News Article | 10/11/2006

Live, Work, Play, Texas-Style

Dallas — A decade ago, Ross Perot Jr. bought the National Basketball Association’s Dallas Mavericks and persuaded city leaders to help finance a new arena on some 60 acres of blighted land he amassed on the edge of downtown.

Cities have long built arenas in hopes they will spur revitalization around them. But Mr. Perot, son of the former presidential candidate, sold Dallas on a more sweeping idea: an urban district built from scratch with the 20,000-seat American Airlines Center as its hub.

Mr. Perot, who now holds a minority interest in the Mavericks, opened the hip W Dallas Victory Hotel and Residences in June and has some 850 apartments and condominiums under construction. In all, he plans to build 12 million square feet of office, hotel, residential and retail space for $3 billion — one of the most ambitious mixed-use projects in the country.

Victory Park is one of a growing number of mega developments to be paired with large professional sports venues. In suburban Phoenix, owner Steve Ellman of the National Hockey League’s Coyotes is preparing to open the first phase of his $1 billion Westgate City Center this fall with the Glendale Arena as its centerpiece and the home of the National Football League’s Arizona Cardinals, complete with retractable roof, across the street. And baseball’s St. Louis Cardinals and the Cordish Co. of Baltimore are planning Ballpark Village, a $650-million urban neighborhood spanning six blocks next to the new Busch Stadium in St. Louis.

Until recent years, noise and traffic discouraged many people from living near arenas and stadiums. But as the entertainment value of professional sports has grown, sports venues have become selling points. Now they figure prominently in the pitch by many urban centers to “live, work and play” in the same place.

Economists debate whether stadiums do spur economic development. Supporters of such ventures point to successes such as Denver’s Coors Field and Washington D.C.’s Verizon Center, both which sparked downtown revitalization. But many stadiums and arenas have yielded little in the way of economic development, in part because patchwork landholdings and planning restriction make development difficult. The upshot: More cities are experimenting with stadium-anchored urban districts built from the ground up.

Steve Graham, vice president of destination development at RED Development LLC, which built a one-million square-foot retail and entertainment center on 110 acres of farmland in Kansas City, Kan., says “We used to depend on movie theaters. But sports are a better generator of traffic.” Opening earlier this year, the Legends at Village West, which doesn’t feature residential space, sits alongside two new venues: the Kansas Speedway and a minor-league baseball park.

But such developments are tricky to pull off because their scale and mix of uses make them more challenging than a retail, residential or office project. Mr. Ellman of the Coyotes is two years behind his target date for opening the project’s first phase. Though city officials in Glendale, Ariz., predict Westgate will provide a big economic boost, they have struggled to recruit other money-generating projects around the arena and fined the Ellman Cos. $2 million for missed deadlines. An Ellman Cos. spokesman says Mr. Ellman was slowed in part by financing hurdles following the Sept. 11, 2001, terrorist attacks, but that he will open 500,000 square feet of office, entertainment and retail space in November, complete with Bellagio-style fountains and a video plaza evocative of Times Square.

In Dallas, Mr. Perot had only limited interest in basketball — colleagues say he once asked one of his employees how many players were on the court — and he sold his majority stake in the Mavericks in 2000 for a profit. He opened the arena in 2001, retaining what is now 75 acres around it. And he is developing the project, in which Hicks Holding LLC has an ownership interest.

At first, Mr. Perot’s Hillwood firm envisioned American Airlines Center as a catalyst for a retro-style, middle-income, mixed-use development with rental units and retailers and restaurants such as Abercrombie & Fitch and the Cheesecake Factory. But that plan fell apart when the U.S. economy sank after the Sept. 11 attacks, and his acreage sat idle for more than a year. In January 2003, swayed in part by the condominium boom, Hillwood revised the project. The result: a mix of edgy architectural styles, exclusive boutiques and penthouses priced as much as $1 million.

But the move toward high-end consumers forced Hillwood to rethink the role of American Airlines Center, a red, brick building that looks almost like a giant hangar. Many of the events held there would draw the kind of crowds planners didn’t want wandering into the rest of the development. Hillwood’s solution: Seal off the residential portion with two sleek office and retail structures and a plaza complete with giant video screens that move back and forth on tracks across the facades. “A U2 concert is fabulous,” says Mr. Perot of the interplay between his urban neighborhood and the arena. “Kiss, not so good.”

Some residents seem to like the arena because it provides their faux urban setting with what it most needs: people. “The hustle and bustle give it a city feel,” says Kit Sheffield, who purchased a unit at the W residences and has a down payment on a condo in another Victory property, the House by Starck, designer Phillipe Starck’s ultra-modern, 28-story luxury high rise scheduled to open in late 2008.

With about $1 billion under development at Victory Park, Hillwood will open almost 300,000 square feet of retail, 150,000 square feet of office space and 700 residential units between next month and next summer. Thirty-five retailers are already committed and Hillwood says retail space is 75% leased. By 2009, the company expects to have as many as 75 retailers and a Mandarin Oriental Hotel occupying the first 11 floors of the project’s signature office and residential high-rise, 43-story Victory Tower.

Though Mr. Perot is bullish on the remainder of the project, he says rising construction costs and a proliferation of luxury condominiums in Dallas could force Hillwood to scale back future development of Victory. The vast north end of the project is currently an asphalt parking lot. “It’s a balancing act,” he says. “Every year gets tougher and tougher.”