Risk & Redevelopment

The development of Dallas is nothing but redevelopment on top of redevelopment. Did you know that the current 1893 “Old Red” county courthouse is the sixth downtown structure to be built for that purpose? As with any city of its age in this region, the early urban core comprised wood structures that were gradually replaced with masonry to fend off fires. Many of those masonry buildings were then replaced with larger or better masonry buildings. Reviewing census data revealed significant boosts to redevelopment throughout the city’s history—when the railroads came to town in the 1870s, when the banking and automotive industries established regional roots in the early 20^th century, and again after World War II. Dallas’ postwar growth led to an expanded footprint and the establishment of many outlying small towns, known as suburban or “bedroom” communities. The Dallas economy outperformed that of most of the United States during the 1970s and early 1980s, and the boomtown mentality lasted until the economic bust in the latter 1980s. With the exception of the Great Recession of 2009, Dallas has since sustained a strong economy for real-estate development. And yet the redevelopment of Downtown Dallas and its edge districts has been slow and, presumably, risky.

Historic buildings in the urban core are often perceived as the greatest risk because they come with the most unknowns, particularly for inexperienced developers accustomed to new construction. These building types are more difficult logistically and often involve greater interface with government entities and the public. However, according to Jason Harper of Echelon Leadership, Dallas redevelopers understand and appreciate the intangible value found in older buildings and can factor that intangible value into their financial analysis when considering a project. The community is small and specialized. Those who dare have a unique understanding of how to accomplish these “risky” project types. Supported by tax increment financing (TIF), historic preservation tax credits, and the city’s investment in downtown parks, streetscape improvements, and signage, these developers are ready to take on the added risk while others shrink from the opportunity.

Taking the Long View  

In 1997, Downtown Dallas was truly struggling. Some of the first adaptive reuse and loft conversion projects were being completed and these projects offered promise for the rest of an underutilized downtown. One property stood out as a symbol of urban blight, the old Dallas High School (Crozier Tech), which had been designated a historic landmark without the owner’s consent; a rare case. Alumni brought attention to the building and demanded its preservation after Dallas Independent School District sold it in 1998. A fire caused extensive surface damage in 1999, and after trying to demolish it for over a decade, the owner sought to sell it in 2011. The landmark ordinance had just been revised to include a clause prohibiting “demolition by neglect” that was used by the city to file a lawsuit against the owner for not maintaining the property. The city prevailed in the suit and the owner was forced to make repairs. However, the landmark ordinance did allow for redevelopment with new construction on the site, which totaled over five acres.

A few more years passed before the property was sold to Matthews Southwest in 2015, which begs the question “Why?” What made the risk of redeveloping this property palatable to Matthews Southwest when no one else was interested? The answer lies in the company’s long-term vision, its means to be patient, and its willingness to take on more perceived risk. “We don’t mind being in the rough, not the fairway. We don’t mind taking some risks,” says Kristian Teleki, senior vice president at Matthews Southwest.

By purchasing property on the edge of downtown, the company banked on the location increasing in value down the road, and it was willing to wait for that to happen. In the case of the old Dallas High School, there was also a tenant, Perkins&Will, financial incentives from the city through TIF, and the ability to use historic preservation tax credits worth 45% of the qualified rehabilitation costs. The high perceived risk became an educated one, when all the factors fell into place.

By taking the long view and being a willing pioneer, Jack Matthews started his mission in 1988 to develop in Dallas around the downtown core, including in The Cedars. “What led me there was the value of the land. I couldn’t understand the great disparity in land prices between north and south. I knew that a longtime bias needed to be corrected and that the only way that was going to happen was for us to be successful,” Matthews told D Magazine in 2024.

In 1997, Matthews Southwest redeveloped the Sears Roebuck & Co warehouse and distribution center, now South Side on Lamar, into rental housing and mixed-use development, followed by the Nylo Hotel (now the Canvas Hotel). Both projects utilized the federal historic preservation tax credit and other incentives. Over the last 27 years, the area has slowly redeveloped into a revitalized and still-growing core. While historic building developer Bennet Miller had begun to redevelop The Cedars prior to this, it was the scale of Southside on Lamar that brought enough people to support restaurants and other businesses, which in turn brought residential development and redevelopment. Soon, The Cedars will receive another boost from the upcoming new convention center that Inspire Dallas, a Matthews Southwest–managed entity, is overseeing for the City of Dallas, in partnership with several other entities.

Collaboration

On the other side of town, Westdale Asset Management has been patient. The Deep Ellum neighborhood is located on the edge of Downtown and visually separated by the I‑345 highway. It was first established in the 1870s along two railroad tracks as a small Freedman’s community and later housed day laborers for the cotton fields just outside of town. A century later, the area was a recognized hot spot with a unique character defined by nightclubs, tattoo parlors, artists, and residential loft conversions—all the cool things. Since the 1980s, its reputation has been hot and cold, but now it is back with a vengeance. Westdale Asset Management, one of the larger landholders in the area, credits the recent collaboration among the property owners as a principal reason for its renewed success.

Just after the real-estate downturn of the late 1980s, Westdale purchased several residentially renovated warehouse buildings. At that time, property ownership in the district was fractured, with many entities owning just one or two buildings. A block of buildings, for example, would have multiple owners and, thus, it was difficult to accumulate parcels of land large enough to allow developing new construction. The fractured ownership is one of the reasons why the area has been preserved, but it is also the reason why it was difficult to build consensus and gain momentum toward common goals.

In the mid-2000s, 42 Real Estate (which later sold the property to Asana Partners) began to purchase and redevelop a significant number of the small commercial buildings along Main Street as restaurants and for other entertainment uses. By this time, three major property owners owned approximately 90% of the district and collaboration was much easier to accomplish. The Deep Ellum Foundation was formed with the cooperation of these property owners to provide improvements, maintenance, security, and marketing services to the area. The highest priority was placed on safety. As the district prospered, these property owners continued to reinvest. With their support, the district was recently listed on the National Register of Historic Places, which makes it easier to utilize historic preservation tax credits on redevelopment. Their collaboration created a destination with a myriad of things to do, including restaurants, bars, housing, and office uses. Today, Westdale Real Estate Investment and Management’s Executive Vice President Jeff Allen says that the company fields calls from across the globe from people interested in buying property in Deep Ellum.

In recent years, confidence in the area has been demonstrated by large-scale new developments that, in some cases, pose a concern in relation to maintaining the scale and the simple building type that give the area its architectural character. On the edge of the district closest to Downtown, one new development incorporates high-rise new construction into the existing historic structures. Known as The Epic, it supports a connection to history and to the future. By incorporating the landmarked Knights of Pythias building as the Pittman Hotel on the Deep Ellum side, the scale of the site is made manageable with the two large glass towers on structured parking facing Downtown. An internal street, which feels like a pedestrian path, provides pedestrian access to ground-floor restaurants. Along Elm Street, the existing turn-of-the-century two-story buildings were redeveloped, creating a unique sense of place that is both new and connected to historic Deep Ellum. At the same time, the scale of the older Elm Street buildings allows for a variety of rental costs and provides more affordable options to encourage “mom and pop” establishments.

Work With What Is There  

Perhaps the most obvious, but not always utilized, approach to redevelopment is to start with what is there. Working around inconvenient existing conditions takes a certain mindset—one that can transform the viability and economic impact of an urban area without big moves, wholesale changes, or even new construction. There is nothing particularly exciting or special about the buildings or the development pattern of the Bishop Arts District, but it works in part because it works with what is there.

Good Space has played a continuous and peripheral role in Bishop Arts’ redevelopment since 1995, when founder David Spence redeveloped a multifamily housing complex on Bishop Avenue across the street from a similar property recently improved by Trey Bartosh. One property at a time, Spence and Bartosh created enough impact to attract others to Bishop Avenue. As the area improved, Spence began to acquire commercial properties on the edge of the district and, later, properties on West Davis Street. Spence describes his business model in the same way as he describes his strategy for preservation and design—he works with what he has. He started with one property, made improvements, rented it, and moved on to the next one, borrowing just enough for one project at a time without going into long-term debt. Likewise, he approaches each building by starting with what is there and enhancing it, not by trying to make it something else or something trendy. Spence describes his “slavish” respect for the original building but says he might also “turn up the saturation” on the style. Improvements are low-key, like the buildings themselves, but the high quality of renovation and maintenance sets the tone for neighboring properties and the broader neighborhood.  

The Bishop Arts Merchant Association was created to help promote the district. In 2000, the city made a significant investment in streetscape improvements that helped catapult redevelopment. Over a 20-year period, the area has transformed into a regional destination that has expanded into adjacent neighborhoods and along West Davis Street, anchored by Bishop Avenue in the east and the Kessler Theater in the west. Most of the recent redevelopment has involved the adaptive reuse of existing buildings. The simplicity of the buildings makes them inexpensive to repair and the smaller spaces and diverse rental costs encourage the unique and small shops that characterize the area.

Conclusions

The reuse of existing and historic building stock and revitalization of our older urban areas is important to the vitality and diversity of our city. Due to a dominant propensity to build larger and new, it has become increasingly difficult to encourage redevelopment. Only 10 years ago, an otherwise redevelopment-oriented developer demolished four small historic buildings on Main and Elm Streets during a Sunday football game and brought to light again the necessity of protecting smaller downtown buildings. Redevelopment brings too many positive attributes to be ignored and should be part of our city’s typical planning process, integrated into economic development and smart growth plans. To encourage redevelopment, Dallas must provide economic support by maintaining incentives that serve historic landmarks, the historic tax credits programs and, through TIF districts, other tax tools, and public reinvestment. To make redevelopment possible, the reward must be greater than the risk.