News Article | 7/30/2006

At the center of something on the rise 5 years on, AAC gleams, development takes shape

The consumption of hundreds of thousands of hot dogs might not seem like a commendable milestone.

But factor in more than 1,000 concerts, sporting events and other attractions witnessed by at least 13 million patrons, and that’s a fifth anniversary to brag about.

It’s especially auspicious considering American Airlines Center’s shaky start.

“It’s certainly, in modern time, the best investment Dallas has ever made. Period,” said Ross Perot Jr. , who as owner of the Dallas Mavericks in the 1990s, pushed for construction of the arena while simultaneously proposing a surrounding mixed-use real estate development now known as Victory.

Mr. Perot’s Hillwood development company teamed up with Dallas Stars owner and Southwest Sports Realty principal Tom Hicks to build the arena, which in 2001 replaced nearby Reunion Arena as North Texas’ largest indoor athletic and entertainment facility.

Since opening with an Eagles concert on July 28, 2001, the arena has hosted events ranging from World Wrestling Entertainment to the Promise Keepers to Britney Spears to the National Basketball Association finals.

A Dallas Area Rapid Transit train line now runs by it. And the Victory area is fast resembling an extension of downtown, with the skeletons of future buildings filling recently vacant land.

“We have underpromised and overdelivered,” said Ron Kirk, who, as Dallas mayor in the late 1990s, strongly advocated the arena’s construction and Victory’s development.

“When you can leverage public investment to leverage private development in the way we did, you serve the public much better.”

No other Dallas project has commanded so much public investment. Few have produced as much debate over merit and value to taxpayers.

And all the while, development of Victory and AAC has occurred with difficulty, sometimes of deal-unraveling proportions.

A narrow margin

In 1998, Dallas voters approved the arena’s $230 million funding package in one of the closest citywide ballots in history: 62,861 to 61,237.

Developers envisioned development rapidly ringing the arena on what was then a polluted former railroad yard and electric utility site. But the 72-acre Victory development never proceeded as conceived.

Weak economic conditions after the Sept. 11, 2001, terrorist attacks prompted New York-based Urban Related Development (formerly Palladium) to scrap a planned $600 million mixed-use project.

The venture promised 300,000 square feet of retail – plus residential and office space – in exchange for $43 million in public investment that the Dallas City Council already had approved.

“There isn’t a lot of confidence that something is going to go there anytime soon,” Veletta Forsythe Lill, a council member at the time, said in 2003 after the developer’s decision.

For a while, Victory stagnated.

But Hillwood pressed on with Victory, and by 2005, passers-by began seeing evidence of construction. That building accelerated this year, marked most notably when the 33-story W Hotel opened last month.

Adjacent retail, office and residential buildings are near completion.

Still, the development is less than half completed, and its taxable value about one-third, when compared with original outlooks.

“Without Sept. 11, we would have opened what you see today two years ago,” Mr. Perot said. “We always wished [the Palladium plan] would have worked out. But Victory will be bigger. It’s going to be higher density.”

Within 10 years, the Victory project will match or exceed the most optimistic of projections from the 1990s, Mr. Hicks said.

And that development, said Dallas Assistant City Manager Ryan Evans, is crucial to the economic health of the immediate downtown area and Dallas as a whole.

“Without the American Airlines Center, without the two professional sports teams playing there, the energy from downtown would be gone,” Mr. Evans said.

“Just imagine for a minute if it was not there. What would you have?”

Knowing what they know today, Mr. Hicks said, voters would have “easily passed” the arena construction package eight years ago.

Projecting the dollars

Through 2018, the public is scheduled to directly invest $185.3 million in the AAC/Victory project – $125 million for the arena and more than $60 million in infrastructure and other public improvements, according to City Hall’s Department of Economic Development.

So far, the private sector has invested $725 million, city officials said. By 2018, the city forecasts Victory to have property value of more than $1.1 billion if all current and pending projects are built, and higher if additional projects go up.

“I still have the same problem with it: The city did not cut a good deal. The city got the shaft,” said former council member Donna Blumer, who in 1997 voted against the arena funding package.

While the arena is a proven success, that alone doesn’t justify, or vindicate, the funding deal struck years ago, Mrs. Blumer said.

And had the arena not been built? Developers still would have improved the property, she said, given its lucrative location just north of the downtown freeway loop and west of burgeoning Uptown.

“We had rich robber barons use their influence on weak politicians. This experience has taught a lot of citizens that you can’t trust bureaucrats and can’t trust politicians who are currying favor with the elite,” said Sharon Boyd, who helped lead a residents’ campaign against the arena.

Mr. Perot sees it differently.

“The land – it was so beat up, it was so polluted, you’d still have that all sitting there today,” he said. “You needed public participation. No one could afford to clean it up.”

Said Mr. Kirk: “This is not only a good deal, it’s a very good deal.”

Promising future

Mr. Hicks projects that the arena will last at least another 40 years.

That said, frequent amenity upgrades throughout its life – the arena may feature a new high-definition scoreboard as soon as the 2007-08 season – will allow the arena to remain comparable in quality to newer facilities nationwide, Mr. Hicks said.

Hillwood is also planning to install four outdoor video boards on buildings south of the AAC, and the AAC itself is slated to install a high-definition video board on the arena’s exterior. Video monitors inside are also being upgraded, as are some of the food offerings, said Brad Mayne, president and chief executive officer of Center Operating Company, which runs the arena.

He and Mr. Perot contend that Victory will soon generate its own gravity, attracting more development and luring large companies to the area.

And without AAC in the center of it all, they said, none of this would have been possible.

“One or two [companies] soon,” Mr. Perot said of corporate relocations. “In 10 or 15 years, you’ll see 10 or 15 companies from the suburbs moving back in.”