Investors in Bishop Arts District
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Architects & Developer Clients: Developers Speak Out
In late July, I sat down with key participants in the Bishop Arts District, Design District, and more recently Waxahachie, to talk about the architect/client relationship, the development climate, and alas, design. Bite your lip for this candid discussion with Jim Lake, Amanda Moreno-Cross, and David Spence.
Jim is with Jim Lake Companies, specializing in adaptive urban redevelopment. He says: “Our company has been around since the early ‘60s. I really have a passion for restoring old buildings. We have something called a double bottom line at our company. Not only do we want to make a reasonable return on our investment at some point, but we also want to positively impact our neighborhood and community. You know it’s about more than just real estate, particularly when you look at the Bishop Arts District and the change that it affected over a long period of time and how it’s impacted that area of town. Having that experience gives us the motivation or courage to go and pioneer in other areas as well. We’re all involved with our city leadership at different levels and it really is about making this city a better place to live.”
Amanda is an Oak Cliff real estate investor and DART board member. She says: “I started investing back in 1989 and it took me a long time to do it, mostly because I didn’t have the money. It took one spot at a time. The building I’m most proud of right now is at 1836 W. Jefferson Blvd. You must come see it. It was a P.O.S. building. I’m sorry I have to say that, but it’s true. It didn’t have a roof. It is 1,200 square feet and I believe it’s the most beautiful building on Jefferson. You must come see it. It’s already 100% leased and almost complete. It’s beautiful and I love it because it was falling down. The thieves basically gutted it for me. There was no electrical at all, and seeing the new transformation has kept me bragging about it for some time. You can’t miss it. It’s beautiful.”
David, an attorney by training, left a 10-year career in nonprofit community development to “buy and save cool old buildings.” After his initial success with partner and mentor Trey Bartosh on Bishop Terrace Apartments, he decided to invest exclusively in his adopted neighborhood, the Bishop Arts District. He says, “I pretty much want to be Jim Lake. When I was about your age [he says to Jim] and putting together a business plan, your dad, Jim senior, very nicely gave me an hour of his time. I called him cold and he told me everything he knew about Bishop Arts. I have a business plan similar to Jim. I pretty much exclusively do things with buildings that are already there. The only new construction I’ve ever built is a garage, a dog house, and a den. I work exclusively in and around the Bishop Arts District. And I guess I do adaptive reuse, as you architects call it.”
What’s up in Waxahachie?
Jim: Two years ago, Amanda called me to come down to Waxahachie. I’m from Dallas and went to school at Baylor University in Waco, and I had never gotten off the highway at I-35 to go see the actual City of Waxahachie until two years ago. I went down there the next day and I thought, Oh my gosh! This is another Bishop Arts District waiting to happen. It’s only 25 minutes from downtown Dallas. We’ve been acquiring about 35% of the downtown square, just less than 100,000 square feet, that we’re in the process of redeveloping right now.
David: You know, about three or four years ago, one of the merchants from Waxahachie had come up to see Bishop Arts. He called and asked, “Can we ever get you to get down here to do some work with our square?” I told him I was too busy and I told him what they needed to do was get Jim Lake down there.
The Bishop Arts District is a happening place today. There are lots of people all the time and the public transportation infrastructure is finally coming into place. What are the benefits of adaptive reuse, as we call it, versus new construction, economically, socially, and culturally?
Jim: It costs a lot more [to revitalize a place like Bishop Arts] but it’s authentic. You can go build something in Southlake but it’s just not the same.
David: We work with the scarcity as if we were all jewelers and only worked with platinum or something like that. There’s lots of aluminum around, but there’s only a little bit of platinum. In Dallas there is, relatively speaking, not much pre-World War II building stock left in Oak Cliff or other areas like East Dallas and South Dallas; because all development went north because of that ornery river, our buildings were kind of put into deep-freeze. We have a lot more of the original grid, a lot more of the original buildings per square foot, than you find north of downtown. I think we all got into it because we like old buildings—or lack the imagination to go north—but the economics of it, the reason it works, is because it might take more time to work with platinum than a hunk of aluminum. You come up with a more valuable product. That’s what makes the numbers work, especially when you have a mass of those buildings together, which the Bishop Arts District is, and as it was when it was a trolley stop near lots of other districts like it.
Amanda: Bringing the buildings back to life is extremely important. To be able to create planned development areas: That is what’s important. It takes a lot of work and what I call patient money. It takes a lot of money and a lot of commitment from the neighborhoods and the people who are actually making the investment, including the city and the city council person. It’s not about just coming in, turning out a project, and walking out.
Photo: Michael Cagle, Assoc. AIA
There seems to be a whole other world of responsibilities that come with owning a building, and developing or rehabilitating a building than there is in documenting something on a computer screen.
Jim: It’s true. You have to surround yourself with a good team, whatever the project, and a good architect certainly. First you need to have a vision, and then download that vision to the architect, and then you have contractors. Planned developments and zoning to allow us to do what we’re doing is hugely important. That’s what we did in the Dallas Design District when we did PD-621 back in 2003. We couldn’t live down there before we had that zoning, so we did the Trinity Loft projects as the first residential project down there. Even when we go back and analyze what makes Bishop Arts a success, it’s a lot of things. David mentioned one of them; we had enough mass to make a difference and control all of it at once. We’re doing the same thing in Waxahachie. We have to do as many square feet as we did in Bishop Arts to make an impact because it’s been tried many times down there, one-off deals. Reiterating what Amanda said, we’re not just patient money, we’re long-term money and not sellers, so we have a different view of the returns and there’s no holding period for us. And when you look back at Bishop Arts District, I actually brokered those deals to my dad in 1985. That was his vision. We struggled for a long time. During the 1986-89 recessions, we used to have to beg people to come across the river just to look at the space. They just wouldn’t come because it was too dangerous over there; but then in 1999 there was a zoning change.
David: The big one came in 2002, when we amended it.
Amanda: It’s already been amended how many times? … Four times?
Jim: That was one thing that basically cut the parking requirement. The other thing that happened to Dallas in 2001 was a bond package that Mayor Laura Miller got pushed forward. It provided a lot of street improvements over there to get street trees, widen the sidewalks and pavers, and make it more walkable. Added lights made it feel safer. Once those things happened, we started to see a change. It took a while to get the mix we have now. … We’re very sensitive because we have separate ownership over there, but we communicate and make sure we don’t have two Chan Thai [restaurants]. Not only are the buildings authentic, but the places are authentic and our leases require that the business owners be there; when you go in those restaurants, the owners are there and around the community. We’ve actually declined offers from the chains that wanted to come over there.
In a situation like yours, what is the relationship between architects and owners?
David: I’ll be candid. For years, the only architect I knew was a friend of mine named Trey Bartosh who is actually trained as an architect and yet did not go through the licensure process, He’s now a contractor. I thought that every architect knew how to frame a wall … but that’s really not the case. I kind of got an awakening when, for various reasons, I needed to go to someone else besides Trey and I was surprised that your typical architects, at least those in my budget, did not have a lot of practical experience—especially construction experience. When you’re dealing with an old building, one needs that knowledge.
I’ve never gone to bed daydreaming about building new construction on vacant land. For some reason my mind doesn’t work like that. I’m good at working with an existing building. There’s something about “These are the constraints you have to work within” that brings out the creativity in me. Also, it’s not so much an issue now, but it was when we all started … You really had to be careful not to put diamonds on a dog’s ass, to use Ross Perot’s quote. We had to do things inexpensively because we did not have the prospect of income that we would have on the other side of the river. Renovation in that context is an iterative process. The very first thing you do, which is the fun part, is to go in and do selective demolition and start tearing it out. One thing you need to know is, since many of these buildings have been renovated so many times, what’s holding what up? While you’re clearing it out you’re also saving little things. You say, “Don’t take that out because that’ll be really cool.”
Then, even in the design, there’s a lot of value engineering. You don’t know exactly how the slab is going to look or whether or not it can be a finished floor until you take a grinder to it—and you’ve saved a whole lot of money if you don’t have to dress up that old slab. For one reason or another I don’t think you guys [architects] are trained that way. I think you guys like to start with a clean sheet of paper or clean computer screen and design out the whole thing. That has real cost implications to me. I can’t afford to just design this from scratch. That might be the expeditious thing for you, but that’s an unaffordable thing for me. Besides, if you’re doing that, you’re missing opportunities along the way to do things with existing architectural elements.
A building reveals itself as you go along and that goes not only for the interior, but also the exterior and the site plan and how people move through it, and of course the city codes and the permitting process.
You get a better product if you’re going about it little by little, making decisions as you go. The way I am experiencing architects right now is that I’ve got a building of about nine storefronts built in 1922. Not coincidentally, it is the next streetcar stop west of Bishop Arts so it’s the same architecture, same scale. I’m working with white boxes and letting the tenants take over. I have one woman who wants to do “French Macaroni.” She wants to do cookies. Her architect has come in and specified a ridiculous finish-out that includes curtains of glass. He’s been to NorthPark Center one too many times. What’s offensive about that to me is that he’s not paying attention to his audiences and it’s like, if you sat down to write an article and your language is too legalistic, simplistic, or poetic, your architect readers might ask, “Doesn’t he know who he’s writing for?” It didn’t surprise me at all that he had never even set foot in the place before he developed a complete set of plans—at a lot of expense to this woman. She has to amortize his fee over 1,027 square feet.
What I admire about an architect is when he or she seems to understand “Okay, now I’m working in Oak Cliff, or Park Cities, or the corn fields of Frisco.” You have a different audience each time, and you need to adjust your product. I love my painter because, when I need him to do a really nice job on my house, he can execute that; but when we have to get something done on a storage building, he can adjust his workers to adjust to my budget.
That raises a good point, then: Who is the client? A lot of times, when you work in an office, you have a client and you take care of them as best you can; but sometimes, especially with new construction, the end user can be far disassociated from the designer.
David: You architects are trust-busting us to then know who the end user is. There’s an intermediary called our tenants, so Jim is not actually serving up a plate of food to the diners at Hattie’s, but when he was redoing the building, it was his job to contemplate what kind of restaurant could go there and what kind of people would come to eat there. So obviously the client is not the diner. He’s the end user. Jim’s the one you should be pleasing, not your architecture professor, not the AIA, not your firm. It’s the client, and I have been surprised how frequently architects come in with their agenda, and I have to think, “This is Oak Cliff; I need you to design this way.”
Jim: You make an excellent point, but I’ll say that the experience we’ve had has been excellent with David Farrell and Good Fulton & Farrell.
Amanda: He’s the only one I’ve ever hired.
Jim: He did International on Turtle Creek [Design Center], and then helped me come up with a plan for the Trane design center. David is rare, I think. He’s working on the Jefferson Tower project, and we have had weekly team meetings and he comes to every one of the meetings and sits with the contractors in the room. David is there so we can make on-the-spot decisions.
Amanda: Every time he comes in, it scares me because I think it’s going to cost me more money. [laughs].
David: One of the great architectural performances that’s been done in Oak Cliff recently is Larry Good’s rezoning of 342 acres of the Bishop Avenue/Davis Street corridors. It’s a brilliant piece of rezoning and perhaps the most progressive zoning in Dallas until maybe when the gateways passed. But, by and large, when Larry was in control, he was adjusting things to the building stock and their end uses. Now we’ve got some boilerplate, new-urbanist language worked into the zoning where you can’t do an office unless it’s got residential above it. That’s a great idea if you’re doing a new project outside of Louisville, but all of these buildings are one-story. We have hamstrung a mile-long-stretch with all of these great buildings, and many of them are mid-century modern buildings, and nobody can get a certificate of occupancy because you can’t use them for offices, even though they’re offices now.
Amanda: Yes, and that’s crazy because that committee was put together to raise money to create the planned development (PD) and then it went to the city and to the city attorney’s office, and they changed the zoning. In fact, they didn’t even bring it back to the committee. I don’t understand that. This PD, the Oak Cliff Gateway, is 800 acres. Now, there is a huge confusion because even the Oak Cliff Chamber of Commerce had to go through the city planning office and city council for a building that was an office before … and all because this PD took place.
David: Sometimes it is the same case as the guy who is designing the cookie shop. Whoever slipped that clause into the zoning obviously had never driven down Bishop Street. He or she is working in the comfort of an office, probably pulling out some language from some continuing education course done on the computer.
What are the challenges in your work setting?
David: I don’t see a whole lot of challenges to it. If some guy wants to build 500 units, it’s up to him to make that work. The free market will either reward him or punish him for his planning. I’m not sure that needs to be monitored. A free enterprise system will do that. For people like us, there’s a lot of opportunity in it. The demographers have been telling us for years: “We need more rooftops, we need more rooftops, we need more rooftops,” but there are only so many little bungalow rooftops and so many 1920s apartments. At some point we need to build new, and that new is going to look very different from the old. It’s a very different pro-forma now than it was in 1928 to build an apartment building. I think you have assembled a threesome here who all love old buildings, but we’re also probably a bit more comfortable than your typical Oak Cliff resident with something new being built. New has to come. Not everybody wants to live in a drafty old bungalow, so I welcome it. I’m not worried about overbuilding or too much glut.
One thing about buildings in Oak Cliff is that the parcels are so small. We’ve all dealt with this and it’s a real constraint for an architect. It’s very difficult to put together a whole lot of land and so there’s not a whole lot of risk of someone building a 200-unit monstrosity full of a bunch of undergraduates. There’s just not room to do it. You have to work within pretty finite spaces. That is one way the environment is self-policing.
Jim: I view it more of an opportunity, because, as you mentioned about the demographers, there are 100,000 people a year coming to the greater DFW area and another million here or a million there. It looks like this trend is going to last a while. Then you start looking at traffic, your generation, and where you would rather live versus your parents. I think all those factors influence Bishop Arts and places like Jefferson Tower, which we hope will energize that whole block of interesting buildings. Then you also have Mayor Mike Rawlings with his grow south campaign. He’s been putting his money where his mouth is. He has really encouraged economic development to happen south of the Trinity River. There’s so much opportunity in the south and that’s one thing that took us to Waxahachie—just the understanding of how close that was.
Amanda: I also think we have a passion for what we do. You have to love what you do. If you don’t, then you won’t do it well.
But what happens when 1986 or 2008 comes back around? The market is cyclical. How do you prepare for that situation and are those accounts lurking somewhere in the back of your mind?
Amanda: You start small with mom and pop stores. They are unique and different, so we have a unique relationship with our tenants. It’s not a big box of 5,000 square feet with one tenant and if he doesn’t pay, you’re out. Divide that box into five different tenants at five different locations and you have a better opportunity than with fewer large properties. What works for me is having small tenants.
Jim: I’ll say that 2008 was nothing compared to 1986. In 2008, you could find people to lease space. In 1986 there was nobody.
David: We were kind of an exception in 2008. In 1986, we were the epicenter.
Jim: I think that’s always affected me on how I structured my deals with debt. I’ve never been one to go over 50 to 70% on debt. If you do have a situation where there’s nobody to lease to, then you have to be very careful on your exposure on the liability side for sure. And it helps if you have it paid off!
Ryan Flener, Assoc. AIA is an intern with Good Fulton & Farrell Architects.