June 2016 ULI Case Studies Mercantile Place QUICK FACTS Location Dallas, Texas Site size 3.3 acres Land uses Multifamily rental housing, restaurants, retail, underground parking, pool, spa, fitness center Keywords Adaptive use, historic preservation, office to apartment conversion, tax increment financing, urban redevelopment, restoration, public/private development, downtown housing Website www.mercantileplace.com Project address 1800 Main Street Dallas, Texas 75201 Developer/owner Forest City Residential Inc. 1800 Main Street, Suite 250 Dallas, Texas 75201 www.forestcity.net Mercantile Tower renovation architect BGO Architects—Pitts Design Studio The tallest structure in the Mercantile Place project, the iconic 31-story Mercantile Tower was converted from office Element Building architect space to apartment uses. Redevelopment involved the restoration of the historic clock tower and lighted weather spire Dimella Schaffer Architects at the top. BGO Architects—Pitts Design Studio PROJECT SUMMARY Continental Building renovation architect Merriman Associates Mercantile Place is a rental apartment community in downtown Dallas that Marley+Co Interior Design consists of four separate and diverse buildings with a total of 704 apart- Interviewees Brian Ratner, president, Forest City Texas Inc. ments. Two of the apartment buildings were converted from office buildings James Truitt, senior vice president, development, (one of which was historic), the third involved the renovation of a historic Forest City Texas Inc. Lisa Ratcliff, regional manager, Forest City building previously converted from office space, and the fourth is a new Enterprises 15-story apartment building. Though the buildings are located on three Karl Zavitkovsky, director, City of Dallas Office of Economic Development separate blocks, they share amenities and parking, and the four buildings Gary Pitts, senior associate, REES have been positioned and marketed together as one residential community. (formerly with BGO Architects) The project also includes four restaurants at street level. Mercantile Place involved the use of tax increment financing (TIF) and is part of a public/ private effort to renovate older structures and bring more housing to downtown Dallas. casestudies.uli.org Mercantile Place Case Study 1 Introduction were addressed via a partnership between that Forest City had developed with successful the city of Dallas and Forest City, resulting public/private redevelopment efforts in other It is not often that two urban problems can be in revitalized buildings and blocks in the cities. Forest City did not have an office in Dallas addressed with one solution, but Mercantile heart of downtown that have stimulated other at the time, however. Notes James Truitt, senior Place in Dallas provides an excellent example of redevelopment throughout the downtown. vice president, development, Forest City Texas how this can be accomplished. For downtown Inc.: “A prominent broker in the city knew about Dallas, the first problem was what to do with The Site and the Idea the city’s interest in redeveloping the property numerous vacant and largely obsolete office and he called David Levey, an executive vice buildings in the heart of the historic core of the The idea behind the project originated with the president with Forest City at the time, and [invited city. The second problem was how to bring new city, which was faced with the two problems him to visit the property]. David came down to housing and residents to the downtown to enliv- discussed previously. When redevelopment was Dallas from Cleveland, met with Mayor Miller, en the city center and create an 18-hour use pat- being considered in the early 2000s, many real who wanted to see downtown developed, and that tern there. Mercantile Place is a redevelopment estate investors had expressed interest in in- is how it started. It took about a year to put [the and adaptive use project, initiated by the city of vesting in downtown Dallas, but were reluctant deal] together.” Dallas and Forest City Residential Inc., that ad- to do so unless they were convinced that the city dresses both of these issues. would invest in revitalizing the downtown. In The site and location. When Forest City first The redevelopment effort involved response, the city sought to stimulate redevel- considered redevelopment, the site comprised renovation, adaptive use, demolition, and new opment via the creation of several TIF districts a variety of buildings erected during the 1940s construction. The numerous vacant office that were put in place during the early 2000s, and 1950s or earlier, located on three separate buildings on the site were no longer suitable but there were still headwinds. Many developers blocks facing Main and Commerce streets in the for office use and had to be either converted looked at the costs of redevelopment versus the heart of downtown. The principal building on to another use or torn down. But converting value created and found a large gap. the central block, between Main and Commerce, 1940s- and 1950s-era office buildings, one To jump-start redevelopment, the city was the historic 31-story Mercantile National historic, to residential use is an expensive reached out to Forest City Enterprises—with the Bank Building, erected in 1942 and for many undertaking with costs that can easily exceed Mercantile Place conversion and redevelopment years the tallest building in Dallas. This large those of new construction. These challenges idea in mind—in part because of the reputation central block also included three other sizable The Continental building, as lit at night, also was an office-to-apartment conversion. The Mercantile Place pool and amenity area appear in the foreground. 2 Mercantile Place Case Study casestudies.uli.org but not historically significant buildings that park. Neiman Marcus is located directly across Wilson became available in 2008. We thought were part of the bank complex. Notes Gary Pitts: Ervay Street from the Merc, and the newly there was an opportunity to upgrade that “There was originally 1.3 million square feet on renovated and historic Joule Hotel is located on building.” Forest City executives also felt they the property and the entire block had been built Main Street approximately one block to the west could operate the building efficiently together out, including the Dallas Tower, which was 20 of the Merc building. with the other structures, and that it would stories, the Securities building [14 stories], and Site assembly. Assembling the site involved strengthen the overall neighborhood. the Annex [four stories].” several property owners. Most of the Merc block Forest City’s goal in acquiring all of these A second, smaller block to the south was site was owned by a private development company, was to establish a critical mass of residential the site of a 1950s-era office building—now and the Continental building was owned by a sec- rental units, with varying price points and with the Continental building—also part of the ond group, both fee-simple owners. One parcel on shared amenities, that would serve as the heart bank complex and also unoccupied. Lying to the Merc block, where the pool deck now sits, was of a new neighborhood in downtown Dallas. the north and west of the Merc building, a third controlled by a family via a ground lease, and the Public/private effort. In crafting the deal, corner site featured a historically significant family wasn't eager to sell. Forest City acquired the Forest City initially tried to obtain historic tax former office building that had previously been sites from the fee-simple owners and planned on credits on the Merc building, but the National converted to apartments—now known as the moving forward without the ground-lease parcel, Park Service (NPS) would not allow this for the Wilson building—by another developer and but eventually Forest City was able to acquire that Merc because several of the buildings in the Merc was being used for that purpose. parcel as well. Forest City acquired the sites for the complex were to be demolished. When the NPS The project is adjacent to the newly created Merc, the Element, and the Continental in 2005. said no, Forest City withdrew from negotiations Main Street Garden Park, and three of the Forest City acquired the Wilson building with the city and said they could not do the deal. completed buildings offer units with views of the from Post Properties later. Notes Truitt: “The The city then stepped in to provide an enhanced SITE PLAN The core Mercantile Place block site plan. The Mercantile building is on the left and the Element building is on the upper right. The Jewel building connects the two and serves as the lobby for both structures, as well as the access point for the amenity area in the lower right-hand area of the plan. The Wilson building is located off the plan to the upper left, on the opposite corner from the Mercantile building, and the Continental building is located off the plan to the south, on Commerce Street directly across from the pool. casestudies.uli.org Mercantile Place Case Study 3 The Wilson is the oldest building in the Mercantile Place project. When it was acquired, it had already been converted from offices to apartments. The Mercantile Tower is a former office building with large floor plates; the conversion to apartments involved TIF offering to fill the financing gap. Notes Brian upfront money, beyond the developer’s equity, the creation of many deep and narrow units. The Wilson building is in the right foreground. Ratner, president, Forest City Texas: “The city to start the project and to obtain debt financing. understood the importance of [what needed to be Thus, to make the project work, the city agreed started in 2011, and was financed with a $28 done] here; they very much wanted what we were to alter the typical TIF deal, and agreed to issue million nonrecourse U.S.