 600/56 Financial services 2 6,000/557 Total 7 21,000/1,951 Percentage of gross leasable area leased (as of June 2008): 95 Annual rents (per square foot/square meter): $30 $35/$ $ Average length of lease: 5 to 10 years Total Gross Leasable Area (Square Feet/Square Meters) DEVELOPMENT COST INFORMATION Site Acquisition Cost: $11,300,000 Site Improvement Costs: $3,900,000 Excavation/grading: $700,000 Sewer/water/drainage: $1,500,000 Paving/curbs/sidewalks: $200,000 Landscaping/irrigation: $400,000 Fountain/landscaping: $1,100,000 Construction Costs: $113,700,000 Soft Costs: $29,500,000 Architecture/engineering: $3,800,000 Marketing: $1,800,000 Taxes/insurance: $400,000 Construction interest and fees: $7,000,000 Other commissions, developer furniture, fixtures, and equipment: $16,500,000 Total Development Cost: $158,400,000 DEVELOPMENT SCHEDULE Site purchased: 1980 Planning started: December 2004 Sales/leasing started: December 2004 Construction started: June 2005 Project completed: July 2008 DRIVING DIRECTIONS From Dallas/Fort Worth International Airport: Exit airport onto International Parkway North. After 1.6 miles (2.5 km), merge onto Texas Route 114 East via the ramp to downtown Dallas. After 10.8 miles (17.3 km), merge onto Texas Route 183, and in 2.5 miles (4 km) merge onto Interstate 35 East. Take Exit 429A toward Houston/US- 75/Interstate 45. Merge onto the Woodall Rodgers Freeway East. After half a mile (0.8 km), take the Pearl Street exit. Keep right at the fork, and merge onto Olive Street. Take an immediate right at Woodall Rodgers Freeway,

8 and right at Routh Street, about three blocks. The project will be on the left, at the corner of Routh and Flora streets. Driving time: 27 minutes in nonpeak traffic. Anil Krishnamurthy, report author Jason Scully, editor, Development Case Studies David James Rose, copy editor Joanne Nanez, online production manager Rob Goodspeed, editorial intern This Development Case Study is intended to serve as a resource for subscribers in improving the quality of future projects. Data contained herein were made available by the project s development team and constitute a report on, not an endorsement of, the project by ULI the Urban Land Institute. Copyright 2008 by ULI the Urban Land Institute 1025 Thomas Jefferson Street, N.W., Suite 500 West, Washington, D.C

9 Located in Dallas s Arts District, the 24-story One Arts Plaza comprises five restaurants, 61 luxury condominiums, and 7-Eleven s corporate headquarters. A six-story cube set in the structure s facade contains balconies of residential units overlooking the downtown.

10 The office lobby features a streamlined design, a large sculpture, and multimedia artwork. The ground-floor courtyard includes a fountain and outdoor seating for five restaurants that form a dining hub for the Arts District s major venues.

11 Ranging in size from 1,090 to 4,840 square feet (101 to 450 sq m) with prices that go from $500,000 to $3 million, the residential units have high ceilings and city views. The deep floor plates desired by the office tenants caused a problem for the condominiums on the upper levels. In order to avoid deep but narrow condo units, the facade was stepped back at the residential levels to create outdoor balconies.

12 One Arts Plaza floor and site plans.

13 Located at opposite ends of Flora Street, One Arts Plaza and the Dallas Museum of Art bracket the Arts District. Other facilities along the pedestrian-friendly boulevard include an arts high school, a sculpture garden, and the Meyerson Symphony Center, among others.